(Justin Vaughn, Editor, Options Trading Report)
April showers bring May flowers…..the bear scampered off, the bull charged in, and the market sizzled…just what the street needed. Friday finished convincingly, with all indexes on fire nudging new highs. After a dismal April, with stubborn inflation and constant negative inflation news there-of, May has had a spate of positive indicators. Corporate earnings, leveling of labor and wages have given investors indications that inflation trends are heading downward. So far in May the Dow Jones Industrial Average, the Nasdaq Composite, and the S&P 500 are all up 3.7%. with the Russell 2000 ( An index with smaller value stocks) nearing 2100. Mr. Powell’s inflation target of 2% now seems more realistic, as the equation begins to balance. Friday closed with most of the Magnificent 7 struggling to stay even with the indexes, a slight bit up while the Dow Jones sparked 125 points continuing the streak, the best in 2024. The 10-year Treasury yield finished at 4.50% (“Yields rise as prices fall.”). Oil was down a bit, leveling at $78.26 a barrel, not at all volatile in light of several warring factions in Israel, Ukraine and Africa. “We still think that interest rates matter and that they haven’t filtered all the way through the economy,” said Chris Diaz, a portfolio manager at investment firm Brown Advisory.
The 8 day Dow Jones Industrial Average streak snapped on Tuesday, ending the longest run of the year. Both the Dow Jones and the S&P 500 lost ground while the Nasdaq Composite was up sharply, led by popular high techs. All eyes are trained on Wednesday’s release of the CPI (Consumer Price Index), a major component that feeds the Federal Reserve’s determination on prospective interest rate hikes. Tuesday’s release of the Producer Price Index was all positive, giving the market players a renewed confidence all the while looking to Wednesday’s release of the CPI. “A hot CPI print would create volatility as expectations for interest-rate cuts are lowered,” said Richard Ratner, investment advisor at Bel Air investment Advisors.
The S&P 500 surged over 5300 on Wednesday boosted higher by a good reading of the CPI of 3.4% for April, year over year, down a smidgen from March’s 3.5%, but importantly a drop in the right direction satisfying Mr. Powell and his colleagues. The market turned almost celebratory, giving investors a long awaited reason to be optimistic, setting inflation fears aside. As would be expected the market finished with all indexes higher, along wi\h most equities. “People have money to gamble. When things are really bad, people aren’t willing to make those kinds of bets,” said Brad McMillian, chief investment officer for Commonwealth Financial Network. Stocks staggered Thursday backing off from a blistering Wednesday. The Dow Jones Industrial Average tickled 40,000, then drifted up closing at 40,025, with the other two indexes up just a tick. The S&P 500 crested over 5300, then closed at 5322, another record.
Cocoa futures were down 23% for the week, sliding from some of the highest prices seen in the past four months. Tremendous amounts of rain and extremely hot weather in the West African Nations of Ivory Coast, Ghana, Togo, major producers of cocoa beans, have driven cocoa prices higher around the world, hitting a record high on April 19. Chocolate producers have raised retail prices weekly, with just recently prices stabilizing. As cocoa prices settle back, your favorite chocolate might taste better.
RUMBLINGS ON THE STREET
Eric Green, chief investment officer with Penn Capital Management, Barron’s “The economy is better than anyone would have thought. It’s the opposite of a year ago, when we were worried about the Fed raising rates into a likely slowdown. Now, they will be potentially lowering rates in a better economic environment. I don’t see a big slow down ahead in the markets.”
Randall W. Forsyth, writer of UP & DOWN WALL STREET, Barron’s, “Things on Wall Street and Main Street seem to be moving in opposite directions. The S&P 500 has returned to within 1% of its record high. While the University of Michigan’s latest reading of Consumers attitudes about the economy took a tumble to a six-month low, so, in this tale of two tallies, is it the best or worst of times?”
Amos Hochstein, a senior advisor of President Biden, WSJ “We don’t have a lot of new supply coming online around the world,” Hochstein said. “What concerns me is even when a discovery is made, it could take between seven and 15 years before the first copper comes out.”
Elon Musk, CEO, Tesla, WSJ “If there are not trade barriers established, they will pretty much demolish most other car companies in the world,” Must said during Tesla’s earnings call in January.