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Morning Commentary


By Charles Payne, CEO & Principal Analyst
4/5/2024 9:23 AM

Yesterday was a crimson sea, as the saber-rattling between President Biden and President Netanyahu has put the world on edge.

String of Dangerous Events

The last 48 hours in the Middle East have seen anything that could go wrong …go wrong, including the accidental death of aid workers from an Israeli strike. Israel conducted a strike against Iran, and there was another coordinated attack.

Yesterday, President Biden did his own saber-rattling, suggesting the United States could change its policies if Israel doesn’t commit to a ceasefire. The news sent the stock market reeling.

A new research paper suggests geopolitical risks and energy uncertainty are greater long-term issues than periodic geopolitical events.

Concluding Remarks and Policy Suggestions

The empirical results at the global level have shown that positive shocks to global energy uncertainty have negative and statistically significant effects on global energy prices, whereas the effects of shocks to global geopolitical risk are statistically insignificant. It is implied that energy producers, investors, and policymakers may want to focus more on the dynamics of global energy uncertainty rather than those of global geopolitical risk.

The empirical results including domestic energy prices (for 157 countries) have shown that the effects of global geopolitical risk on domestic energy prices are positive and statistically significant only for the pooled sample of euro area countries in the short run (after one month), whereas the effects of global energy uncertainty on domestic energy prices are negative and statistically significant only for the pooled samples of advanced economies and euro area countries (in all horizons).

West Texas Intermediate (WTI) moved higher, and Brent Crude hit $100.

I was looking for crude oil to peak in the near term, as demand for gasoline has been lower, and the historical path pointed to a decline. I don’t know how long this current situation will affect this.

Jobs Report

This morning, we’ll get the March jobs report. The Street is looking for 213,000 jobs. It’s a coin flip of the number, as Goldman Sachs (GS) is looking for 240,000.

However, I do believe average hourly earnings (AHE) will come in below the consensus, and more people will enter the labor force, although the U-3 unemployment rate should edge higher.

Upward Revision?

The February payroll number has been revised to be higher for the last six years. Buckle up.

Today’s Session

The jobs report came in better than expected, and while that is no shocker (the fix is always in), the result was good for the stock market, and potentially, corporate bottom lines.

It should be noted that private payrolls were 232,000, so government job creation continues to surge. That growth is not sustainable, but it is partly powered by billions of federal taxpayer dollars distributed to local governments.

Most components were in line with the consensus. However, th average hourly earnings declined to 4.1% from 4.3%. There has been much talk about the role of immigration, which has been seeping into the conversation for months. A lot is planned from a political point of view in an attempt to ease the worries of people entering the nation illegally.

There are two problems:  are these workers replacing Americans and are they driving down wages?

Investors hoping for rate cuts are on edge as the likelihood of action in June eased a little.

Should we be concerned about Russell 2000 & small caps not breaking out yet? THANKS for your insight!!

Mike King on 4/5/2024 9:14:01 AM
The small cap rally stumbled, there is still potential but it also is a bit unpredictable. On the downside, I would initially worry at a test of 1,914 and then 1,891 (50-day moving average).

Karina Hernandez on 4/8/2024 10:51:55 AM

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