Morning News: June 11, 2020
Posted by Eddy Elfenbein on June 11th, 2020 at 7:03 am

The U.S. Shale-Oil Industry May Collapse, New Report Says, After Goldman Warns Crude Is Set For A Fall

U.S. Weekly Jobless Claims Seen Declining Further, But Millions Still Unemployed

U.S. Futures Slump on Fed Caution and Virus Fears

Pessimistic Pros Missed the Big Rally, and So Did Many Americans

Economics, Dominated by White Men, Is Roiled by Black Lives Matter

Amazon Pauses Police Use of Its Facial Recognition Software

Tesla Approaches Milestone of World’s Most Valuable Carmaker

China’s Street Vendor Push Ignites a Debate: How Rich is It?

Despite Pandemic, New U.S. Solar Capacity Will Grow 33% In 2020

How Uber Hailed A Deal With Grubhub Only To Let It Slip

Tyson Foods Cooperating in U.S. Probe of Chicken Price-Fixing

Joshua Brown: Rates

Ben Carlson: Backtests vs. Real Life in the Markets

Howard Lindzon: Nasdaq 10,000 – Here We Are …And The Uniquely Risky Future

Michael Batnick: Animal Spirits: Stock Market Euphoria & There Are Always Reasons to Sell

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Today’s Federal Reserve Policy Statement
Posted by Eddy Elfenbein on June 10th, 2020 at 2:50 pm

Here’s today’s Fed policy statement:

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

Here are the economic projections.

Still More Deflation
Posted by Eddy Elfenbein on June 10th, 2020 at 12:00 pm

This morning’s CPI showed that inflation fell by 0.1% last month. This was the third monthly drop in a row. This comes after the CPI fell by 0.8% in April.

In the 12 months through May, the CPI gained 0.1%. That was the smallest year-on-year rise since September 2015 and followed a 0.3% increase in April. Economists polled by Reuters had forecast the CPI would be unchanged in May and gain 0.2% year-on-year.

The National Bureau of Economic Research, the arbiter of U.S. recessions, declared on Monday that the economy slipped into recession in February. Nonessential businesses were shuttered in much of the country in mid-March to slow the spread of COVID-19, the respiratory illness caused by the novel coronavirus, almost bringing the economy to a halt.

Excluding the volatile food and energy components, the CPI slipped 0.1% in May after decreasing 0.4% in April, the largest drop since the series started in 1957. The so-called core CPI fell in March for the first time since January 2010.

The stock market is down a bit today. The Federal Reserve’s policy statement will come out this afternoon. Also, Chairman Powell will hold a press conference.

Here’s a look at the monthly change in the core rate. It appears to be getting back to normal. We’ll see.

Morning News: June 10, 2020
Posted by Eddy Elfenbein on June 10th, 2020 at 7:02 am

Economic Impact Of The Coronavirus Crisis Is ‘Dire Everywhere,’ OECD Says

China Factory Gate Deflation Deepens On Global Demand Slump

Expats Fleeing Dubai Is Bad News for the Economy

ECB Prepares ‘Bad Bank’ Plan For Wave Of Coronavirus Toxic Debt

With Crisis Response In Place, Fed Looks To Long Term

A $22 Trillion Stock Rally Now Hinges on Rapid Economic Recovery

Virus Splinters Global Economy, Exposing Inequality Fault Lines

What Are Fintechs and How Can They Help Small Business?

‘Morally Impossible’: Some Advertisers Take a Timeout From Facebook

Jack Dorsey’s Stand Against Trump Marks a Long-Debated Red Line

CrossFit C.E.O. Greg Glassman Steps Down in Chaos

AMC Says ‘Almost All’ U.S. Theaters Will Reopen in July

Tesla Model Y: The Legacy Car Killer

Nick Maggiulli: The Depth of Privilege

Ben Carlson: 5 Signs This Might Be a New Bull Market

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Nasdaq 10,000
Posted by Eddy Elfenbein on June 9th, 2020 at 2:58 pm

At 1:43 pm ET, the Nasdaq Composite broke 10,000 for the first time ever.

The index has nearly doubled its famous peak from 20 years ago.

The index was started in 1971 at 100. It’s now up 100-fold in just under 50 years. The Nasdaq Composite first got to 1,000 in 1995.

There are about 2,500 in the index, but the Nasdaq 100 contains about 90% of the full Nasdaq’s weighting.

Morning News: June 9, 2020
Posted by Eddy Elfenbein on June 9th, 2020 at 7:11 am

U.S. Failed to Properly Oversee Chinese Telecom Carriers: Senate Panel

Behind China’s Twitter Campaign, a Murky Supporting Chorus

Prepping Portfolios for Next Market Storm? Not Just Gold and Govvies

Stock Markets in Europe Fall. Wall Street May Follow.

