Morning Commentary
Yesterday, Jay Powell did a lot of bobbing and weaving and exuded confidence, which sent the market soaring during the Federal Open Market Committee (FOMC) question-and-answer period.
It was a very wild and, in the end, a very cautious session, where the traditional safe havens finished higher.
Fair Amount of Trepidation
Make it thirteen sessions in a row in the ‘fear zone.’
But the Volatility Index (VIX) settled lower after initially spiking higher.
Powell’s Greatest Hits
The market received a small gift from the Fed:
Rate Hike(s)
"I think it's unlikely that the next policy rate move will be a hike. I would say it's unlikely."
Election & Rate Policy
"We just don't do that. You can go back and read the transcripts forever. This is my fourth election, fourth presidential election here. Read all the transcripts. See if anybody mentions, in any way, the pending election. It just isn't part of our thinking. It's not what we're hired to do. If you start down that road, I don't know how you stop."
Stagflation
"I was around for stagflation. It was brutal. Ten percent unemployment. High single-digit inflation. And very slow growth. Right now, we have 3% growth. Which is pretty solid growth, I would say, by any measure. And we have inflation running under 3%. So, I don't really understand where concerns about stagflation are coming from.”
“I don’t see the ‘stag’ or the – ‘flation.’ “
How I stopped worrying - I have learned to live with one rate cut
Okay, so there will be one rate cut this year. Everyone will come to reconcile that notion. The flip side is the expectation that the game will favor the Bulls. That’s because two rate cuts would feel like a gift. Powell gave us a couple of gems:
Wage increases do not matter; it's all about prices.
He seems to be still bracing for an employment shock (if it happens tomorrow, three rate cuts will be back on the table).
Keep Watching Bond Yields
The Ten-Year yield pulled back nicely, but it remains too elevated for comfort.
More earnings, including Apple (AAPL) after the close.
Today’s Session
Equity futures are holding up, but the wild, and increasingly difficult to predict economic data, has dropped another head-scratcher.
Non-farm Productivity was expected to come in at +0.8%, but instead it landed at +0.3% from +3.2% in the previous quarter.
But, But, But…
The soft-landing camp weighed in immediately, saying that while the number is a disappointment, don’t forget about the three robust quarters.
That’s a fair rationale, but one might say those three strong quarters were offsetting a couple of years of flat to negative quarters.
The real issue was the spike in unit labor cost of +4.7% against the consensus of +3.6%.
Hourly compensation was up +5.0% from +4.7% a year earlier, but real hourly compensation was only up +1.1% from +1.5% a year earlier.
Inflation is still a major issue.
Comments |
Need Dramamine for the up and down of the market! Carl L Mossberg on 5/2/2024 11:09:39 AM |
With government spending out of control I do not see any rate cuts in 2024. P Krueger on 5/2/2024 1:08:59 PM |
Tweet |
5/2/2024 1:54 PM | Holding Up |
5/2/2024 9:41 AM | COOL HAND POWELL |
5/1/2024 1:22 PM | Which Powell? |
5/1/2024 9:40 AM | MAY DAY, MAY DAY, MAY DAY |
4/30/2024 1:02 PM | Complete Flop |
4/30/2024 9:48 AM | CHIPS TAKE THE LEAD |
4/29/2024 1:39 PM | Musk Rides Back to the Mag Seven |
4/29/2024 9:50 AM | DIE BY THE SWORD, PROSPER BY THE SWORD |
4/26/2024 1:46 PM | Full Steam |
4/26/2024 9:39 AM | BIG TECH STEPS UP |
4/25/2024 1:16 PM | Don't' Bury me, Yet! |
4/25/2024 9:27 AM | THERE CAN ONLY BE ONE |
4/24/2024 1:30 PM | Earnings Flood In |
4/24/2024 9:26 AM | BUYING THE DIP |
4/23/2024 1:25 PM | Bloom Off Rose |
4/23/2024 9:32 AM | WHAT HAPPENED TO THE BRAVADO? |
4/22/2024 1:22 PM | Pins and Needles |
4/22/2024 9:30 AM | LIVE BY THE SWORD … |
4/19/2024 1:20 PM | Fair Chunk of Rotation |
4/19/2024 9:35 AM | DON’T OVERREACT |
4/18/2024 1:37 PM | Didn’t Break Down |
4/18/2024 9:40 AM | MARKET OFF SCRIPT |
4/17/2024 1:59 PM | Facing Pressure |
4/17/2024 9:37 AM | POWELL STILL WANTS TO HELP |
4/16/2024 1:35 PM | Muted |
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