Stocks started the day in the green and then lost steam to hit the lows of the day during the lunch hour and then modestly clawed back to finish off the lows but still in the red.
The FED and the war in Ukraine are setting us up for an “Economic Hurricane” said JP Morgan CEO Jamie Dimon.
In terms of the FED he is worried about is Quantitative Tightening and who is going to buy these assets and at what price as the FED now begins their selling. Today was the first day the QT program of selling $95 billion monthly of mortgaged back securities and treasuries.
In regards to the war in Ukraine he sites the impact of food and fuel, saying oil could hit $150 to $175 a barrel.
The San Francisco FED’s Mary Daly says rate hikes should continue until inflation is under control. Meaning she sees additional 50 basis point moves after the next two meetings to get to neutral rates which is around 2.5%.
The Bond market today repriced in a higher probability of a 50 basis point hike in the September meeting.
Treasury Secretary Janet Yellen admits she was wrong last year calling inflation “transitory” and that the White House has several strategies to reduce inflation.
The US is giving a $700 million military aid package to Ukraine. The package includes advanced rocket-launcher system known as HIMARS.
Monkeypox (which is similar to but not as severe as Smallpox) has now been confirmed in more than 550 cases across 30 countries. The WHO says the virus has been spreading undetected for some time now and unclear how long the virus has been spreading outside of Africa. They also don’t know if it’s too late to contain. The virus looks to be spreading via sex and the WHO has asked people with the virus to refrain from having sex.
A California Reparations report (an unprecedented first-in-the-country government report on Reparations) acknowledged how slavery touched nearly every aspect of life for Black Americans that are still felt today. The report suggests creating an office of Freedmen Affairs to specifically address the systematic issues facing Black Americans. Also suggested are raising the minimum wage, increasing investment in Black neighborhoods, environmental infrastructure, and health inequities as initial steps before enacting full reparations which could include free college for Black Americans that are descendants of slaves.
Stock Specific News:
Today D&D started our first ever position in Defense Contractor Lockheed Martin. We picked Lockheed over Raytheon due to the lower P/E of 19.9x rather than Raytheons P/E of 34.51x.
Elon Musk gives Tesla workers an ultimatum to return to office full time (40 hours a week) or resign.
Targa Resources is maintained at Overweight rating at Wells Fargo but lowers price target from $86 to $83.
Meta (Facebook) announced COO Sheryl Sandberg is stepping down as COO after 14 years and Javier Olivan as next COO. The stock dropped over 2.5% immediately upon release of the news just before the closing bell.
Salesforce rallied 9.88% today after reporting an earnings beat last night.
Market Knowledge Tip:
Be Diversified in your stock holdings.
Today D&D beat the markets rising 0.22% due to our diversification strategy.
When the facts change an investor also needs to change their strategy.
We began shifting our diversification strategy all the way back to the night of the Presidential Election, continued to further the strategy last year and into this year transitioning away from high multiple valuation tech stocks towards energy and industrial stocks.
Overall this year the companies that have sky high valuations and don’t make profits have been slaughtered in favor of energy and lower P/E companies that actually create profits and return those profits to shareholders via dividends and/or stock buybacks.
Closing Markets (as of 1:15pm PST)
DOW down -0.54%
S&P 500 down -0.75% (4,101.23)
NASDAQ down -0.72%
VIX down -1.91% to 25.69
10 Year Note UNCH to 2.915%
Oil up 0.026% to $114.70 a barrel.
Gold up 0.124% to $1850.70 an ounce.
Bitcoin down -5.09% to $29,973.13
Ethereum down -6.50% to $1,806.90
~ Dave James / Principal Trader and Market Strategist