Jim’s Notes – Markets bounce on PPI data

Moving the Market – April 11th

The markets liked the PPI data on Thursday as it was better than expected overall. The core numbers however were higher but ignored on hope that inflation is under control… why else would you be buying? The actual hope component resides in stimulus whether from the Fed in the form of rate cuts, the government in deficit spending, the Treasury Department in the form of free money, as long as there is hope of stimulus money the buyers continue to engage. Services numbers were high in the PPI just like the CPI and goods were lower… sales to dump inventory. Interesting that energy was -1.6% as the cost rose for crude oil and refined products. Go figure? Gasoline prices jumped 6.3% but were seasonally adjusted to -3.6%. There are increases at so many levels it is hard to grasp the depth of how much inflation is growing. I guess I was the only one who saw the core year/year increase to 2.4% from 2% last month. That is worrisome as most of that came from crude oil, but that was discounted or seasonally adjusted away… they number would have been higher. The yield on the 10-year bond jumped to 4.56% impacted by the CPI data and remained at 4.57% on Thursday. TLT tanked on the news helping our TMV position. Interest-sensitive sectors like banks, real estate, and utilities remain challenged by the data. The dollar remains higher. Technology led the upside on Thursday gaining 2% and transports were up 1.1% bouncing back. Financials led the downside with earnings on tap Friday. Taking what is offered and managing the risk that is.

The indexes were positive overall. The broad indexes bounced overall but we did see red numbers in five sectors. The biggest losers were XLF, XLV, XLP, XLU, and XLB. The money flow was flat despite the upside move. The RSI moved slightly higher. Six sector closed in positive territory. The NASDAQ closed up 1.7%, DIA was up 0.01%, and the SP500 was up 0.7%. The major indexes closed higher. The SOXX was up 2.2%. Small Caps (Russell 2000) were up 0.6%. The ten-year treasury yield was 4.57% up 1 bps for the day. Crude Oil (USO) was down 0.6%. (UGA) was flat. Natural gas (UNG) was down 5.2%. The dollar was up 0.07%. We are focused on managing the risk in the current environment and letting it unfold.

Friday Outlook: The PPI data is behind us as we look to bank earnings on Friday before the open. Investors shook off the selling following the CPI data as they again turned their money towards technology stocks. The sector was up 2% with semiconductors leading the upside move. The software sector remains sluggish. Sectors we continue to watch are Precious metals, Industrial metals, crude/gasoline, semiconductors, mega-caps, and software. Technically speaking the Dow closed below the 50-day MA. SP500 at the 10-day MA and the NASDAQ near the previous highs. The charts still show topping patterns but overall are still in good shape should investors want to resume the uptrends. Overall we remain cautious, we hit stops on positions, and added short positions and long positions, as we manage the risk and look for opportunities.

Headlines Worthy of Note:

Proposed new banking rules… with liquidity an issue for banks why not put in some guidelines for creative accounting. Since the financial crisis the current “system” has created ways to keep the “system” and its members solvent and benefitting from being a part of the “system”. Thus, with the current balance sheets being impacted by higher interest rates ala the Fed, we need ways of imparting liquidity and thus, banks can buy treasury bonds and without any mark to the market rules. In turn, no harm to your balance sheet or credit and in turn keep your status with the Fed and Treasury in good standing. It is good to be a part of the system!

The 10-Year auction was described as catastrophic. The $39 billion offering on Wednesday wasn’t pretty. The stop yield at 4.56% was well ahead of the 4.16% in March. It was the highest yield posted since 10/2023. The tail, or the difference in yield offered versus expected – was bad at 3.1 bps versus 0.9 bps in March, it was the third largest on record. The auction on exacerbated the move in bonds on the day.

Metal prices are higher and heading higher based on the current speculation from analysts. Precious metals gold and silver continued higher on Tuesday as the charts continued their verticle moves. CDE, HMY MUX all added to the upside in Gold. AG and PAAS rallied as well on the day. Industrial metals FCX and SCCO gapped higher on volume as copper continued to rise. STLD, MT, TMC, CENX, and AA rested on the day but the charts still show solid upside trends.

TSLA – Elon Musk stated that Tesla would launch robotaxis in August. The stock was up 2.2% on the news. The bottoming pattern on the chart is worthy of attention. The downside trend remains in play.

Charts to Watch: See Notes on “Reality of the Markets” & “Jim’s Beliefs About the Market” pages…

Quote of the Day: “Frisbeetarianism is the belief that when you die, your soul goes up on the roof and gets stuck.” — George Carlin.

Note of Changes on Website: The ‘Weekend Update & Outlook’ will now reside on the “Reality of the Markets” page. It will be updated throughout the week as needed relative to market changes.

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