**Dow Jumps More Than 800 Points as Fears of Interest-Rate Hikes Subside** **S&P 500, Nasdaq also rally, finish week with gains of more than 6%** **By Anna Hirtenstein and Alexander Osipovich, The Wall Street Journal, June 24, 2022**
**...**
**Market indexes bounced back this week after bargain-hunters swooped in to buy cheap stocks and—in a paradoxical twist where bad news was good news—some worse-than-expected economic figures fueled investors’ hopes that the Fed might become less hawkish....**
**The University of Michigan’s index of consumer sentiment dropped in June to its lowest-ever recorded level, according to survey data released on Friday. The drop highlighted the grim mood among Americans as inflation eats into their purchasing power and recession fears loom. The university also revised its May reading of inflation expectations over the next five to 10 years, lowering them to 3.1% from 3.3%. ...**
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Hello! Over the past 2 days that Fed Chairman Jerome Powell told both houses of Congress, “We can’t fail on this. We really have to get inflation down. We’re going to want to see evidence that it really is coming down before we declare any kind of victory.”
Inflation!! As measured by the BLS and the BEA!!
NOT NOT NOT the University of Michigan’s index of consumer sentiment!
It’s very possible, and indeed probable, that the Fed will induce a recession by raising rates BEFORE inflation drops. As in STAGFLATION which plagued the 1970s.
Traders are grasping at any straw. Will a bad consumer sentiment report change Powell’s mind to raise the fed funds rate if inflation stays high? I don’t think so!
Today’s stock market pop won’t last. Mr. Market is bipolar. When the Fed raises rates in July the markets will groan as if that’s a surprise.
I’ve noticed that gas prices are now dropping and prices at my local Safeway are starting to moderate. This week I bought a half-gallon of milk for $0.99 and 73/27 ground beef for $1.99/lb. Potato chips are still up by 50%, but it’s probably healthier to avoid them.
Random walk theory gets quite a workout these days.
I used to do an occasional thing called “spin cycle” where different “analysts” would spin the same news item, or the same stock, in opposite directions, on the same day.
Steve…wish I had watched Ned Reilly touting Dell on bubblevision, the day Dell issued am earnings warning.
Today’s stock market pop won’t last. Mr. Market is bipolar. When the Fed raises rates in July the markets will groan as if that’s a surprise.
If we hearken back to the market bottom in March 2009, the news was uniformly extra crappy across the board and remained extra crappy for months. I’m not necessarily predicting a bottom. Remember there was a fake bottom in 2008 and the markets slid down a long way after that. But I would not expect the market bottom to coincide with good news.
The biggest banks (over 100B assets) have 2x more than the Fed requires… Which makes possible
As a result, banks including JPMorgan Chase (JPM.N), Bank of America (BAC.N), Wells Fargo (WFC.N), Citigroup (C.N), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) can use their excess capital to issue dividends and buybacks to shareholders. Those plans can be announced after the close of trading on Monday.
What was an interesting spark was just before today’s SC decision oil got close to unchanged. With the decision the property rights SC perceptions saw oil up over $3 on a tear.
< But I would not expect the market bottom to coincide with good news. >
You make a good point. I remember March 2009 and also April 2020. The news looked horrible both times and the financial press was talking about long, deep recessions to come.
The Fed is talking about several fed funds hikes to a “neutral” rate now. That will probably cause a recession.
Has all the bad news been priced in?
I guess the “mungofitch 99 day rule” is a handy idea. If a bounce lasts 99 trading days while still making new highs it’s more likely to be a durable bull market.
Perhaps you’re seeing signs of Retail inflation relief authored by Safeway but, having been in Grocery Retail for 40 years, Retailers accrue $s to fund BOGOS and other discounted products (e.g. Kroger $2.16/lb CH Briskets) as loss leaders to draw customers.
When discounting becomes widespread I’ll buy into arriving inflation relief.
GLTAF,
Paul
People used to talk about “triple witching” when three different sets of options expire on the same day.
According to Seeking Alpha, Q2 triple witching was a week ago, June 17th, the end of the really horrible week down. So, was this past week a triple witching fueled DCB, before resuming the general downtrend that has been in place since the start of the year?
Triple Witching
Four times a year, contracts for stock options, stock index options, and stock index futures all expire on the same day, resulting in much higher volumes and price volatility.
2022 Triple Witching Dates
In 2022, the triple witching dates occur on:
Friday, March 18, 2022 Friday, June 17, 2022 Friday, September 16, 2022 Friday, December 16, 2022
You make a good point. I remember March 2009 and also April 2020. The news looked horrible both times and the financial press was talking about long, deep recessions to come.
The numbers were horrible, the spin was that everything was great.
I still had cable in 2009, and remember Cramer saying “the first quarter numbers will be better than expected”. The local Motown media followed that script to the letter. As the big three auto sales numbers rolled in (they all reported monthly then), each down 30-40% y/y, the local media would cheer “GM better than expected, Ford better than expected, Chrysler better than expected”. Everything was “better than expected”, just as Cramer predicted, like they were all reading the same script.
In March 2020, it was “two weeks to stop the spread”, everything would be fine by the end of March. Then it was Florida man and “hydroxycholroquine will save us”. Then “people will be able to crowd into Church on Easter”. Then “Remdesivir will save us”. Then everything will be fine by the end of April. Then, when the end of April arrived, assurances that everything would be fine by Memorial Day. Then “we don’t need a vax, it will go away on it’s own”. Then “the economy will be roaring by the 4th of July”. Then “Ivermectin will save us”. The BS parade continued until effective vaccines were developed to show a real path out of the plague.
When the market is down for a week or two with obvious shorting there comes a time to cover. The shorts often do not like being short the weekend. News changes over the two day weekend can pile up into a losing position come Monday.
A little momentum to cover on a Friday can build into a lot of covering on a Friday.
It is something that happens. It fits the bill last Friday but it is not a proven quantity by me. It is just a probable event.
It is a better reason that saying xyz happened with oil, or abc happened with tech. At least as far as last Friday goes. Whatever the press was saying is more than likely wrong. Commonly the press sees the obvious news event that has little to do with anything. But once a suggestion is in place the public is sold it for a day as this caused that. Less probability than what I am suggesting right now.
