Morning Roundup

By Mark Masterson on March 8, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary:

It’s been an interesting week.

Equity markets have moved mostly sideways.  However, I have seen some broadening out as investors are pulling modestly from tech and adding other places. 

More notable has been the move in commodities – which are pushing higher and breaking out.  Gold, energy, the broad CRB index, all moving higher.  More on that below.

The dollar is breaking down.

While this is happening, Powell reiterated his stance to hold rates for a bit and watch inflation.

Today we get the jobs data.  It was a mixed bag.

The headline number was good at +275,000.  The estimate was +198,00.

The problem is – no one believes the headline number.  10 the last 12 headline numbers have been revised down.  It’s almost as if this administration is purposely misleading the markets with false information.

Take a look:

• The January jobs report number was just revised LOWER from showing 353,000 jobs added to 229,000.  This means 129,000 LESS jobs were added in January than initially reported.
• The November 2023 jobs number was revised lower, from 199,000 to 173,000.
• The October jobs report was also revised lower from 150,000 to 105,000.
• For September, the jobs number was revised lower by 74,000 jobs.
• We are talking about hundreds of thousands of jobs being revised out of previously reported data.  It also means 10 of the last 12 months have seen downward revisions in their jobs number.

It was notable that the unemployment rate jumped up to 3.9%.  We are nearing the 4% level. 

Als, total jobs in the US increased 1.8% over the last year, the lowest YoY growth rate since March 2021.

Finally, the number of full time jobs is declining…..

Full-Time Jobs USA:

• Feb: 2024: 132.9M
• June 2023: 134.7M
• *-1.8 million. BLS data.

So – the headlines say strength, while the revisions and details say modest weakness.  Also – remember that many of these new jobs are government jobs created by the massive Fiscal borrow and spend policy of Janet Yellen.

Powell said he would hold steady, but is leaning towards a rate cut later this year…..

• Powell: We will not wait for inflation to reach 2% before dialing back Federal Funds rates.
• FED CHAIR POWELL: IF ECONOMY EVOLVES AS EXPECTED, CUTS CAN BEGIN THIS YEAR

While investors cheer a rate cut, perhaps they should not.

As you can see in the interesting chart below – investors tend to be most invested right before the Fed cuts rates.  Then, as the market falls, their allocation to equities falls as well – at least historically.  Perhaps it will be different this time.

Lance Roberts 3 8 24

More below in the charts…..

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Articles of Interest:

• Central banks:
  • Powell suggests Fed nearly confident enough on inflation to begin loosening policy stance (Bloomberg, FT)
• Economy:
  • US payrolls forecast growing 200K in February, slowing vs previous two months but still strong (Reuters)
  • Layoff announcements in February hit highest level for the month since 2009 (CNBC)
  • US mortgage rates tick down for first time in five weeks (Bloomberg)
• Washington:
  • Biden calls for tax changes, Ukraine and Israel funding, while drawing sharp contrast with Trump (NYT, Washington Post, Bloomberg)
  • House Republicans seek to jump the gun on Biden by unveiling a plan for the next year (Reuters)
  • Senate Democrats from automaking states urge Biden to raise tariffs on Chinese EVs (Reuters)
• Geopolitics:
  • China raising more than $27B for third chip fund in response to US attempts to restrain China’s abilities (Bloomberg)
  • House committee advances bill that would force ByteDance to divest TikTok (Politico, FT)
  • Biden instructs military to create temporary port on Gazan coast for aid deliveries (Bloomberg)

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Charts of the day:

Inflation is going to move higher.

Take a look at the CRB (Commodity index)

It has been moving steadily higher since the end of last year…..

It is also being driven by the US dollar now moving sharply lower.

You can see the dollar moved higher, lower, higher – and looks to have started another meaningful move lower.

Lower dollar will push commodities higher, and likely spark inflation concerns.

Another look at the dollar as it breaks below the 200 day moving average.

The weekly chart of the dollar shows it has quite a bit of room to move lower before it hits the 200 week moving average and gets oversold

More weekly candles shows it has moved sharply lower this week. 

It is rare to only have a few weekly moves lower.  Once it rolls over, we tend to get a good move lower.

Market is very concentrated now – with 33% of the S&P represented by the top 10 names.

This is the second most concentrated market in history.

Goldman Sachs 3 8 24

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Quote of the day:

If you are depressed you are living in the past. If you are anxious you are living in the future. If you are at peace you are living in the present….

-Lao Tzu