Jim’s Notes – PPI Keeps Upside in Play

Moving the Market – June 13th

The markets gapped higher at the open following lower-than-expected PPI data. Month over month PPI fell 0.2% versus up 0.5% in April. Year over year it was up 2.2% versus 2.3% in April. The data was positive with stocks responding higher at the open. There was some selling/profit-taking midday but ended the day higher. The activity on Thursday begs the question of does the market test the move higher or continue higher. From my perspective it is a news-driven environment, what news is coming to keep the upside going? On the economic calendar not much until next week with the retail sales out on Tuesday. Politically anything could happen. Putin added some intrigue as Moscow Exchange barred trading the dollar and euro expanding sanctions on the US. It seems that not only the US can enact sanctions. Tesla approved Mr. Musk’s record-breaking payday as the stock broke higher from the consolidation pattern. Earnings in the tech sector keep producing thanks to AI. AVGO shot up 12% following their latest news helping SOXX move higher in turn. The laggards DIA, MDY, IYT, and IWM all closed lower on the day. The NASDAQ, QQQ, SOXX, and SPY continued to lead higher. Interest rates dipped lower to 4.23% pushing TLT above the previous highs and resumed the bond rally. All said this remains a narrow move higher by sector and by stock. It continues to be a stock pickers market. The big names continue to lead with AAPL, TSLA, NVDA, and MU all adding to the upside. Jobless claims rose to 242k versus 229k prior. That is the highest since 8/23. California got the blame for the $20 minimum wage increase taking a toll on layoffs in the fast food industry. The bottom line is to mange the risk that is, know what you believe to be true, and follow the trend. There will always be noise from the talking heads focus on what you know and what you believe, the rest will take care of itself.

The major indexes closed the day higher as technology led the move. The volume was above average as the major indices closed in positive territory. The activity gapped higher with some volatility in the afternoon but managed to close higher. Thursday the NASDAQ closed up 0.3%, DIA was down 0.2%, and the SP500 was up 0.2%. Overall positive activity on the day. The SOXX was up 1.1%. Small Caps (Russell 2000) were down 1%. The ten-year treasury yield was 4.23% down 6 bps for the day. Crude Oil (USO) was down 0.3%. (UGA) was up 0.8%. Natural gas (UNG) was down 3.4%. The dollar was down 0.3%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Friday Outlook: no big news or data out and traders will be left to their own devices. I would expect more speculation on what the future holds relative to the Fed. The question is how this unfolds. Do the big stocks continue to move high? Will we get more breadth in the move? Do we get more clarity as to the drivers expanding beyond the news of the day and what the Fed will do or not do? The key factors of interest heading into the new trading day are 1) The dollar’s response to the data. 2) Interest rates moved to 4.23% with TLT at a new high near term. 3) Crude oil bounced back to $77 resistance on USO… what is the catalyst for more upside? 4) Natural gas remains volatile gaining 6.6% on Tuesday and falling 6.8% last two days. 5) DBA is showing some volatility as well in the consolidation pattern but trending higher. 6) Mega caps leading… rewarding the leaders. Do the laggards move higher? All a matter of time before we get the answers we want within the trends.

Headlines Worthy of Note:

Federal Reserve holds interest rates steady, lower forecast to 1 rate cut in 2024. If you want more details on the FOMC meeting this piece does a good job of laying out the numbers.

Big oil warned by the IEA that peak crude is on the horizon. The estimate from the IEA is that oil will gradually slow before reaching a peak of 106 million barrels per day in 2030. If this is true oil companies will be at risk relative to their exposure… thus, the current diversification by many of the major oil companies.

Tesla shareholders give Elon Musk his record payday. The stock gapped higher initially but gave back some fo the gains prior to the close. Worth watching this as many believe it will be back in the courts as shareholders sue again. Either way, there will be opportunities in the stock.

Quote of the Day: “Genius ain’t anything more than elegant common sense.” — Josh Billings.

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