D&D Note (6.3.2022) ~ Bear Market Bounce Fades as Markets Give Back Yesterdays Gains ~
It would appear that the recent Bear Market Bounce has ended today with markets giving back the gains from yesterdays rally and the gains for the week.
The Jobs Report today came in above estimates at 390,000 added compared to estimates of 328,000. While this might be peak jobs it still signals that the FED can concentrate on bringing down inflation and remain hawkish longer.
Essentially when it comes to the Jobs Report the good news is bad news and caused the market to fall.
The 10 Year Note yield climbed to 2.95% after the report came out.
Cleveland FED President Loretta Mester said she supports aggressive rate hikes ahead as she does not see enough evidence that we have hit peak inflation.
Earnings estimates need to come down with oil looking to keep going higher, the strong dollar creating FOREX issues, and the ongoing war in Ukraine causing food scarcity.
All investors eyes are squarely set on next Fridays CPI report (Consumer Price Index). The report is likely to be a big catalyst for market direction. If the reading comes in lower than last month we’ll have a better idea if inflation has peaked and could spark another Bear Market Rally. If the report comes in at the same level or higher than clearly inflation has not peaked and the market would likely begin falling back towards the lows.
The war in Ukraine enters its 100th day and Russia now controls 90% of the Luhansk region.
Russian President Vladimir Putin met with Senegal President and African Union chairman Macky Sall and the Russian leader appeared to be willing to start releasing grain exports from Ukraine that have been blocked for months now.
US Monkeypox cases double over the last week to 20 according to the CDC. Most of the people with the virus had traveled internationally and likely caught the virus abroad.
It’s likely thousands of crypto coins will collapse similar to the dot com era say industry experts. There are currently over 19,000 cryptocurrencies and dozens of blockchain platforms.
Stock Specific News:
Tesla is cutting 10% of jobs at the company and CEO Elon Musk in an internal email says he has “super bad” feeling about the economy. The stock fell -9.22% today.
Apple dropped -3.86% today after a research note from Morgan Stanley saying the App Store growth is slowing and could lower services revenue in the near-term. The companies World Wide Developers Conference kicks off next week where they will present the newest software for iPhones, iPads, Mac, Watch, and TV.
Coinbase extends hiring pause for “foreseeable future”, shares where down -9.66% today.
Market Knowledge Tip:
When you are diversifying your portfolio remember to look at all 11 sectors. You don’t need to be in all 11 but you don’t want to be in only 1 or 2. At different times in economic cycles you may want to be in or out of specific sectors.
You also want to further diversify within sectors (such as owning semiconductors, software, and hardware within the Tech Sector). Diversifying across different countries is also wise but again at certain times (for instance a high dollar negatively effects Emerging Markets but periods of weak dollar can propel EM profits).
These are the 11 Sectors:
Closing Markets (as of 1:15pm PST)
DOW down -1.05%
S&P 500 down -1.63% (4,108.54)
NASDAQ down -2.47%
VIX up 0.28% to 24.79
2 Year Note up 2.70 bp to 2.66%
10 Year Note up 3.75 bp to 2.95%
Oil up 2.969% to $120.34 a barrel.
Gold down -0.957% to $1853.50 an ounce.
Bitcoin down -2.78% to $29,582
Ethereum down -4.04% to $1,758.36
~ Dave James / Principal Trader and Market Strategist