[Chart courtesy of MarketWatch.com]

1. Moving the markets

Last week was a roller coaster ride with the S&P 500 dropping some 4% in the first three trading days but making up most of it during the last two and ending down only 1.4%.

The Nasdaq fared the worst and continued this trend this morning by leading the other two major indexes to the downside, as an early drop put traders on edge. The rotation out of growth stocks kept punishing the tech sector while benefiting the cyclical and value arenas.

Today’s action showed that Small Caps and QQQs were on the selling block, losing 0.64% and 0.61% respectively, whereas the value ETF RPV eked out a 0.52% gain, along with the Small Cap Value fund IJS, which added 0.58%.

In the end, however, this afternoon’s bounce-back severely reduced the early morning losses, making the red numbers appear less daunting.

Last week’s inflationary numbers of the CPI/PPI releases finally caused some discomfort, which explains not only the above rotations, but also that Gold may after all still have validity in investors’ portfolios. That meme was on everybody’s mind today, as the Gold ETF GLD rallied not only 1.18% but also recaptured its long lost $1,800 level and closed at its highest point since January.

The 10-year bond yield roundtripped and inched higher into the close after an early morning drop. However, we’re still below the highs of last week, which exceeded the 1.7% level when the CPI number was released.

The US Dollar Index eased up after last week’s rally and settled at a level that is close to where it was before bond yields ramped higher last Wednesday.    

With inflationary forces (CPI/PPI) being opposed by an economic slowdown (disappointing job creations), it will be just a matter of time before the dreaded “S” word, as in Stagflation, will be uttered by the mainstream media.

That leaves me pondering: “how will equities react?”

[Chart courtesy of MarketWatch.com]

1. Moving the markets

After three days of relentless selling, the major indexes seemed to find a bottom today, as dip buyers stepped in and gave a long overdue assist. The Dow and S&P 500 took the lead, but the much beaten-up Nasdaq managed a decent showing, along with Small Caps, which had taken a severe beating over the past few days.

For some reason, yesterday’s inflation print, along with spiking bond yields, were viewed in the rear-view mirror, even though today’s PPI showed that April Producer prices exploded 6.2% YoY, far worse than the expected 5.8%. As ZeroHedge pointed out, sequentially, the PPI was shockingly hot, rising 0.6% MoM, which was double the expected 0.3%.

That means inflation is here to stay, when considering Friday’s disappointing jobs report and this week’s CPI/PPI numbers, you won’t have to look far to see the dreaded “S” word (Stagflation) mentioned by those in the know. If you were around in the early 1980s, you saw a similar pattern, namely inflation and no growth. We’ll have to wait and see if history repeats itself.

Despite dipping into the close, we saw solid gains across the board with “value” still outperforming “growth.”  The US Dollar was essentially unchanged, 10-year bond yields slipped to 1.66%, and the Gold ETF GLD managed to eke out a modest gain of 0.42%.

On deck tomorrow will be April retails sales which, according to some analysts, will be another big miss vs. expectations. Why not? Nothing else has met expectations this week, but the question is “how will markets react?”

On a personal note, I am out tomorrow and will not be back in time to write the Friday report. My regular posting will resume on Monday.  

[Chart courtesy of MarketWatch.com]

1. Moving the markets

US core consumer price inflation reared its ugly head as a 0.2% expected rise in the CPI index turned out to be wishful thinking with the real number showing a surge of 0.8% MoM, which represents an explosion of 4.2% YoY. As ZeroHedge pointed out, this is the biggest YoY jump since September of 2008 and the biggest MoM jump since June 2008:

Core CPI was expected to rise by the most this millennia, but it was hotter than that. The index for all items less food and energy rose 3.0% over the past 12 months; this was its largest 12-month increase since January 1996… and the MoM jump of 0.92% is the biggest since 1981.  

As a reminder though, there is nothing to see here, Fed is focused on jobs, not inflation which is “transitory”… forget about your crumbling cost of living… as real wages crash…

Consequently, the equity markets got thrashed, with the tech sector and Small Caps taking the brunt of the beating. And, as was to be expected, bond yields spiked with the 10-year slashing through the 1.65% level and touching its recent high from April 29.  

The US Dollar pumped and dumped and then surged higher. The combination of higher yields and a rebounding Dollar took the starch out of Gold’s early upswing, and the precious metal succumbed to the bears as well.

Just like yesterday, there was no place to hide, and it remains to be seen if the dip buyers, who were conspicuously absent today, will make their presence known tomorrow.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

We saw another wild day in the markets with the major indexes tanking, as the Nasdaq was still negatively influenced by rising valuations and ever climbing inflation fears.

It was a strange day, because the tech sector rebounded in the afternoon, in part due to Amazon Buyback rumors, which traders took as a hint that the sell-off may have been overdone. As a result, the Nasdaq bounced back to its unchanged line, but the other 2 major indexes remained in the red with the Dow leading the downside charge.

On the economic side, we learned that job openings soared to a record high of 8.1 million with the labor market being totally out of sync. Nobody wants to work and, thanks to the current administration’s monetary give-away, it’s more “profitable” for many to sit at home and collect stimulus checks and other assistance in amounts larger than their salaries would be.  

And that does not only apply to low-end jobs. Commented ZH:

It looks like the hiring (and retention) shortage isn’t just for rank-and-file minimum wage jobs.

UBS has now said that, amidst historic competition and a “retention crisis” in the investment banking world (which we noted weeks ago), it is going to pay a one-time $40,000 bonus to its global banking analysts when they are promoted. This is double what some of the bank’s competitors are offering.

Despite the chaos in the markets, the US Dollar went sideways again, as it did for the past 2 sessions. 10-year bond yields flip flopped and, after diving sharply early on, surged back into the close and over the 1.6% level. Gold followed the same theme by recovering towards the unchanged line after an early drop.

The only solid green number we saw all day was the Commodity index which, after yesterday’s dump, reversed and surged higher.

No matter what asset class you owned, there was no place to hide, because the bears were in no mood of taking prisoners.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early rally, at least for the Dow, petered out with all 3 major indexes diving into the close. The S&P 500 managed to hug its unchanged line for most of the day but succumbed to weakness in the end with the Nasdaq being the guilty party dragging down the indexes.

Technology continued its slump, making Friday’s gains look like a dead cat bounce, as traders rotated out of the high-flying tech sector and moved into companies better suited for a strong economic rebound.

“The tech price action is especially frustrating for many as the thought was Friday would elicit a more sustainable rebound in the space,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “Instead, the group is seeing aggressive selling and accumulating technical damage as prices breach key levels.”

SmallCaps got thrashed with the widely held VBK losing 2.7%, and the sector closing below its 50-day M/A, as Bloomberg shows. Surprisingly, commodities reversed the northerly trend and gave back some of their recent gains, as did Lumber futures, whose reckless bullish ascent has contributed to sharply increased pricing for new homes.

Despite the US Dollar being flat, and the 10-year bond yield rising back above 1.60%, Gold managed to eke out a 0.35% gain and produced one of the few green numbers in today’s roller coaster ride.

It was a sloppy start to a new week, despite early promises, and may have been simply a hangover from Friday’s disgusting jobs report.