There was a lot of green on the screen yesterday, as early resolve morphed into a rush to buy, as the pendulum of fear swung to concerns of missing out.

Market Breadth was encouraging, especially the up volume for the New York Stock Exchange (NYSE) and NASDAQ Composite.

Market Breadth	NYSE	NASDAQ
Advancers	2,450	3,552
Decliners	891	1,240
New Highs	110	87
New Lows	241	218
Up Volume	3.19 billion	4.00 billion
Down Volume	622.28 million	874.66 million

Banks Blowing It

It was an amazing session with red blotches from JPMorgan (JPM) and PayPal (PYPL). But note to Jamie Dimon, CEO of JPMorgan: if you want to run for the White House you have to be more upbeat. It’s laying it on too thick, and while that’s a virtue in politics and the stock market, focusing on the worst-case scenario that (unless it’s a rival) is the kiss of death.

There was a time this year when Financials (XLF) were second only to Energy (XLE), but the sector was sliding quickly and needs strong results and guidance from reports this morning.

Inflation & Federal Reserve

Late in the session, Fed Governor Waller stated, “inflation has peaked and will start to fall,” and that put extra pep into the rebound. It’s easy to see why many believe (and even pray) inflation has peaked; take a look at the spike in so-called flexible inflation. Yikes!  That is an all-time high point. Sticky inflation is at the highest point since 1990.

It is easy to see why anyone would think flexible inflation is transitory at this stage of the game – just look at that parabolic move; it’s like a Roman Candle. There are so many exogenous factors beyond monetary policy inputs that will work themselves out at some point. 

Powell guessed this would have happened almost a year ago, and his credibility took a massive hit for being out of touch.

The Market Agrees

The market thinks he’s onto something. Actually, early action on Tuesday hinted at a sea change in inflation and recession assumptions, as stocks initially rallied, and bond yields made a sharp early morning reversal, as the ten years tickled the long-term trendline that many say would trigger a multi-decade decline in bonds.

Bond yields continued lower yesterday.

Of course, when it comes to inflation, all eyes are on the Federal Reserve, which has worked overtime trying to jawbone the market into submission. Soon they will begin to act, and when they do, perhaps they’ll think we’ll officially begin a recession watch. Interestingly, these are the top two biggest tail risks to the market according to the global money managers polled by Bank of America.

Treasury Secretary Yellen chimed in yesterday ahead of a huge International Monetary Fund (IMF)/World Bank conference next week. How the vote of confidence in Powell was dubious and very familiar:

"The ultimate outcome for the global economy of course depends on the path of the war."

-Janet Yellen

“The path of the economy depends crucially on the path of the virus."

-Jay Powell

I should note, however, I’m not in the recession camp this year, but the jury is still out for 2023.   Indicators concur the economy is probably not in a recession now nor will it be the next twelve months.

Key Charts

Transportation stocks are putting in a bottom trend and attracting buyers (see volume). The sharp swoon in these stocks led by truckers two weeks ago sent shockwaves throughout the market.

Although J.B. Hunt Transport Services (JBHT) fetched an upgrade, it was airline stocks that flew the highest, with four names among the top 10% gainers (American Airlines (AAL) was number one +10.6%).  The airline exchange-traded fund (ETF), JETS is still in a downtrend, making a series of lower highs and closing right at the 200-day moving average.

Commodities Rally

Commodities continue to surge ahead as there are several narratives to be ‘long,’ although the best might simply be momentum,  which is attracting brand new buyers.

Gold has struggled to close at a new all-time high, but it’s up 14% in the past year while Bitcoin (BTC) is -37%. So, while the metal is right at a potential monumental breakout point, the miners are marching higher. I prefer gold coins and bars for long term, but the miners are attractive short term.

Portfolio Approach

While there are no sector weighting changes today, we corrected our new position in our Hotline Model Portfolio yesterday from Technology to Consumer Discretionary.

Lots of news this morning – let’s start with big banks.  Solid numbers for the big money center banks, which made massive money on their trading desks.  Interestingly, the biggest banks all missed on investment banking.

Retail Sales

Retail sales for February came in slightly less than expected, and overall, the report is something of a dud at +0.5%.

Without autos, the number was +1.1% against consensus of +1.0%.

Standouts

• Electronics +3.3%
• Clothing +2.6%
• Sporting goods +3.3%
• Food services (restaurants) +1.0%

Negative

• Internet -6.4% is huge

Musk Makes His Move

Elon Musk makes a $54.20 all-cash offer for Twitter and the way the news is covered underscores how hostile the media has become to free speech.

I was livid listening to nonsense about funding and how musk could convince Wall Street to back him on the offer and I twitted as much.

Best and Final

In his letter to the CEO, Musk points out the free speech potential, how generous the offer is and how he could unlock potential.

Twitter Share Price & President Trump

When Jack Dorsey permanently banned Donald Trump, the sitting president of the United States, on January 8, 2021, he probably felt it wouldn’t have a big business impact, and like many multinational corporations, any domestic business lost could be made up on business outside the United States.

The company posted its earnings results a month later, and the stock rallied 13% that day and 24% over the next week.  The move lasted through March 1, when the stock peaked at $77.63.  It’s been all downhill since.

Make no mistake, while this is about free speech, Musk also knows free speech is a great business model.

Social Media Ad Revenue
TikTok	$11.0 billion*
TWTR	$5.58 billion
SNAP	$4.86 billion

*Note: $6.0 billion from USA

There is also the question of business execution. In the past 12 quarters, Twitter’s management has missed Wall Street consensus 9 times during the same period Tesla (TSLA) has missed only three times.   If Twitter accepts this bid, it would be a victory for free speech, the very foundation America was built on and the only way the nation can be dismantled.

The Fed Speaks

It’s unnerving to see the Federal Reserve say they need to reduce job opportunities but that is what NY Fed President John Williams admitted this morning.

Comments

Nice commentary. Charles seems to have a lot to say. I suggest a look at shadowstats.com. Inflation, as it was calculated back in the 80's, is over 15%. Please also compare the 10yr treasury yield vs the Bund and other countries. It's evident to me that our inflation is driven fiscal policy, exacerbated by monetary policy. I see neither changing soon, ergo I expect inflation has only just started. Jeff Riddell on 4/14/2022 8:34:30 AM

Maybe I'm wrong but the CEO and board of directors of any public company should seek the best deal for its shareholders - Tweeter should sell to Elon. Patricia Heng on 4/14/2022 11:37:52 AM

Would love it if Elon bought the whole of Twitter. Among other benefits, it would be a shot across the bow of all the woke anti-free speech crowd! Lorin on 4/14/2022 11:50:52 AM

remember transitory inflation?? JERRY on 4/14/2022 12:00:22 PM

Sort of an easy call, don't you think, Charles.....no recession in 22. Recession defined as 2 consecutive quarters of GDP growth. We are already in Q2. That would take a real economic catastrophe (slowdown) to achieve 2 negative back to back quarters in 2022. No recession in 22 is pretty easy to predict unless one believes Q3 will see negative growth (which I don't). That being said....I'll bet you dollars to doughnuts the Fed (in all their infinite wisdom) fails to engineer a soft landing. So, look out below! Charles Haselberger on 4/14/2022 12:31:25 PM

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