Tuesday, April 11, 2023

Morning Note: Since the March Jobs Survey

The immediate aftermath of last Friday's jobs report saw the market -- via Fed funds futures -- go from discounting a 40% chance of a quarter-point rate hike at the May meeting to over 70%.

Economist Peter Boockvar thinks another rate hike right here would be ill-advised:

"No, Friday’s payroll report should not be tilting the Fed’s May decision to a rate hike as I’m hearing many saying. The survey period ended March 12th, just a few days after SVB went down and the ripple effect was just starting to filter through the entire banking system and capital markets. Therefore Friday’s report for March should be viewed as mostly pre SVB and old news. Look at things that have happened since like the last few weeks of higher jobless claims than we originally thought. Also, did you see the C&I loan data last week?

Over the two weeks ending March 29th, C&I loans outstanding have fallen by a large $68b to the lowest level since late September 2022. The last time we’ve seen a drop like that was in June 2021 and which was during a run of 6 months in a row of declines. Real estate loans outstanding for construction and land development for the week ended March 29th saw its biggest one week drop since January 2022. For commercial real estate loans, the amount outstanding is down by $30b over the past few weeks. The last time we saw a drop like that was in 2011. Bottom line, the credit squeeze is on and this is why the Fed should pause their hiking to see how this plays out from here. The jobs data, again, is old news."

Given, among other things, the present read from our own general conditions index (below zero denotes high recession odds), we sympathize:

In case you missed our latest update:

Economic and Stock Market Snapshot (video)

Asian stocks rallied overnight, with 13 of the 16 markets we track closing higher.

Europe's green nearly across the board so far this morning, with 17 of the 19 bourses we follow trading up as I type.

US equity averages are mixed to start the session: Dow up 49 points (0.15%), SP500 down 0.03%, SP500 Equal Weight up 0.44%, Nasdaq 100 down 0.37%, Nasdaq Comp down 0.21%, Russell 2000 up 0.75%.

The VIX sits at 19.01 up 0.21%.

Oil futures are up 1.08%, gold's up 0.49%, silver's up 0.55%, copper futures are up 1.82% and the ag complex (DBA) is up 0.77%.

The 10-year treasury is down (yield up) and the dollar is down 0.51%.

Among our 36 core positions (excluding options hedges, cash and money market funds), 25 -- led by EWZ (Brazil equities), MP Materials, XME (base metals miners), EWW (Mexico equities) and Dutch Bros -- are in the green so far this morning... The losers are being led lower by Amazon, Albemarle, AMD, XLK (tech stocks) and OIH (oil services companies).

"...the foolishness of yesterday has become the wisdom of tomorrow." --Sir William Osler

Have a great day!

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