The Long Term Investor

As usual....nothing to see here.....move on.

Stock market news today: Stocks slump amid hawkish Fed, sticky inflation signs
Here's what's moving markets on Friday, February 17, 2023.

https://finance.yahoo.com/news/stock-market-news-live-updates-february-17-2023-124607352.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks fell Friday morning as investors pointed to a continued risk-off tone, with tech stocks underperforming, bond yields higher, and a stronger dollar.

The S&P 500 (^GSPC) slumped by 0.6%, while the Dow Jones Industrial Average (^DJI) declined by 0.5%. The technology-heavy Nasdaq Composite (^IXIC) plunged by 0.6%. All indexes are headed for its lowest close since January.

Tech stocks underperformed, while consumer discretionary and communication services were the worst sector performers.

The yield on the benchmark 10-year U.S. Treasury note rose to 3.88% Friday morning. The dollar index added 0.4% to trade at $104.32. Energy traded weaker, with U.S. benchmark WTI crude oil down about 3.5% to around $75.80 a barrel.

Stocks continued a sell-off from Thursday, when investors parsed through more hotter-than-expected economic data and hawkish Fedspeak.

On the macro front Friday, January’s import prices slumped for the seventh consecutive month, declining to 0.2%, as lower fuel prices more than offset higher nonfuel prices, the Labor Department said Friday.

Meanwhile, Federal Reserve Bank of Richmond President Thomas Barkin continued a more hawkish tone from officials, saying the labor market remains "quite hot" and the "risk of doing too much outweighs the risk of doing too little." Wall Street also expects to hear from Federal Reserve Governor Michelle Bowman.

Data out Thursday showed supplier prices rose at a monthly increase of 0.7%, hotter than the 0.4% expected by economists. Coupled with a hot consumer price reading for the month, recent data has driven worries that the central bank will maintain its hawkish stance, drive interest rates higher, and keep them there longer.

That narrative got a boost following two other Fed officials' commentary on Thursday suggesting larger rate hikes this month amid sticky inflation.

“On the back of those comments, investors moved to price in a growing probability that the Fed might choose to move by more than 25bps at the next meeting in March,” Jim Reid and colleagues at Deutsche Bank wrote in an early morning note Friday morning.

Economists at Bank of America are forecasting a quarter-percentage point interest rate hike in March and May, and then a pause.

"Resurgent inflation and solid employment gains mean the risks to this outlook are too one-sided for our liking," wrote the team at Bank of America. "March and May hikes appear very likely, and the Fed might have to hike further if inflation, job growth, and consumer demand refuse to soften."

In single stock moves, shares of DraftKings (DKNG) jumped 15% at the open, the highest since August after the online sports betting company reported fourth-quarter revenue of $855.1 million, above analysts expectations of $798.6 million. Active monthly payers climbed 31% to 2.6 million, higher than the 2.5 million forecasted.

Applied Materials (AMAT) stock rose after the semiconductor equipment vendor topped Wall Street’s expectations for the current period and its fiscal first quarter.

Intuitive Machines (LUNR) shares traded lower Friday as the company closed its SPAC merger with Inflection Point Acquisition this week. The company aims to be the first American private venture to touch down on the moon.

DoorDash (DASH) shares climbed after the company reported a 40% revenue jump to $1.8 billion compared to the prior year. Total orders also came in higher at 467 million, a 27% increase from the previous year. The delivery service company also announced a stock buyback program and projected an upbeat guidance for the current quarter.

Shares of Moderna (MRNA) sank Friday morning after the company's flu vaccine study failed to reach one its goals.

Deere & Company (DE) climbed after the agricultural machinery giant beat expectations, with $11.4 billion in equipment sales, and earnings of $6.55 a share. The company is also projecting their net income of 2023 to be between $8.75 billion and $9.25 billion."

MY COMMENT

Nothing new here. It is amazing how often and for how long the financial media can use the same story over, and over, and over. At least 6-12 months now.

