1. Moving the markets

Early weakness gave way to a mid-day pump, which was followed by a date session rip with all three major indexes closing in the green. The laggard again was the Nasdaq, as “value” continued outperform “growth.” YTD, the Russell 1000 Value index has gained 17%, while the Russell 1000 Growth Index shows only a meager 5%.

It seemed like traders were front running tomorrow’s jobs report, which is highly anticipated due to its representation of the labor market recovery. If today’s much improved weekly Initial Jobless Claims, which dropped to a pandemic low of 498k vs. expectations of 527k, is any indication, we might be in for a surprise. Despite today’s encouraging improvement, keep in mind that over 16 million Americans remain “on the dole.”

“Today’s read is another proof point that we’re one step closer to full economic recovery, sooner than some may have expected,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial. “As we see some serious momentum building on the jobs front, all eyes will be on how this plays into action taken by the Fed, if any.”

Bond yields were in retreat mode with the 10-year holding steady below the 1.6% mark, while the US Dollar did its best imitation of a swan dive, as Bloomberg demonstrates in this chart. This combination did wonders for Gold, which surged 1.7% and finally recaptured its $1,800 level.

We will now have to wait and see if tomorrow’s jobs report can indeed live up to these high expectations, or if we will be witnessing the old standby routine, namely “buy the rumor, sell the fact.”

1. Moving the markets

Supporting the initial comeback bounce in the markets was Treasury Secretary Yellen, who completely reversed her hawkish talk on interest rates.

ZeroHedge presented it this way:

“Let me be clear it’s not something I’m predicting or recommending,” Yellen says about rates, flip-flopping her earlier perspective entirely.

Then she addressed the issue of inflation, toeing the establishment line that it will be “transitory” for the next six months or so…

She added that if there is an inflation problem, she is certain the Federal Reserve can be counted on to address it.

That’s all it took to pull the major indexes out of the basement and into green territory, at least early on and before the roller coaster ride opened up. Supporting actors were strong earnings results and general optimism, but they did not help the Nasdaq to return above its unchanged line.

Volatility picked up in part due to inflationary forces being hard at work, with the Bloomberg Commodity Index adding another up day, it’s 16^th straight and the highest level since 2015. However, keep in mind that the Fed considers this “transitory,” though they are living under the illusion that they are equipped to control accelerating prices.

A major sell program kicked in later in the session and took the starch out of upward momentum, just about the time as the Biden administration supported the waiver on Covid vaccine-patents at the WTO, as ZH pointed out.

Bond yields spiked initially above the 1.6% level but sold off into the close dropping to 1.57%. The US Dollar trod water all day and traded in a tight range, while Gold managed to eke out a small gain but was unable to conquer its $1,800 level.  

And, as we have seen lately, “value” outperformed “growth.”

1. Moving the markets

After yesterday’s strong bullish bounce into May, the picture looked anything but warm and fuzzy this morning, when the major dropped sharply but managed to rebound off their lows, however, only the Dow climbed back into the green.

The Nasdaq had its worst day since March, as fears of rising inflation, concerns of higher bond yields as well as the Biden administration’s potential tax hikes extracted their pound of flesh from the tech sector.

It was none other than Treasury Secretary and former Fed head Janet Yellen, who put the bulls on notice that changes might be forthcoming. Here are her highlights:

“It may be that interest rates will have to rise a little bit to make sure our economy doesn’t overheat.”

“We’ve gone for way too long letting long-term problems fester in our economy.”

Ouch! That was enough to send the markets reeling, and— stocks puked as one would expect at the first signs of the punchbowl being taken away…as ZeroHedge commented so eloquently.

That was followed up by another bon mot, namely: We wonder what Jay Powell will have to say about Janet stepping on his toes? Did she just start the process of thinking about thinking about thinking about normalization?

Tongue in cheek comments aside, the US Dollar jumped after Yellen’s remarks, which demolished Gold’s early gains and pushed the precious metal back into the red. Value outperformed Growth with RPV storming back into the green during the afternoon recovery.

The 10-year bond yield chopped around aimlessly but ended up below the 1.6% level. For sure, as I have commented on may occasions, inflation is a concern and you only need to look at trend of the Commodity Index, which continued its rise to the highest since 2011, as ZH pointed out.

And again, via ZH, Bloomberg updated the Global Liquidity Proxy, which shows that, absent of further stimulus, the S&P 500 may drop but find support around the 3,900 level.   

1. Moving the markets

The major indexes, except for the Nasdaq, continued last month’s bullish theme on the first trading day of May by vacillating above their respective unchanged lines, as the Dow led with a 0.70% gain.

With the continual reopening of the economy retailers benefited, also supported by New York Gov Cuomo’s announcement that most capacity restrictions will be lifted across NY, NJ, and CT with 24-hour subway service in NY City to resume later this month.

Traders now are worried about the truism of the adage “sell in May and go away,” which CNBC explained like this:

Data going back to 1928 shows that the May-October period has the lowest average and median returns of any six-month period of the year with the S&P 500 up 66% of the time on an average return of 2.2%, according to Bank of America.

However, right now another busy earnings week is on deck with much attention being given to Friday’s widely watched and eagerly expected jobs report.

The US Dollar tanked, while 10-year bond yield followed suit by breaking back below its 1.60% level, both of which are the ideal combination to push Gold higher. Today was no exception, and the precious metal rallied 1.39% stopping just short of its $1,800 level.

With inflationary fears rising, it came as no surprise that the Commodity index surged adding some 1.12% in the process and continuing its ascent to higher prices.

ZeroHedge, in its infinite and spot on wisdom proposed that we need a bigger global balance sheet, as Bloomberg charts here, or dire consequences, like a slipping market, may be on the horizon.