It was another one of those slow and steady sessions that saw major indices trade in narrow ranges with the S&P 500, edging higher with another record. The NASDAQ Composite finished lower, but up volume was much stronger than down volume. 

Market Breadth	NYSE	NASDAQ
Advancing	1,930	1,977
Declining	1,425	2,363
52 Week High	205	135
52 Week Low	12	36
Up Volume	2.70B	3.00B
Down Volume	1.57B	2.19B

Meanwhile, the S&P continues to act like the old ‘Pong’ video game with yesterday’s up sectors, tomorrow’s down sectors. 

S&P 500 Index	+0.13%
Communication Services XLC		-0.18%
Consumer Discretionary XLY	+0.08%
Consumer Staples XLP	+0.78%
Energy XLE	+1.24%
Financials XLF	+0.44%
Health Care XLV		-0.06%
Industrials XLI	+0.78%
Materials XLB	+0.27%
Real Estate XLRE		-0.78%
Technology XLK		-0.11%
Utilities XLU		-0.19%

Party Like It’s 1998

The Heat  Map underscored the lack of oomph in mega-cap growth. But the S&P 500 finished the first half of the year with strong performance up14.4%.

• 1H98 (first half quarter) +18.0%, fiscal year (FY) 18 +27.5%
• 1H19 +18.8%, FY19 +30.0%

The advance/decline line is very strong and suggests a lot more room on the upside.

Park the Money & Run

The reverse repo market has gone loco. I have no idea what’s going on, but $992 billion worth of securities were sold in yesterday’s operation.

I admit I’m not 100% sure we should be worried, but this is not usual by a long shot. 

At the last Federal Open Market Committee (FOMC) meeting, the Fed lifted the rate it pays firms to 0.05% from zero to help keep key benchmarks rate above zero. 

New York Fed President Williams initially voiced concern when demand soared to $765 billion. Now, he’s cool with the program and the mind-bending demand: saying this is how the program was supposed to work. 

The bottom line is there is just so much money out there that the Fed is having a tough time containing the negative aspects.

Eligible financial institutions park cash with the Fed overnight and get paid for it – not a bad gig.

Description:

Frequency:  Daily

This series is constructed as the aggregated daily amount value of the RRP transactions reported by the New York Fed as part of the Temporary Open Market Operations.

Temporary open market operations involve short-term repurchase and reverse repurchase agreements that are designed to temporarily add or drain reserves available to the banking system and influence day-to-day trading in the federal funds market.

A reverse repurchase agreement (known as reverse repo or RRP) is a transaction in which the New York Fed under the authorization and direction of the Federal Open Market Committee sells a security to an eligible counterparty with an agreement to repurchase that same security at a specified price at a specific time in the future. For these transactions, eligible securities are U.S. Treasury instruments, federal agency debt and the mortgage-backed securities issued or fully guaranteed by federal agencies.

IPOs Begin to Limp

2021 is on pace to shatter the record number of Initial Public Offerings (IPOs) from  2014, with 209 already in the books. But Didi (DIDI) had a dud opening at $16.65, hitting $18.01 before closing to $14.14. 

Now, Krispy Kreme is indicating to open at $17,00, despite an offer range of $22 to $24. IPOs are still outpacing the S&P over the past year, but they are becoming more and more selective.

Portfolio Approach

Yesterday, we took profits in Communication Services and Consumer Discretionary in our Hotline Model Portfolio.

Today’s Session

Initial jobless claims fell by 51,000 to 364,000 for the week ending June 26, a new pandemic low. 

However, continuing claims, which runs a week behind, rose by 56,000 to 3.47 million. A better gauge, the 4-week moving average declined by 75,000 to 3.48 million and was the lowest read since March 21, 2020.

There were 115,267 additional applications for pandemic assistance, and there are still 11 million people receiving assistance from a pandemic-related benefit’s program.

Filling jobs remains challenging and job cuts of 20,476 in June was the lowest level in 21 years and 88% lower year over year. Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc. said, “Companies are holding on tight to their workers during a time of record job openings and very high job seeker confidence. We haven’t seen job cuts this low since the Dot-Com boom.”  He added, “So far this year, employers have announced plans to cut 212,661 jobs, down 87% from the same period last year and the least since 1995 with the most redundancies announced in the Aerospace/Defense, Telecommunications and Energy.”

Comments

Thanks Charles for attempting to explain what the Feds are up to with the Federal Open Market Co. Sounds a little like the old carnival shell game with the tax payer loosing to the big banks. Old Story! Looking forward to Charles on Making Money today, 11:00 to 12:00 on Sirus Radio. You keeep us on the inside Charles, thanks. Lorin K on 7/1/2021 10:54:38 AM

It appears the economy is slowing down and usually the S&P trends down after a delay when this occurs. But, these days who knows what correlations make sense! garro on 7/1/2021 2:34:03 PM

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