I really dont care if the next FED increase is 0.25% or 0.50%. The amount of each raise is meaningless. What counts is the final FED target which is still about 5.5% to 6%.

I dont think there is a chance of a snowball in hell that the FED will end up above this target rate. So....if they want to raise more and get us to the end of the rate increases quicker than doing a number of 0.25% increases......great....have at it.

 

Looks like we will have a nice three day weekend for investors.....and.....a short market week next week.

"Is the Stock Market Open on Presidents Day 2023?
The New York Stock Exchange, the Nasdaq Stock Market, over-the-counter markets, and bond markets will all be closed in observance of Presidents Day.

The bond markets will resume regular hours on Tuesday, Feb. 21, at 8 a.m. Eastern, while the other U.S. markets will reopen at 9:30 a.m"

 

Much of the markets having a bit of a pause for the past couple of weeks is the Ten Year Treasury yield.

10-year yield hits highest level since November as traders assess inflation data

https://www.cnbc.com/2023/02/17/us-treasury-yields-investors-digest-inflation-data.html

(BOLD is my opinion OR what I consider important content)

"U.S. Treasury yields climbed on Friday as concern over persistently high inflation and the prospects of tighter Federal Reserve policy for longer grew.

The yield on the 10-year Treasury hits highest level since November, reaching a high of 3.929%. It was last up 4 basis points at 3.886%. The 2-year Treasury yield also reached levels not seen in three months, last trading up 7 basis points at 4.692%.

Yields and prices have an inverted relationship and one basis point is equivalent to 0.01%.

Thursday’s producer price index reading for January came in higher than expected, causing investors to fret about inflationary developments and upcoming Fed monetary policy decisions.

Wholesale prices increased by 0.7% on a monthly basis in January after having declined by 0.5% in December. Economists previously surveyed by Dow Jones had expected January’s PPI to rise by 0.4%.

Data released earlier this week showed that consumer inflation rose by 0.5% in January, which was also a larger-than-expected increase.

Several Fed speakers hinted at further interest rate hikes after the data was released on Thursday. The central bank has been using rate increases as a tool aiming to cool the economy and ease inflation. Many investors have been hoping for the central bank to pause rate increases this year as they are concerned that high interest rates will cause the U.S. economy to contract.

On Friday, investors will be scanning comments from Richmond Fed President Tom Barkin and Fed Governor Michelle Bowman for further clues about what policy moves to expect. No key economic data is due."

MY COMMENT

Regardless of the headline......the rates we are seeing in various Treasuries are NOT above what would be considered "normal" in usual times. I am actually.....positively.... surprised that the rates on the various treasuries are as low as they are after the FED increases.

 

ACTUALLY....if you live in the world of REALITY.....the Ten Year Treasury yield is STILL at historic lows.

<a href='https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart'>10 Year Treasury Rate - 54 Year Historical Chart</a>

The current rate below 4% is among the lowest Ten Year Yields in the past 54 years. So much for the constant media hype about the HIGH rates and their impact on business. We are in a HISTORIC LOW RATE environment for business. You would never know this is you just read the current financial media.

 

GET WELL.....Zukodany.

You know if I did not own AMAZON I would probably see the current price as an attractive price to buy in. BUT....I do already own it. I am still reinvesting all dividends into the stock. I see it as a great company.....with a "potential" management issue.

I have seen many great companies have BIG ISSUES making the transition from founder management to the next level of management. I think that is happening with Amazon. I think it will take a year or two to see how this is going to sort out. If it works out well....I will continue with the stock. If it becomes more of a disaster....I will sell the stock.

Of course.....if I end up selling.....I will be watching for the company to change management and get some of their old magic back. At that point I would not have any issue re-buying the company.

 

Ok I am out of here to get ready to leave for my show this evening. We will be doing shows today and tomorrow evenings.

