Damn the Growth! Tapering Full Speed Ahead! (Market Recap Week Ending September 10 )
Dow 34,607 -762 or (2.2%)
Nasdaq 15,115 -248 or (1.6%)
S&P 4,458 -77 or (1.7%)
U.S. 10 Year Treasury Yield 1.341%, +1.5 bp or 1.1%
Economic data continues to give concern to the markets. Though jobless claims were a new pandemic low, hiring is stagnant, and the JOLTS number showed a record 10.9 million job openings available. The Producer Price Index was higher than at any time since 2010 and the month over month number was larger than expected as well. In the meantime, the European Central Bank said they will begin tapering their asset purchases and several Fed members said that their organization should do the same, starting in October. The next major data point arrives Tuesday with the Consumer Price Index that began to moderate last month but which could spook the markets if the print is more in line with Friday’s PPI numbers instead of continuing to moderate.
Crypto in the News
On Tuesday, El Salvador became the first country in the world to make bitcoin a legal tender. As expected, there were some hiccups with the rollout but there were plenty of videos online showing customers purchasing goods with ease from McDonalds and Starbucks. Despite that news, the entire crypto space has been under enormous pressure this week. Bitcoin, after bouncing from a recent low of $28,000, had retaken the $50,000 mark and peaked at $52,000 this week before retreating to $45,191 at the time of this writing.
Infections, hospitalizations, and deaths all decreased markedly this week. The current 7-day moving average of daily new cases (136,558) decreased 12.7% from the previous 7-day moving average (156,341). Hospitalizations decreased 4.1% to 11,754 from the prior 7-day average (12,251). Deaths decreased 11.3% to 1,077 compared with the previous 7-day moving average of 1,214. However, the situation regarding hospitalizations among children is concerning. The rate among children from 5 to 11 years of age has tripled from 0.3 per 100,000 to 0.9 per 100,000 from June 26 through August 21.
Market Data Points Next Week
Monday – Oracle (ORCL) reports.
Tuesday – Consumer Price Index.
Wednesday – Empire State Manufacturing.
Thursday – Initial Jobless Claims. Retail Sales.
Friday – Consumer Sentiment.
Last week’s trading…
Monday– Markets closed in observance of Labor Day.
Tuesday – Dow (269) to 35,100, Nasdaq +10 to 15,374 (record close), S&P (15) to 4,520.
- Eight of the eleven S&P sectors traded lower, led by Industrials, Materials and Real Estate.
- Supplemental unemployment benefits expired over the weekend for 7 million Americans.
- 3M (MMM) traded down 4.53% and along with Honeywell (HON), Amgen (AMGN), Boeing (BA) and Coca-Cola (KO) were to blame for the Dow’s underperformance.
- Bitcoin was officially adopted as the official currency of El Salvador, the first country to adopt a crypto asset as its national currency.
- Crypto assets had a tough day despite the El Salavador news, bitcoin was down 10% and Ethereum lost nearly 11%. Traders blamed “sell the El Salvador news”, profit taking, glitches at several exchanges and a $44 million sale on a Seychelles crypto exchange.
- The 10-year U.S. Treasury yield rose nearly 4 bp to 1.364%.
Wednesday – Dow (69) to 35,031, Nasdaq (87) to 15,286, S&P (6) to 4,514.
- The Job Opening and Labor Turnover Survey (JOLTS) showed a record of 10.9 million job openings in July, up 749,000 or 6.9% from June. Hiring was little changed at 6.7 million, up 4.5%
- Dallas Fed President Kaplan said that tapering should be announced in September, begin in October, and wrap up in eight months despite today’s JOLTS number and last Friday’s lackluster Non-Farm Payrolls number. And New York Fed President Williams said that tapering could begin prior to year-end even in the face of lackluster job growth.
- Eight of eleven S&P sectors traded lower again today, led by Energy, Materials and Real Estate.
- The 10-year U.S. Treasury yield fell nearly 3 bp to 1.338%.
- Earnings: Lululemon (LULU) traded up 13% and Restoration Hardware (RH) traded up 1.32% both on better-than-expected earnings.
Thursday – Dow (151) to 34,879, Nasdaq (38) to 15,248, S&P (20) to 4,493.
- Initial Jobless Claims fell to a pandemic low 310,000 vs expectations of 335,000 and last week’s upwardly revised print of 345,000.
- Today marked the third consecutive day that eight of the eleven S&P sectors traded lower, led by Real Estate, Healthcare and Utilities. Of the three positive sectors, Materials and Energy were almost unchanged and Financials was the best performer, up a scant 0.25%.
- The European Central Bank said today it would begin to taper its bond buying program but would continue to remain dovish regarding raising interest rates.
- Fed Presidents Kaplan, Rosengren, and Kashkari all spoke today but the only headlines were that the first two pledged to sell all active investments (read individual equity holdings) and own only passive investments (ETFs and Mutual Funds).
- The 10-year U.S. Treasury yield fell nearly 4 bp to 1.30%.
Friday – Dow (271) to 34,607, Nasdaq (132) to 15,115, S&P (34) to 4,458.
- August Producer Price Index printed up 8.3% year over year, the biggest jump since 2010 and was up 0.7% month over month vs 0.6% expected.
- Not a single S&P sector was spared today, with all eleven trading lower. Utilities, Real Estate, and Technology were the worst performers.
- Apple (AAPL) was a major part of the underperformance in technology, trading down 3.31% after a court ruled they could not force applications to use Apple Pay for in-app purchases.
- The 10-year U.S. Treasury yield rose 4 bp to 1.341%.
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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.