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Morning Commentary

Rate Hike Good But Where’s DC?

By Charles Payne, CEO & Principal Analyst
3/15/2017 9:56 AM
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The market continues to look very sloppy after its historical post-election rally on Tuesday. The rally, of course, benefited from the American-centric Russell 2000 Index as President Trump’s focus is on “Buy American and hire American,” which fits these businesses perfectly. 

However, the Russell took a larger hit than any other indices yesterday; it’s has been flat for the year.

I think the Federal Reserve meeting today will spark the stock market since it underscores the strength of the economy as all eyes will be on Washington and beyond the Federal Open Market Committee (FOMC) gathering.  

Crude Oil

Another issue for the market is crude oil, which is now in a tailspin. Inventory levels continue to surge in the most recent count, climbing north of 1.3 billion barrels. This is by far the most crude oil America has ever had in storage, which proves our market and providers are resilient and can turn things on quickly; should the industry show some restraint? 


Considering, crude oil wells had dried up to only 127 in January 2003, and then the industry discovered fracking and directional drilling; reviving the industry to the point Saudi Arabia launched a counterproductive war in late 2014.  According to the Organization of the Petroleum Exporting Countries (OPEC), drilling increased as prices moved lower and that forced American producers to pull back.  

Recently, the OPEC declared victory and implemented its production limits, sparking a rally in crude oil.  
However, perhaps the shoe is on the other foot as U.S. rigs came back swiftly from a low of 386 a year ago, to 617 in the most recent count.  The problem is maybe it’s too much too soon and could have the same detrimental impact on capital projects, jobs, and stock prices. 

Business Sentiment Strong But Needs More

It’s yet another sentiment reading that underscores the surge of enthusiasm in this nation; this time, it’s from 141 of the nation’s top Chief Executive Officers.  The Business Roundtable quarter report on optimism surged more than 19 points, the single largest month-to-month surge since the fourth quarter of 2009.  

In addition, the 93.3 headline reading is also the first to go over the historical average of 79.8 since the second quarter of 2015. 

CEOs are focused on three things to spark this economy, beginning with tax reform in which 79% of participants agreed that it is the single best policy change to lift the economy. Jamie Dimon, CEO of JP Morgan Chase, who serves as chairman of the Business Roundtable, is calling this a “once-in-a-generation” chance to overhaul the tax code.

Dimon also pointed out to CEOs that “we’re not believers that we’re stuck in low growth,” and reminded them that the Federal Reserve rate hike today would be a sign of strength, not a “sign of weakness” for the economy.  

CEOs understand the Fed can provide assistance if all hell breaks loose; no matter how extraordinary and accommodative the Fed is, it cannot spark growth alone.  For the moment, all pieces are in place and CEOs of the biggest companies are ready to pounce.

Most of the CEOs see increases in sales, capital spending (investment), and employment.

Of course, before any of the above can be addressed, Washington D.C. has to get an Obamacare replacement pushed through. Investors and business leaders are waiting patiently, but they have expressed concern about how long they can maintain or improve on their optimism at current levels. 

Remember the statement from the National Federal of Independent Business (NFIB) President and CEO Juanita Duggan, noting the sustainability of this surge...”If the healthcare and tax policy discussions continue without action, optimism will fade.”

The bottom line is large businesses and small businesses share an extraordinary amount of optimism that could get even greater if Washington, D.C. doesn’t drop the ball. 

Today’s Session


What a day! Today, there is an avalanche of events with a slew of economic data released.  The big news, however, comes from the Federal Reserve. 

While it’s a forgone conclusion the Fed will hike, there will be serious nitpicking over the accompanying language. 

Today is the Ides of March, that faithful day when Gaius Julius Caesar was assassinated,.

It’s interesting because many Donald trump allies are warning him that key members of the GOP have laid a trap, in the form of GOP Obamacare replacement.

Inflation news via the Consumer Price Index (CPI) is mostly benign this morning, but the Empire State Fed report on manufacturing and retail sales have meaningful stories.

Empire State decline month over month, but still came in better than expected. Standouts in New Order 21.3 from 13.5, and Employee Workweek 15.0 from 4.1 the highest level since 2012.

Has Rachael Maddow not seen her own tax return? Her tax return shows nothing about sources of revenue. Neither does Donald Trump's tax return. Trump has said to check with the Federal Election Commission, which has thousands of pages of detail.

This goes way beyond mere innumeracy.

Al M. on 3/15/2017 12:11:31 PM

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