Yesterday wasn’t a pretty session as the market stifled up ahead of today’s jobs report. I also think the move by President Biden to release 180 million barrels of oil from the emergency reserve sparked a wave of general panic. Just think that over the last 48 hours, we learned that France and Germany will issue (natural) gas-rationing cards. And our Commander-in-Chief just layered more on the war against American oil producers with his latest move.

Then there’s the strong bounce in the Ruble and surge in Russia’s Foreign currency reserves. In addition, they haven’t tried to sell any of their gold positions, which was supposed to be a sure sign of panic. Putin has made a lot of mistakes in underestimating Ukraine, but for all the cheering, it feels like the west is taking it on the chin more than Russia.

Certainly, Americans are taking it on the chin. But rather than make any adjustment, President Biden keeps saying this is Putin’s fault with an assist from the pandemic. It’s an unnecessary public relations stunt that’s not working. Inflation and crude oil prices were growing like weeds after that $1.9 trillion “Covid” relief plan was rammed through a year ago. Forget growth versus value – defensive names have been outperformed, underscoring confusion and lost faith.

Utilities

The broad market has put in a strong move off the February 24^th low, but the real sleeper sector has been Utilities (XLU). It’s the second-best performing sector in 2022, up 4.14%. The sector was a big winner under President Obama, who funneled billions for solar projects and subsidies. If President Biden had a larger margin in Congress, I suspect these names would be even higher. I am tempted to get positioned in the sector – but not yet.

Ugly Close S&P 500

The market fell off a cliff into the closing bell = selling begets selling, indeed.

S&P 500 Holding Back

The S&P 500 has closed with a thud but remains above the 50 and 200-day moving averages. I was looking for consolidation, but I would have been more unnerved if yesterday’s session had occurred on higher volume.

Simply Red

Holding back the years

Thinking of the fear I've had so long

When somebody hears

Listen to the fear that's gone

Strangled by the wishes of pater

Hoping for the arms of mater

Get to me the sooner or later

-Simply Red - Holding Back the Years

The Heat Map says it all. There was no place to hide. While there wasn’t a sense of panic, the way the market closed was evidence of late profit-taking by traders, knowing their first good month could be wiped away from a series of bad headlines.

The Heat Map was like the face of the sun. It was an ugly day for sure, but the month was higher after one of the roughest starts to any new year.

The S&P 500 +3.6% for March is encouraging, and while mega-cap came to the rescue, buying was widespread, which is needed for a near-term sustained rally.

April’s Rainbows

April may bring showers and bad practical jokes,  but it’s been an amazing month for the market.

Portfolio Approach

There are no changes in the sector weighting in our Hotline model portfolio.

Today’s Session

Futures were higher all morning long ahead of the jobs report before losing some altitude from the U3 employment rate headline.  It’s the most specious part of the report but it gets all the ink.  That said I gave the report a grade of C.  The key is whether jobs and wages are growing enough to keep consumers in the mix against runaway inflation.

Jobs Report

March jobs came in at 431,000 which was slightly below consensus, February was revised higher to 750,000.  The U3 unemployment rate will get all the ink but I prefer other metrics.  I’m encouraged by 418,000 increase in labor force but want that number higher, as it’s still well below the pre-pandemic level. 

I feel the same with employment to population.

Wages are up 0.4% month to month and +5.6% year to year.  These would normally be huge, but in this inflationary environment it’s not enough.  Ironically, these higher wages have some Fed watchers murmuring about the Philip’s Curve, which points to higher wages as major culprit of inflation.  Powell dismissed this in January 2019, however; it’s been regaining credence among other economists.

Ten year yield spurted higher in the report – hope it’s just a knee jerk move.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.