Wednesday, February 16, 2022

Morning Note: This Morning's Data Support Fed Action, Ukraine's Influence on Commodities -- And -- "Men Think in Herds"

It's been a busy morning in terms of data releases, and while we're waiting on oil inventories, on balance it supports the Fed's need to get off the dime with regard to its balance sheet and interest rates.

Here are the headline reads, haven't dug into any of the reports yet:

  • Mortgage apps continue to fall (the 30-year fixed rate is now north of 4%), purchase apps down 9% week-over-week, refis down 11%
  • Homebuilder sentiment dropped another notch to a still-high 82 
  • Retail sales rose notably above expectations
  • Import prices rose 10.8%  year-over-year, export prices rose 15.1%
  • Industrial Production beat estimates, as did factory capacity utilization
  • Business Inventories hit the high-end of expectations

Stocks this morning seemed to react mostly (in negative fashion) to the strong retail sales number. I.e., if the economy looks strong, there's in theory nothing in the way of the Fed hiking interest rates.

We could talk Russia, but other than rumors that they're stepping back, offset by rumors that they're moving into strike position, there's nothing to add right here. Strength this morning in the commodities space* suggests that the situation is anything but resolved at the moment.

*Peter Boockvar reports this morning on Ukraine's influence in the commodities space:
" are some important stats on the importance of Ukraine when it comes to industrial metals, energy and ag. 1)They are 1st in Europe with uranium proven reserves, 2)They are 2nd place in Europe and 10th in the world with their titanium ore reserves, 3)They have the 2nd most explored reserves of manganese ores in the world, 4)They have the 2nd most reserves of iron ore in the world, 5)They have the 2nd most reserves of mercury ore, 6)They have the 3rd largest reserves of shale gas in Europe and 13th place in the world, 7)They have the 7th most reserves of coal, 8)They have the most amount of arable land in Europe, 9)They are 1st in the world in the number of sunflower and sunflower oil exports, 10)They are the 2nd largest producer in the world of barley, 11)They are the 3rd largest producer of corn, 12)They are the 4th biggest maker of potatoes, 13)They are the 5th biggest producer of rye, 14)They are the 8th largest grower of wheat, 15)They are the 9th biggest producer of chicken eggs, 16)They are #16 in the world in cheese exports."

Asian equities rallied overnight, with all but 1 of the 16 markets we track closing higher.

Europe's leaning red this morning, with 10 of the 19 bourses we follow trading lower as I type.

US equities, save for energy, banks and materials, are mostly lower to start the session: Dow down 203 points (0.57%), SP500 down 0.65%, SP500 Equal Weight down 0.22%, Nasdaq 100 down 1.27%, Nasdaq Comp down 1.16%, Russell 2000 down 0.22%,

The VIX sits at 26.34, up 2.49%.

Oil futures are up 2.32%, gold's up 0.41%, silver's up 0.46%, copper futures are up 0.09% and the ag complex (DBA) is up 0.31%.

The 10-year treasury is up (yield down) and the dollar is down 0.16%.

Among our 38 core positions (excluding cash and short-term bond ETF), 18 -- led by energy stocks, Nokia, metals miners, South Korean equities, Latin American equities and gold -- are in the green so far this morning. The 20 losers are being led lower by Viacom/CBS, AMD, AT&T, tech stocks and Sweden equities.


When I'm struggling to find a timely quote for a morning note, I know I can always turn to Jesse Livermore, J.K. Galbraith, or, in this case, Charles Mackay from his 19th Century Classic, The Madness of Crowds:

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Have a great day!

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