Somewhere, yesterday, around 2:40 EST, Senator Thom Tillis was jumping up and down, screaming affection for Fed Jay Powell, who essentially pulled a big chess move by saying he isn’t going anywhere until the investigation against him is over. And even then, he might linger on as an Federal Open Market Committee (FOMC) member.

Remember, Sen. Tillis is going to hold up the Kevin Warsh nomination until the investigation is over, which means the longer it takes, the longer Powell will be the Chairman of the Open Market Committee.

This is a heck of a development for President Trump. The thing is, Republican members of the Senate Finance Committee have already said they do not think Powell lied before them. The amount of cash used to fix up the Fed building is obscene and irresponsible, but it's hard to see legally how it can be proven to be a deliberate crime.

I am worried about Powell staying on as a measure of what’s best for the institution. It would be the final blow to an institution that is already badly tarnished.

Too Cool for School

The market reacted to two major events yesterday. The FOMC wrapped up its meeting without rate cuts and with little change in its communique. The Fed pointed to the unemployment rate as “little changed,” which was better than admitting there have been net job losses in five of the last nine months. 

Later, Powell remarked that zero job growth might be right for this economy.

I get the notion that there is negative net immigration and that artificial intelligence (AI) is beginning to take jobs. Still, there has to be a better way to quantify how many jobs we should expect before sounding the alarm.

Double-Digit Midget

When I was in the U.S. Air Force, folks on their way out with less than 100 days left were called “double-digit midgets.” That’s when we got a little loosey-goosey. That was Powell’s posture yesterday, where he even dismissed the seriousness of the Fed’s economic projections.

Core inflation ticked 0.1% higher, and the Gross Domestic Product (GDP) was raised to 2.3% from 2.0% from December projections.

I lost track of how many times Powell said “tariffs,” but essentially said that once the one-time price increase has maxed out, the Fed could begin to cut rates, though he hinted this should have already happened.

Powell was also unsure about the current spike in crude oil prices, which has sent gasoline and diesel soaring.

Armchair General

I cheered when I heard about the strike on South Pars, but then frowned when I learned the facility is shared with Qatar. Right now, Americans need a little more patience, as prices are coming together.

I don’t think this crude oil spike will lead to a recession, but crude oil prices dictate everything, including the stock market.

River of Red

Every sector finished the session lower, including Energy (XLE), which popped on crude oil, but gave up those gains into the close.

Perhaps most compelling was the action in Consumer Staples (XLP), usually a safe haven sector, which got slammed yesterday, as a bevy of household names finished at new 52-week lows:

Campbell’s Co. (CPB), McKesson Corp (MCK), General Mills (GIS), Brown-Forman Corp (BF-B), and Conagra Brands (CAG).

This time, there really was no place to hide.

Internals Slammed

Decliners swamped advancers, new lows eclipsed new highs, and down volume dwarfed up volume.

Thus, 422 names finished in the red in the S&P 500 (SPX). There has been a harsh about-face, and we are nearing another major test.

                           

Emotional selling commandeered the action yesterday, after what looked like a monster start to the session was erased before the opening bell. The final blow was Jay Powell’s performance during the question-and-answer period that wrapped up the FOMC gathering.

However, under different circumstances, we’d be celebrating the historical earnings results from Micron Technology (MU) after the market close. But I want everyone to keep that in mind. The underlying fundamentals of the economy and the value proposition of world-beater businesses leading our markets matter. I’m confident in holding our positions and looking to buy the dip very soon.

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