We were reminded this week only two banks never go bankrupt: The Federal Reserve & JP Morgan.  Maybe others are on the list, but thousands are learning the hard way – this isn’t a game.

Carnage

This is one of the ugliest charts you could imagine, and it represents an industry the President of the United States and Chairman of the Federal Reserve assured the world was strong. This is becoming like an economical version of the “Burning Man,” a spectacle of design to provide a spiritual cleansing.  This is the only way I can reconcile the Federal Reserve watching this without moving a muscle.

I would submit that a lot of the action now are opportunists stoking fear and panic for profit.

And those folks aren’t done because no day stokes bank runs (or walk if you prefer) than Fridays. Could the Federal Deposit Insurance Corporation (FDIC) be ready to engineer two or three deals over the weekend?  Other than JP Morgan, which banks would get preferential treatment? I’m unsure if the White House will say anything in addition to the daily press conference. It’s not time for the noon lid. There must be clear leadership, not the kind of false bravado of ‘nothing to see here, folks.’

Sinking Feeling

• S&P 500 (SPX) -0.72%
• Nasdaq Composite (IXIC) -0.49%
• Nasdaq-100 (NDX) -0.37%
• Dow Jones Industrial (DJI) -0.86%
• iShares Russell 2000 ETF (IWM) -1.12%

Market Breadth

The New York Stock Exchange (NYSE)_ came into May with market breadth momentum, which has now completely imploded.

The NASDAQ Composite has been great, but it’s been a dozen stocks as market breadth and internals have been a disaster since mid-March. But now, the breadth is getting worse.

Large-Caps

Large-caps remain the de facto safe haven, but at some point, that becomes a bloated lifeboat.

This morning, the focus shifts to the jobs report…hold on, ladies and gentlemen.

Portfolio Approach

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Today’s Session

The jobs report is out and beware and not judge it simply on headlines.

The Fix Was In

When it comes to consensus estimates, I have said and written over and over that the fix is in.  We heard from the Fed that the labor market is ‘robust.’ We saw 296,000 from ADP, and unit labor cost came in much higher than expected.  All of that informed this morning’s read.  The Census Household Pulse survey saw 300,000.

Twelve beats in a row coming into today, but now it’s time to break out the asterisks.

Market Higher

The knee-jerk reaction to the data is compelling – stocks should be down.

• Beat on headline
• Higher wages
• Lower unemployment rate

Here’s the rub there, there were massive revisions lower and the composition of the report hints at the hot areas of the economy slowing.

Revisions

• Feb -78,000
• Mar -71,000 to 165,000

Red flags

• Temp job losses mount
• Decline in leisure (proxy for service economy)
• Slower transportation (proxy for overall economy)

Of course, we will keep an eye on bond yields and see if regional banks can hold early gains.

 

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