As I leave the board for the day.......the markets are firmly in the RED. At the moment the SP500 for this week is at.....(-0.88%). If we end at this level.....so what. This is a very minimal drop for a week. Basically......flat.

We are having an AMAZING year for investors......so far.

COURAGE.....ENDURE.

 

Time for a quick post.

You guys did a great job holding up the markets on Friday. You got the DOW to positive and limited the losses in the other averages.

As a result the SP500 was down ONLY......(-0.28%) for the week.

The NASDAQ was down by ONLY.....(-0.50%) for the week.

The DOW....ONLY down by (-0.13%)

A very minimal losing week for the markets.

 

This little summary says it all.

Dow closes more than 100 points higher on Friday, but notches third straight week of losses on rate fears: Live updates

https://www.cnbc.com/2023/02/16/stock-market-today-live-updates.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks were mixed on Friday as stubbornly high inflation and a rebound in rates continued to weigh on investor sentiment.

The Dow Jones Industrial Average rose 129.84 points, or 0.39% to end at 33,826.69. The 30-stock index rallied from lows of the day boosted by shares of Amgen and United Health
, which gained 2.69% and 2.41% respectively.

The S&P 500 shed 0.28% to end the day at 4,079.09, and the Nasdaq Composite fell 0.58% to close at 11,787.27. Energy was the biggest laggard. Devon Energy dropped 4.29%, dragging down the S&P 500.



CNBC
Yields on the 10-year and 2-year U.S. Treasury bonds hit levels not seen since November, weighing on equities early in the session.

Stocks are mixed on the week. The Dow ended down 0.13% for the week, its third negative week in a row — a first since September. The S&P 500 has shed 0.28% for the week, its second negative week in a row. The Nasdaq rose 0.59% on the week.

Investors continue to worry about how the economy and equities will hold up as the Federal Reserve hikes rates to tame stubbornly high inflation. In a Friday speech, Federal Reserve Governor Michelle Bowman said there’s a long way to go before the central bank reaches its target of 2% inflation.

“We have been in a very contentious tug of war between the equity markets and the Treasury markets,” said Art Hogan, chief market strategist at B. Riley. While Treasurys are signaling that the Fed is going to hold rates higher for longer, equities are not listening and instead looking for a soft landing.

“Equity investors seem to be looking through a couple more rate hikes and looking forward to a pause,” he added.

The moves came after major averages shed more than 1% on Thursday, after the Labor Department said the producer price index — an inflation metric that tracks wholesale prices — rose 0.7% last month. That was more than economists expected.

Next week, investors will continue to watch earnings season for signs of consumer strength or weakness. Home Depot, Walmart and Etsy are scheduled to report results next week."

MY COMMENT

Actually a pretty good week even if it was down. A very minimal loss for investors. I am still at about +10% year to date......not bad for just a few months into the year. A lot better than last year at this time.

Much of the moves we are seeing in the markets is related to daily and short term moves in the Ten Year Treasury yield. At the same time we have the financial media constantly fear mongering the "HIGH" Ten Year Treasury yield.

HOWEVER.......anyone that does a quick search of the Ten Year yield over the past 50-60 years will see that the current yield.....under 4%......is at the extreme low end of the curve for "normal"rates.

So the realistic and logical conclusion is that the media line is not true......and.....modern investors are too DUMB to realize that what they are being fed is simply.....WRONG. You would think that the professionals......."the financial reporters" and the Wall Street traders.....would be saying this. BUT......NO......this stuff supports their short term day daily trading and the market volatility they love to trade.

We are living in a society where IGNORANCE is rampant and increasing daily. Brings to mind something about......being the one eyed man, in a land of the blind.

EDIT: While checking my account today.......I saw that my "actual" YTD gain is +10.62%.

 

As I was driving yesterday I was listening to Fox Business on satellite radio. The Charles Payne show. He mentioned the FED and their constant and obvious attempts to talk down the stock markets with their comments.

I nearly cheered......I have commented on the same thing many times in this thread.

