Jim’s Notes – April 2nd

Moving the Market – ISM Manufacturing data shows inflation

The markets started the new quarter on a down note thanks to stronger economic readings and cautious comments from Mr. Powell. Some say profit taking, we say more selling into upside moves. Treasury yields jumped 12 basis points to 4.32% in response, and the dollar was up 0.3%. Despite the dollar, gold was up more than 1%. Not exactly how many saw the new month starting… but it was April Fool’s day. The Semiconductors jumped at the open but faded the balance of the day along with the technology sector overall. PCE index on Friday was deemed to be within a comfort zone for the Fed, but Mr. Powell had other comments of caution spooking investors some relative to the future of rate cuts. The ISM Manufacturing number showed expansion for the first time in 18 months adding to concerns about the economy heating up again. S&P Manufacturing PMI was lower, but both indices showed surging prices. The key data point was the price increase to consumers. That sent bond yields higher, with gold, oil, and the dollar higher as well. The megacaps are consolidating along with the NASDAQ. The small and mid-caps struggled on the day. The outliers were tested on the day except for commodities. Inflation is still around and many are starting to worry about a resurgence near term. It isn’t hard to see it is still impacting the consumer. We can pretend and lie to ourselves but go to the grocery store, gas pump, or McDonald’s, and you will see inflation. None of this is a positive looking forward. But, we follow the trends and take what the markets offer. Eventually, the truth wins, but in the meantime, the markets can remain irrational longer than you can remain solvent fighting it. 

The indexes started higher on the day and faded, failing to hold the early gains. Commodities were higher along with interest rates and the dollar. The leaders were hard metals, commodities, and energy. Money flow was lower. The RSI was lower as volume remained below average. Three sectors closed in positive territory showing selling on the day. The NASDAQ closed up 0.11%, DIA was down 0.6%, and the SP500 was down 0.2%. The major indexes closed mixed. The SOXX was up 1%. Small Caps (Russell 2000) were down 0.9%. The ten-year treasury yield was 4.32% up 12 bps for the day. Crude Oil (USO) was up 1.2%. (UGA) was down 0.2%. Natural gas (UNG) was up 5.6%. The dollar was up 0.4%. We are focused on managing the risk in the current environment and letting it unfold.

Tuesday Outlook: Based on the current market action we would expect more upside following Monday’s test. We continue to see some selling into the rallies like Monday, but the buyers seem to be resilient in their efforts to push the markets higher… FOMO money? More than likely. Watching the early activity for clues of how buyers respond on Tuesday.

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

Quote of the Day: “A committee is a group who keeps minutes, and loses hours.” — Milton Berle.

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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