• S&P 500: -6.4% YTD
• Russell 2000: -8.0% YTD
• Nasdaq Composite: -11.6% YTD

After early attempts to pick up steam yesterday, the market struggled but never came apart, even with a more hawkish-sounding Jay Powell. Market breadth saw glimmers of demand, and new highs doubled new lows on the New York Stock Exchange (NYSE).

Market Breadth	NYSE	NASDAQ
Advancers	1,316	1,762
Decliners	2,029	2,978
New Highs	118	66
New Lows	59	119
Up Volume	2.29 billion	2.66 billion
Down Volume	2.56 billion	3.03 billion

The ten-year yield surged, which hampered Technology (XLK) but oddly did nothing for the Financial (XLF) sector. Even a hawkish Jay Powell couldn’t move the needle on Financials.

Market View

Energy (XLE) soared as the War on Ukraine continues and gets uglier with dimming hopes of a near-term cease-fire. Investors moved back into cyclical sectors, including Materials (XLB) and Industrials (XLI). Those looking for safety picked the old stalwart Utilities (XLU) sector while skipping growth names.

In fact, value edged higher and extended the move above the 50-day moving average.

Tech Names: Buyers seemed determined to own key mega growth names.

• Amazon (AMZN) before the stock split
• Apple (AAPL), based on value
• Nvidia (NVDA) based on hype and unique business position
• Tesla (TSLA) oversold bounce – the company is still the king of Electric Vehicles (EVs)

I have to point out that the CBOE Volatility Index (VIX) edged lower – a good sign of lingering investor anxiety. The big buy signal is coming down from 38.0.

General Jerome Powell Reporting for Duty!

Fed chairman Jay Powell gave his best impression of a monetary hawk, and the Street acted with restraint, although it was not the kind of fear (or respect) Powell was aiming for. However, he is on the record, and everyone now sees 50-basis points (bps) hike at the next meeting. Here are some of his comments from the WSJ; what is most intriguing to me is the Fed still assumes the supply chain will receive help and reiterates that the Monetary policy is a “blunt instrument”.

Don’t Hate the Player, Hate the Game

Jay Powell told everyone they are looking at the wrong yield combination to determine inversion and the next recession. His explanation makes sense, but I couldn’t help but think he just moved the goal post big time.

Excerpt from Bloomberg article:

“Frankly, there’s good research by staff in the Federal Reserve system that really says to look at the short -- the first 18 months -- of the yield curve,” Powell in response to a question at the National Association for Business Economics. “That’s really what has 100% of the explanatory power of the yield curve. It makes sense. Because if it’s inverted, that means the Fed’s going to cut, which means the economy is weak.”

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

I’m loving the action this morning.

This morning, bond yields continue to climb at a blistering pace with key curves rapidly moving toward inversion, which has been a great harbinger of recessions in the past.

The 2- and 10-year yields have flattened to the lowest point since March 2020.

Powell hopes for a soft landing, which last happened in 1994, were backed up by the hawk that orchestrated the de facto munity at the Fed. James Bullard says he’s confident discreetly hiking and allowing the balance sheet to runoff would result in soft landing.

I’m not sure this is going to happen – all the stars have to align, but I like the way the market is handling the spike in the ten year this morning.

Comments

Great analysis Charles. You keep us grounded! Lorin on 3/22/2022 11:36:00 AM

Thank you so much Lorin. CP Charles Payne on 3/22/2022 11:41:18 AM

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