It is so obvious what they are doing. For some reason they think that TRASHING the stock markets is going to help them with inflation. Unfortunately for them.......they are not going to achieve anything with the economy or inflation by punishing investors. They are simply.....DELUSIONAL.

Of course they.......NEVER.......mention the primary cause of inflation to begin with and the continued inflation......the actions and spending by government.

 

Yep.....people are just starting to notice what has been obvious for some months now.

Economic forecasts are getting revised up, and people aren't thrilled about it

https://finance.yahoo.com/news/econ...people-arent-thrilled-about-it-135118589.html

(BOLD is my opinion OR what I consider important content)

"Stocks inched lower, with the S&P 500 declining 0.3% last week. The index is now up 6.2% year to date, up 14% from its October 12 closing low of 3,577.03, and down 15% from its January 3, 2022 closing high of 4,796.56.

“The bear market is over, but it is not the great reflation,“ Chris Harvey, head of equity strategy at Wells Fargo Securities, wrote on Monday. “We see neither a bull nor a bear market, just a market.“

Calling it a “‘just-a-market’ market,” Harvey said he expected “some giveback, but not a sharp near-term reversal.”

Indeed, we are hearing less from those who had previously forecast a big sell-off in the stock market in the early part of the year.

And while Harvey’s characterization of the stock market is a bit ambiguous, it isn’t paradoxical in the way many are viewing the economy.

An economy so good it’s bad

In last Sunday’s TKer, I discussed how bearish attitudes toward the economy were shifting bullish in the wake of strong economic data, noting that “it could take a few more weeks of resilient economic data before more economists officially revise their forecasts to the upside.“

Well, those revisions are already coming in. Following Wednesday’s strong retail sales report, JPMorgan, Bank of America, and Deutsche Bank were among firms joining Goldman Sachs in revising up their near-term GDP forecasts or putting off their expectations for a recession.

According to Census Bureau data, retail sales in January jumped 3.0% to a record $697 billion. This was the largest gain since March 2021, and it was much stronger than the 2.0% increase economists expected.

Excluding autos and gasoline, sales climbed an impressive 2.6% with gains in all retail categories.
The results were in line with Bank of America credit and debit card data released earlier this month showing an acceleration in spending.

After the retail sales report came out, the Atlanta Fed’s GDPNow model saw real GDP growth climbing at a 2.4% rate in Q1. This is up from 2.2% last week, and up considerably from its initial estimate of 0.7% growth as of January 27.

And it’s not just the hard data that’s looking rosier. The soft data seems to be reflecting a less pessimistic tone as well.

According to Goldman Sachs research published Tuesday, mentions of “recession” on quarterly earnings calls have fallen sharply.

According to Bank of America’s Global Fund Manager Survey published Wednesday, “Recession odds peaked in Nov'22 at 77% and have since declined to 24% this month (down 27ppt MoM), lowest since Jun'22.“


(Source: Bank of America)
Indeed, attitudes about economic growth have shifted to the upside.

To be fair, it’s difficult to quantify precisely what the economy will do in the very near future. But the confluence of data — including strong consumer finances and robust demand for workers — has been suggesting there was bias to the upside.

Unfortunately, many economists aren’t exactly thrilled as it puts at risk ongoing efforts to bring inflation.

Here’s the problem with all of this

The notion that good news about the economy is bad news for inflation has been renewed in the wake of very strong data on the labor market and consumer spending.

“My new take is good news is good news, great news is bad news,” Conor Sen, a columnist for Bloomberg Opinion, tweeted last week.

Accompanying many economists’ upward revisions to their economic growth forecasts were hawkish revisions to their expectations for the path of monetary policy: Deutsche Bank, UBS, Bank of America, and Goldman Sachs were among firms warning that the Fed would hike interest rates by more than previously anticipated as it extends its fight to bring down inflation.

And hawkish monetary policy represents headwinds for both the economy and the financial markets.

