Jim’s Notes – Positive Week for Stocks

Moving the Market – May 11th Weekend Update & Outlook

Overall the markets were mixed as unfolded somewhat as expected. The upside continued early and then there was some slight profit taking the balance of the day without much change in the major indexes. Consumer Sentiment fell to 67.4 from 77.2 prior and it didn’t help relative to trading. It really shouldn’t be a surprise to see sentiment drop as the consumer is under pressure from higher interest rates and sticky inflation. The cost of living continues to rise despite what we hear from the current administration and the Fed. Yellen even said that inflation was down. Yes, month over month the rate of inflation growth is down but inflation is still going up more than 4% annualized. Consumables are rising faster than that along with housing prices. Consumer sentiment also showed looking forward one year, the rate of growth is expected to rise to 3.5% from 3.2% last month. Not a pretty picture in the least. Looking for leadership on Friday was difficult to find. China (FXI) was the leader along with WEAT and SOXX. For the week SPX was up 1.9%, the NASDAQ gained 1.1%, and the Dow was up 2.1%. The leading sector for the week was XLU up 4.1% on electric needs speculation. XLF was up 3.1%, and IYZ rose 2.6%. Next week we will get a fresh look at inflation with CPI and PPI due on Tuesday and Wednesday. We also have retail sales, housing data, and industrial production. It promises to be a busy week of input for the markets and investors. We continue to take what is offered and remain focused on the short-term trends.

The major indexes were mixed on Friday as interest rates moved higher again. The leadership came from telecom and consumer staples. The upside move remains in play with a continuation move on Thursday and flat on Friday. Seven sectors closed in the green. The NASDAQ closed down 0.1%, DIA was up 0.3%, and the SP500 was up 0.1%. The major indexes closed mixed. The SOXX was up 0l9%. Small Caps (Russell 2000) were down 0.7%. The ten-year treasury yield was 4.5% up 6 bps for the day. Crude Oil (USO) was down 1.5%. (UGA) was down 1.8%. Natural gas (UNG) was down 2.3%. The dollar was up 0.1%. Plenty to deal with moving forward as we have inflation data on tap next week.

Monday Outlook: Broad indexes started their next move higher on Thursday. Friday they were mixed again with telecom, semiconductors, and consumer staples leading to the upside. Technology struggled again along with energy and consumer discretionary. 1) Watching the dollar, gold, interest rates, and crude oil. 2) Mega caps have been lagging the last four trading days, if we are going higher they will need to participate in leadership. 3) Since March 1st the S&P 500 index is up just 1.6% (it was up 1.9% last week) and large caps have lagged as well. 4) Rotation has been seen in commodities (stalled near term), treasury bonds, and international via FXI, EWH, IEV, EWU, EEM, and others. Bottom line look where money is migrating and follow it.

Chart of Sectors: The scatter chart below shows the activity of the sectors relative to the S&P 500 index. The red down trendline was broken and the leadership is clear. Watching how this unfolds moving forward.

Charts to Watch: See Notes on “Reality of the Markets”

Headlines Worthy of Note:

Homes are getting smaller, but are they getting more affordable? Home prices were up 6.4% annually in February. This is getting interesting for homebuilders. ITB has been trading sideways of late.

Sound-suppressing silk can create quiet spaces… according to a study by MIT…

Stock buybacks are back! The trend in the first quarter hit the highest level in five years.

Biden hasn’t met a tax he didn’t like. The current administration is set to tax China even more. What is the impact on trade and China’s markets? Over the last four weeks, FXI is up 17.4%.

Taiwan Semiconductor sees sales jump 60% amid AI boost… this should impact the stock in trading on Friday along with SOXX.

Quote of the Day: “Better remain silent, better not even think, if you are not prepared to act.” — Annie Besant.

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