(Justin Vaughn, Editor, Options Trading Report)
The market opened Monday, continuing with the trends of last week, with fears overtaking investors and traders. Economic conditions are at best showing signs of continued uncertainty, as manufacturing and the services industry are struggling. Consumers are more apprehensive in their buying habits, more cautious after digesting massive amounts of negative inflation information. The housing market, new and existing, is slowing big-time as borrowing costs are pricing many out. Fed chair Powell reiterated: “Reducing inflation is likely to require a sustained period below trend growth and some softening of labor market conditions. We will stay the course until the job is done. The historical record cautions strongly against prematurely loosening policy.”
Stocks climbed early on Tuesday’s opening, after four sessions of falling aimlessly, with all indices edging upward, finally breaking the losing streak that bore much distressful news. Investors and traders deluged with negative subjects find it hard to digest for such a long stretch.v“The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year,” said Lawrence Gillum, fixed income strategist at LPL Financial. As the week progresses, several events could shape how December shakes out. Current data on the depressed housing market will be released Wednesday and Friday, with the November’s ‘personal consumption expenditures report,’ an important element of analyzing the effects of inflation for the Fed, coming Friday.
The market continued to stay positive on Wednesday as buying was thin. Investors and traders were active in taking positions in many value stocks that have become ‘bargains.’ Tuesday’s mood flowed over into Wednesday, stoking all three indexes. The Dow Jones Industrial Average popped for 526 points, closing at 33,376.48, up 1.6%. The tech heavy Nasdaq Composite jumped 1.54%, closing at 10,709.37, while the S&P 500 followed suit , gaining 1.49%, finishing at 3978.44. Several market favorites announced higher than expected quarterly earnings, giving buyers a ‘boost’ of confidence. Interestingly, all the indexes look like they will break a three-year positive run, with a very negative year. For December the Dow Jones Industrial Average is off 3.57%, however for the year it is off 8.15%. The S&P 500 slid 18.13% for the year and 4.99% for the month. The Nasdaq lost 31.55% for the year and 6.62% in December. All three indexes struggled all year with not much consistency, lots of peaks and valleys.
Argentina, Bolivia, and Chili have banded together, forming a tight union to control production-mining, supply and price. Lithium has skyrocketed to record highs. In November the recent price was $84,000 a ton, up from $34,000 at the first of the year. The Lithium Triangle, as the alliance denotes (Chili, Bolivia and Argentina hold 58% of the world’s lithium reserves) is presently in discussions with Australia, the single largest supplier, according to the US Geological Survey Mineral Commodity Summary. Should a Lithium ‘cartel’ successfully be implemented, many analysts feel it could yield much power, controlling all aspects of bringing Lithium to the marketplace. China has stepped up ‘exploration’ of alternatives, such as sodium-ion batteries, and hydrogen fuels. Hopefully fusion will be harnessed in the future. Elon Musk quipped “I would really like to encourage once again entrepreneurs to enter the lithium refining business to ‘print money’.
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RUMBLINGS ON THE STREET
Seema Shah, chief global strategist at Principal Asset Management, WSJ “2023 is the year when you will start to see the impact of all those rate increases. You can see strains are certainly building up, but the actual economic numbers are pretty resilient. We don’t think that will last.”
Jerome Powell, Fed Chief, WSJ “We welcome those better inflation reports…but I think we’re realistic about the broader project,” Mr. Powell said. Despite progress on goods and housing inflation, “the big story really will be the rest of it, and there’s not much progress there. And that’s going to take time,”
Gary Gensler, Securities and Exchange Commission Chairman, Barron’s “The markets have become increasingly hidden from view, particularly for investors.”
Katie Talati, director of research at digital-asset investment firm Area. Commenting about the recent collapse of FTX and the path ahead for cryptocurrencies. Barron’s “We’re not out of the woods. Crypto has never been alive in an environment like this.”
Andy McCorrnick, T.Rowe Price’s head of fixed income, Barron’s “If you wait until the all-clear sign from the Fed, you’ll have probably missed most of the opportunity.”