The big question is to what degree the strength in the economy interrupts the current downward trend in inflation. In other words, will we learn that the Fed’s claim that the disinflationary process started was premature?

It doesn’t help that last week’s consumer price and producer price reports were a bit hotter than some expected.

But one month’s data never confirms nor denies a trend. We may still be on track to achieve the goldilocks scenario where inflation comes down without the economy having to go into recession.

We’ll have to wait and see."

Reviewing the macro crosscurrents

There were a few notable data points from last week to consider:

Consumers are spending. According to Census Bureau data Wednesday, retail sales in January jumped 3.0% to a record $697 billion.
Industrial activity cools for a not-so-terrible reason. Industrial production activity growth was flat in December. Manufacturing output actually rose 1.0%. The main source of weakness came from something not everyone will complain about. From the Federal Reserve: “The output of utilities fell 9.9% in January, as a swing from unseasonably cool weather in December to unseasonably warm weather in January depressed the demand for heating."

(Source: JPMorgan)
Inflation continues to cool. The consumer price index (CPI) in January was up 6.4% from a year ago, down from 6.5% in December.

Adjusted for food and energy prices, core CPI was up 5.6% (down from 5.7%).

On a month-over-month basis, CPI was up 0.5% and core CPI was up 0.4%.

If you annualized the three-month trend in the monthly figures, CPI is rising at a 3.5% rate and core CPI is climbing at a 4.6% rate.
The bottom line is that while inflation rates have been trending lower, they continue to be above the Federal Reserve’s target rate of 2%.

Expectations for inflation ease. From the New York Fed’s January Survey of Consumer Expectations: “Median inflation expectations remained unchanged at the year-ahead horizon, decreased by 0.3 percentage point at the three-year-ahead horizon, and increased by 0.1 percentage point at the five-year-ahead horizon, to 5.0%, 2.7% and 2.5%, respectively.“
Inventory levels are up. According to Census Bureau data released Wednesday, business inventories climbed 0.3% to $2.45 trillion in December. The inventories/sales ratio was 1.37, up significantly from 1.29 the previous year.

Home builder sentiment improves. According to NAHB data released Wednesday, home builder sentiment improved in February. From the NAHB chief economist Robert Dietz: “While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market. Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.“
Credit card balances are up. According to the NY Fed data, credit card balances increased by $61 billion to reach $986 billion during Q4, which is above the pre-pandemic high of $927 billion. With the aggregate credit limit at $4.4 trillion, however, consumers are far from maxing out their cards.


(Source: NY Fed)
Debt delinquencies continue to normalize. From the New York Fed: “The share of debt newly transitioning into delinquency increased for nearly all debt types, following two years of historically low delinquency transitions. Transition rates into early delinquency for credit cards and auto loans increased by 0.6 and 0.4 percentage points, following similarly sized increases in the second and third quarters. Delinquency transition rates for mortgages upticked by 0.15 percentage points. Those for student loans have remained flat, as the federal repayment pause remains in place.“ For more on this, read: Debt delinquency rates are normalizing .


(Source: NY Fed)
Unemployment claims remain low. Initial claims for unemployment benefits fell to 194,000 during the week ending Feb. 11, down from 195,000 the week prior. While the number is up from its six-decade low of 166,000 in March 2022, it remains near levels seen during periods of economic expansion.

Putting it all together

We’re getting a lot of evidence that we may get the bullish “Goldilocks” soft landing scenario where inflation cools to manageable levels without the economy having to sink into recession.

And the Federal Reserve has recently adopted a less hawkish tone, acknowledging on February 1 that “for the first time that the disinflationary process has started.“

Nevertheless, inflation still has to come down more before the Fed is comfortable with price levels. So we should expect the central bank to continue to tighten monetary policy, which means we should be prepared for tighter financial conditions (e.g. higher interest rates, tighter lending standards, and lower stock valuations). All of this means the market beatings may continue and the risk the economy sinks into a recession will relatively be elevated.

