1. Moving the Markets

It was another mixed day in the markets as encouraging news via a stronger-than-expected ADP employment report was offset by a collapse in oil prices, which got hammered at the rate of -5.38%, their biggest drop in over a year, caused by a bearish inventory report.

The ADP report showed that private companies added the most jobs in three years in February (280k), which is interpreted as a sign of stronger economic growth. The U.S. government will issue its own broader jobs report on Friday, which will be the last reading before the Fed’s verdict on interest rates due out next week.

The 10-year yield jumped to 2.56% from 2.52% and is now in danger of crossing the 2.6% threshold level, which is widely associated with having a negative effect on equities. Of course, 2.6% is not a hard number, but a yield in the range of 2.6% to 3% is considered a warning sign; sort of the canary in the coalmine.

Ever since Trump’s speech to congress a week ago, the markets have been slipping and sliding, although the magnitude of the retreat has been small and only 0.9% as measured by the Dow. However, the sell-off has been broad based with macro data, emerging markets, copper, high-yield credit, REITs and crude oil all breaking down as “derisking” seems to have been the mantra.

For the time being, however, the major trend in the domestic investment arena, with the exception of a few sectors, remains bullish as my TTI indicator in section 3 below shows.

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1. Moving the Markets

One look at the above chart and you’ll notice something that we have not seen in a long time. After the indexes spent all day below the unchanged line, the usual late afternoon ramp, which we’ve become accustomed to for a long time, did not materialize as stocks took a another dive but were saved from worse by a last minute upturn.

To me, things look sort of dicey right now. A week ago, the Fed announced via its various mouth pieces that a rate hike was imminent meaning it was forthcoming during their March 15 meeting, as Fed chief Yellen seemed to confirm during last Friday’s conference. While we all know that the Fed behind the curve with their rate hike effort, I think they are caught between a rock and a hard place.

According to the Atlanta Fed, the GDP forecast was revised from 1.8% last week to just 1.3% today. That is a huge drop, especially in view of the fact that this number was more than double, or 2.7%, just one month ago. This confirms what I have been pounding on for quite a while, namely that economic conditions are weakening and not strengthening as MSM reports almost daily. That condition would exactly be the wrong time for a rate hike.

If you consider that inflation officially has accelerated to 2.5%, you can see that GDP is actually in negative territory, which means the economy is shrinking and not expanding. Makes me wonder if stocks are finally catching on to this bitter reality? We’ll have to wait a while longer to be sure that the tide has actually turned; right now it looks as though this could be the proverbial canary in the coalmine.

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1. Moving the Markets

The major indexes started out the week on a negative note, rallied off the lows but did not manage to climb above the unchanged line. Setting the sour mood were news reports from N. Korea over the weekend that they had fired four ballistic missiles into the sea northwest of Japan. That was followed by tumultuous news from the Trump administration along with lack of details regarding his economic plans.

Add to that setbacks in filling his Cabinet posts and accusations of Obama wiretapping Trump power during the later part of the election campaign, and you have enough reasons to cast some questions as to the longevity of the post-election rally. For sure, once markets figure out that the Trump economic initiative, as well meaning as it may be, will not be executed in the expected time frame, you may see more weakness creep in.

One of the things discussed over the recent past was the question as to whether the entire Fed stimulus program of trillions of dollars over the past 8 years benefited Wall Street or Main Street. We just got the answer. Take a look at this chart:

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