Yesterday, the S&P 500 finished the session despite a big hit to Communication Services (XLC). Just as I have been pointing out the abandonment of traditional safe haven sectors, they were the biggest advancers on the day.

Market Breadth finished at a standstill.

Market Breadth	NYSE	NASDAQ
Advancers	1,399	2,109
Decliners	1,580	2,361
New Highs	54	65
New Lows	33	140
Up Volume	1.52 billion	2.65 billion
Down Volume	2.02 billion	2.29 billion

Banking Sector is Still Unknown

The KBW Bank Index (BKX) edged a little higher, but it seems a lot of this “action” is from low expectations and nothing material to suggest the banking scare is completely over.

Right now, Wall Street sees massive damage accumulating at regional banks.

Don’t look now, but the juggernaut has been spinning its wheels for a couple of weeks now. As a result, the NASDAQ-100 (NDX), which is by far the best performer of 2023, must be consolidating or out of steam.  Right now, I think it’s the former, but it bears watching as holders could become antsy.

Perhaps the most important resistance point is the Forward Price-to-Earnings (F P/E) ratio on the S&P 500, which has hit 18.4.

Portfolio Approach

We closed a position in Financials this morning in our Hotline Model Portfolio.

Session

Watching the banks after comments in the Beige Book hints at early signs of less lending.

Philly Fed

The Philly Fed was a negative read for the eighth consecutive month -31.1 against consensus of -19.9. The report has been negative for the last 10 of eleven readings.

Prices paid and received have now shifted into freefall mode.  I know that’s supposed to be a good thing, but the velocity of the decline is worrisome.

Wages

Interestingly, the special question saw 55.3% increase wages and compensation over the past three months and zero percent decrease.  Not good for on the wage spiral front.

Jobless Claims

Initial jobless claims come in for the week at 245,000 against the consensus of 240,000.  The trend is picking up steam to the upside.

Continuing jobless claims surge +61,000 to 1,865,000. This hints at a labor market no longer able to absorb all those layoff announcements. This will give employers some wiggle room on wages.

All of this bad news stopped what was becoming a major decline in pre-open trading.  It’s clear these are more signals for the Fed to pause.  There are pockets of inflation that will continue to linger, but I think the policy mistake now is to make a recession A) necessary and B) deeper than it would have to be otherwise. 

Comments

Don’t underestimate the Feds ability to mess things up. Charles on 4/20/2023 10:17:50 AM

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