It’s important to remember that while recession risks are elevated, consumers are coming from a very strong financial position. Unemployed people are getting jobs. Those with jobs are getting raises. And many still have excess savings to tap into. Indeed, strong spending data confirms this financial resilience. So it’s too early to sound the alarm from a consumption perspective.

At this point, any downturn is unlikely to turn into economic calamity given that the financial health of consumers and businesses remains very strong.

As always, long-term investors should remember that recessions and bear markets are just part of the deal when you enter the stock market with the aim of generating long-term returns. While markets have had a terrible year, the long-run outlook for stocks remains positive."

MY COMMENT

The last sentence above is the important lesson for long term investors........stand in there.

Yes.......amazing.....the so called experts are "revising" their estimates and predictions.....so they can be right about the end result.

The FED is delusional with their 2% inflation target. At that level we would be in n economy that is faltering and flirting with DEFLATION. A more historically accurate goal would be for inflation between 3% and 4%. this would represent a good solid growing economy.

The rally that has been happening in plain sight since the end of June 2022 is.....finally...being seen.

 

I have a couple of companies reporting this coming week. Home Depot of February 21....before the open.......and......Nvidia on February 23 after the close.

Something to look forward to next week.

It will be a short week for investors with the markets closed on Monday for Presidents Day.

 

Here is the coming week in advance.

Fed minutes, PCE inflation, Walmart earnings: What to know this week

https://finance.yahoo.com/news/stoc...ederal-reserve-retail-earnings-142330965.html

"Earnings from retail giants Walmart (WMT) and the Home Depot (HD) this week, along with the latest update on the Federal Reserve's preferred inflation measure and the minutes from the Fed's latest policy meeting will be highlights in the holiday-shortened week ahead.

U.S. stock and bond markets will be closed on Monday for President's day.

Results from Walmart and Home Depot, both due out before the market open on Tuesday, will offer further updates on the health of the U.S. consumer, which remains resilient in the face of stubbornly high inflation, most recently evidenced by January's retail sales data out last week.

On the economic data side, all eyes will be on the Personal Consumption Expenditures (PCE) price index — the Fed's most closely watched assessment of how quickly prices are rising across the economy — which is set for release Friday morning.

Prices in January likely jumped 0.5% over the prior month as measured by the PCE index, according to data from Bloomberg. in December PCE inflation rose just 0.1% month-on-month. On an annual basis, PCE inflation is projected to come in at 5% in January, no improvement from the year-over-year figure reported at the end of 2022.

Core PCE, which removes the volatile food and energy components out, is set to show a 0.4% climb over the prior month — ticking up slightly from 0.3% in December — and a marginally slower rise of 4.3% over the year, down from 4.4% in the last month of 2022.

If realized, those numbers would support recent indications inflation is not falling at the pace and extent investors have been hoping for, even as prices have stabilized from the peaks of the current cycle.

The Consumer Price Index (CPI) out last week showed inflation picked up in January, while cooling only slightly over the year to 6.4%. And producer prices shot up by the biggest amount in seven months in January.

This view has thwarted the market's recent momentum.

On Friday, the Dow Jones Industrial Average logged its third-straight losing week for the first time since September, closing down 0.1% for the five-day trading period.

The S&P 500 was down 0.3% for the week, its second consecutive week in the red, while the Nasdaq was an outlier, notching a weekly gain of 0.6%.

The bumpier-than-anticipated road to restoring price stability and strong economic data to start the year — nonfarm payrolls rose by 517,000 in January while retail sales surged 3% — have prompted Wall Street banks to revise their expectations for upcoming rate hikes by the Federal Reserve.

Teams at Goldman Sachs and Bank of America said this week they estimate three more rate increases this year; ahead of February's interest rate increase, some market participants had seen that move potentially marking the end of the Fed's rate hiking cycle.