Despite Recession, Stock Markets Turn Positive for the Year

Once Bitten, Not Shy: Investors Again Seek Margin Loans As Stocks Rally

Debt Shakeout Poised to Make FAANG, Giant Retailers Even Bigger

Apple Plans to Announce Move to Its Own Mac Chips at WWDC

IBM Exits Facial Recognition Business, Calls for Police Reform

TSMC Scores Subsidies and Picks Site for $12 Billion U.S. Plant

In India, the YouTube-TikTok Rivalry Turns Nasty

Michael Batnick: The Fastest Stock Market Ever & How to Talk to Your Friend About Picking Stocks

Roger Nusbaum: You’re Not Smarter Than Stanley Druckenmiller

Cullen Roche: What if the Stock Market is Exactly Right?

Howard Lindzon: The Rarest Asset of All…Time

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Positive for the Year
Posted by Eddy Elfenbein on June 8th, 2020 at 8:08 pm

Thanks to a big push over the last few days, the S&P 500 is now positive for the year.

Well, it’s barely positive…but it’s still positive. For the year, the S&P 500 is up 0.05%. That means for every $20 you invested in the index, you now have a profit of one penny!

Of course we can compare that with a few weeks ago when the index was down 30%!

Mistakes in the Jobs Report
Posted by Eddy Elfenbein on June 8th, 2020 at 10:50 am

The monthly jobs report has unfortunately become politicized. Prominent figures on both sides have accused the other of cooking the data. This is baseless conspiracy thinking.

Interestingly enough, the BLS admitted that the data in Friday’s report was incorrect. They put out the wrong data with an explanation. The BLS will revise the figures next month. They don’t do it immediately in order to avoid the appearance of political pressure.

When the U.S. government’s official jobs report for May came out on Friday, it included a note at the bottom saying there had been a major “error” indicating that the unemployment rate likely should be higher than the widely reported 13.3 percent rate.

The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May. But that would still be an improvement from an unemployment rate of about 19.7 percent for April, applying the same standards.

The Bureau of Labor Statistics, the agency that puts out the monthly jobs reports, said it was working to fix the problem.

Instead of some conspiracy, I think it’s simply hard to get accurate data during such extreme events.

Nine Wins in Eleven Sessions
Posted by Eddy Elfenbein on June 8th, 2020 at 10:36 am

The stock market is up again this morning. This could be the ninth up day in the last 11 sessions. We’re also seeing a continuation of the theme of strong cyclical stocks. The Energy Sector is doing very well so far. Industrials and Financials are also leading the pack. This may suggest that Wall Street believes the economy has turned around. We’ll see.

The Federal Reserve meets tomorrow and on Wednesday. This meeting will also have a press conference by Chairman Powell. I don’t expect any major policy changes from the Fed, but it will be interesting to hear what Powell has to say.

I want to reiterate a point I made in the newsletter — cyclicals stocks are starting to lead the market impressively over the last month. This could suggest Wall Street sees a faster-than-expected recovery.

The graph above is the four main cyclical sector ETFs divided by the SPY. Notice also that the 2/10 Spread has gotten wider.

Morning News: June 8, 2020
Posted by Eddy Elfenbein on June 8th, 2020 at 7:05 am

U.S. Shale Companies Are Turning the Oil Taps Back On

Stock Markets Drift Lower in a Bad Sign for Wall Street

Fed Says Beating Pandemic Is Key, But How Will It Know Things Are Better?

U.S. Fed’s Main Street Lending Facility Likely To Start With A Whimper

Morgan Stanley Makes New Bet on a Steepening U.S. Yield Curve

Local Austerity Will Hold Back U.S. Rebound Like It Did in 2010

Scarred and Scared: Post-Covid Consumers Not Their Old Selves

Farmers Get Billions in Virus Aid, and Democrats Are Wary

Airlines Got $25 Billion in Stimulus; Industry Still Expected to Shrink

‘Corporate America Has Failed Black America’

This Week In Business: The Fight Over Inflammatory Language

Reebok And Athletes Cut Ties With CrossFit Over Founder Greg Glassman’s George Floyd Tweet

Joshua Brown: 10% of Jobs Lost Due to the Virus Have Come Back in May

Michael Batnick: Animal Spirits Talk Your Book: How to Make Better Financial Decisions With Daniel Crosby & Automate Automate Automate

Ben Carlson: The Craziest Charts of the Year (So Far) & The 2020 Stock Market By the Numbers

Cullen Roche: What if the Stock Market is Exactly Right?

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