Whoa! The rally finally ran out of steam with less than an hour of trading left in yesterday’s session. All significant indices followed the same trajectory, and I’m unsure what caused it, but I think the United Parcel Service (UPS) was influential. The stock opened higher at $157.35 and then collapsed to close at $143.79.

Fading Hubris

I haven’t followed UPS closely enough to see what part of their three-year outlook disappointed investors, but it is clear management underestimated the reaction.

The Fear & Greed gauge is retreating in the wrong direction (yes, I prefer it to move toward extreme greed).

Fewer Winners

Financials (XLF), Health Care (XLV), and Consumer Staples (XLP) eked out gains, but it was rough sledding for the rest. There is some support at 5,100 and below that, there is a chance of filling the gap at 5,026.

 

Dual Mandate Could be Double Trouble

The Federal Reserve is responsible for full employment and a stable economy. Powell & Co. embarked on an aggressive rate-hiking mission to arrest runaway inflation, even if it triggered significant job losses.  Large job losses were necessary to help quell spending.

As inflation slowed, the Fed shifted back to supporting the job market, which now precedes inflation (they assume 2.0% is in the bag).

However, there are signs the Fed is losing control of both sides of their marching orders.

Commodities Prices

The S&P GSCI-Commodities Index formed a double bottom in December, trending higher. There is a chance that the move could fizzle out, but the chart is very compelling as the rate of change builds momentum.

A close above 625 would be huge.

Consumer Price Index

Don’t look now, but the Consumer Price Index (CPI) estimates are moving in the wrong direction. Forecasters have sharpened their pencils and now see higher consumer prices (partly due to higher gasoline prices), while the market sees an even higher CPI.

The CPI has ome in hotter than Wall Street’s consensus in five of the last seven months and it was lower only once. Each time it happened, the experts have found ways to dismiss it. The best rationale for the experts missing the move was the January bounce that was blamed on cold weather.

I know the Street is bracing for the Personal Consumption Expenditures (PCE) report on Friday, but no other economic data point has moved the market as much as the CPI since 2021.

Unemployment

The Sahm Rule is a method of identifying recession or the start of the recession (methodology below).

Right now, 20 states have triggered the Sahm Rule.

Employers loathe letting workers go but are pulling back hours big time.

Economic U-Turn

The Atlanta Fed GPDNow tracker sees first quarter Gross Domestic Product (GDP) at 2.1%. Back on February 1st, it was 4.2%.

 

Comments

Inflation Hangs on Dow McDaniel on 3/27/2024 10:14:25 AM

Charles - you are FANTASTIC!! on Gutfield! tonight. Trump/Payne '24 Mike Trinklein on 3/27/2024 10:34:26 PM

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