Economists at Goldman Sachs and BofA each added additional 25-basis-point rate hikes in June to their forecasts, bringing both banks' projected estimates for the peak of the federal funds rate in this cycle to a new range of 5.25%-5.5%.

Bank of America also indicated evidence is strong for a potential 0.50% increase at the Federal Reserve's next meeting in March.

"In our view, several forces would have to come together to cause the Fed to revert to a larger 50-basis-point rate hike," a team of strategists led by Michael Gapen said in a Friday note.

Minutes from the Federal Open Market Committee's (FOMC) meeting Jan. 31-Feb. 1 out Wednesday afternoon will offer insight into the thinking behind officials' 25-basis-point increase earlier in the month.

Cleveland Fed President Loretta Mester said in a speech Thursday she would have favored raising interest rates by 0.50%, asserting that she and her colleagues have further work to do in taming inflation.

"The FOMC has come an appreciable way in bringing policy from a very accommodative stance to a restrictive one, but I believe we have more work to do," Mester said at a Global Interdependence Center conference at the University of South Florida Sarasota-Manatee College of Business.

"I don’t want to surprise the markets," Mester said. "We're better if we explain. In that meeting there was an economic case for [a 50 basis point increase] in my view, but the market wasn't expecting that. That does factor into my views about the proper thing to do at a meeting."

On the earnings side, Walmart will kick off a busy week of quarterly reports from Corporate America on Tuesday.

CFRA Research senior equity analyst Arun Sundaram predicts the supermarket giant will see continued trade-down benefits from inflation, particularly from higher-income customers, which is expected to boost its membership program Walmart+.

Macroeconomic uncertainly, however, does pose some downside risks to the company. Among those potential headwinds are weaker consumer spending from lower-income consumers given elevated inflation and rising interest rates, bigger markdowns on inventories, and continued product, wage, and transportation cost pressures.

Other notable earnings results in the upcoming week will come from the Home Depot, Alibaba (BABA), Keurig Dr Pepper (KDP), Live Nation (LYV), Moderna (MRNA), PG&E (PCG), and Warner Bros. Discovery (WBD), among others.

Beaten-up names like Coinbase (COIN) and Carvana (CVNA) will also report numbers after a junk rally that has lifted shares this year."

MY COMMENT

A busy four day week.....with lots of anticipated busy work. Really......none of the economic stuff above is unknown or shocking.

Nice of Goldman and BA to raise their rate hikes forecasts, bringing both banks' projected estimates for the peak of the federal funds rate in this cycle to a new range of 5.25%-5.5%.

Not exactly a HEROIC PREDICTION.....since the FED has been telling us this for over six months now. I say that the FED will go to somewhere between 5.5% and 6%. We are currently at 4.75%.......and....I anticipate 2-3 more increases of 0.25%.....(PROBABLY 3 more)......most likely three. Although they could slip in one more at 0.50% and a final one at 0.25%........if they are trying to be decisive to the markets. An increase of 0.50% would be aimed directly at the stock markets......but.....would have little to no impact on the general economy.....since the FED really has nothing they can do but sit and watch the economic fun due to the government simply, constantly, throwing them under the bus.

 

DUH......the move back to the office continues.

Amazon wants corporate staff to be in office 3 days a week

https://www.cbsnews.com/news/amazon-return-to-office-3-days/

(BOLD is my opinion OR what I consider important content)

"Amazon will require its corporate employees to return to the office at least three days a week.

CEO Andy Jassy announced the policy Friday in a memo to staff. The new policy, which goes in effect May 1, marks a shift from Amazon's current policy of letting leaders determine how their teams work.

Many companies have been calling their employees back to the office after the COVID-19 pandemic forced them to operate virtually.

Last month, Starbucks told its corporate employees to plan to work from the office three days a week. Disney is asking staff to plan for four in-office days starting in March. And Walmart said this week that it would require its tech teams to plan regular in-office work days.

Jassy said in his memo that Amazon made its decision after observing what worked during the pandemic. Among other things, he said the senior leadership team watched how staff performed and talked to leaders at other companies. He said they concluded employees tended to be more engaged in person and collaborate more easily.

The move could also help local economies, he said.

"I'm also optimistic that this shift will provide a boost for the thousands of businesses located around our urban headquarter locations in the Puget Sound, Virginia, Nashville and the dozens of cities around the world where our employees go to the office," Jassy wrote.

Jassy said the details of the policy haven't been finalized. He said he wanted to share the decision — made at a meeting of the company's senior leadership team this week — as early as possible. He said there will be certain roles that will be exempted from the policy, "but that will be a small minority."

Last month, Amazon announced it would slash 18,000 corporate positions in its efforts to prune payrolls that rapidly expanded during the pandemic lockdown. Other big tech companies, including Salesforce and Google, have been doing the same."

MY COMMENT

If I was a corporate employee......I would work from the office as much as possible. BUT.....that is just me and my drive to excel, exceed expectations, and move up in a business.

There comes a time when you can not let the workers control the company.

 

My account is doing very nicely today.....not moving at all. Well yes.....the markets are closed today.

 

I like this little article.

Some Perspective on Yield-Gap Comparisons

https://www.fisherinvestments.com/e...tary/some-perspective-on-yieldgap-comparisons

(BOLD is my opinion OR what I consider important content)

"Stocks can still compensate investors above and beyond Treasury returns.

Are stocks a good buy? With 13.5 months elapsed since last year’s bear market started—and the rebound since October 12 retracing little more than half the decline thus far—in a coldly emotionless environment, you might think the universal answer would be “yes.” But stocks are funny—when they are on sale, it often seems relatively few want to buy them. That is extra-true when bonds are also on sale since, when bond prices drop, yields rise. Such is the case today. With Treasury bills yielding around 5% and long-term bonds paying about 4% while earnings growth slows, headlines are starting to question stocks’ allure today. In our view, though, the comparison methodology has holes. And some historical perspective suggests it isn’t hard to see stocks’ appeal.

To compare stocks and bonds, some pundits use a metric called the earnings yield—the inverse of the S&P 500’s price-to-earnings (P/E) ratio. For the vast majority of the 2000s, it has been comfortably above Treasury bond and bill yields. Given the earnings yield is a rough approximation of stocks’ long-term expected price return, this means someone buying stocks could theoretically expect to return more than bond investors would receive in interest. These days, however, the gap is narrower. As Bloomberg noted this week, earnings yields now exceed 6-month Treasury bill yields by only about half a percentage point, the lowest since early 2001. The spread over 10-year yields, though higher, is also down lately—to its lowest level since 2007. Hence the questions about stocks’ attractiveness.

The comparison here isn’t entirely useless. Comparing companies’ borrowing costs to expected earnings yields gives a rough approximation of whether interest rates support investment. The same comparison can also show whether borrowing to fund a stock buyback is profitable (yes, after accounting for the US’s new 1% buyback tax). It can even be a decent snapshot of sentiment if the earnings yield isn’t skewed by short-term moves.

But the theory that it approximates long-term returns is hazy and general. In reality, stocks also pay dividends, businesses invest in new growth avenues and innovation turbocharges everything. The earnings yield doesn’t really hint at that. So, we don’t think comparing earnings yields to bond yields shows whether stocks or bonds are a better investment (and that is without factoring in all the things we think should underpin asset allocation decisions, including investors’ long-term goals, cash flow needs, time horizon and comfort with volatility). And after comparing stocks’ earnings yield to long-term bond yields for years and years, we have come to the conclusion that meaningful gaps between the two might be interesting but don’t predict future returns.

As Exhibits 1 (10-year Treasury bonds) and 2 (6-month Treasury bills) show, the comparison just doesn’t have much predictive power. Spreads were low and even negative throughout the 1990s—a fantastic time to own stocks. They were all over the map during the 2002 – 2007 and 2009 – 2020 bull markets. Interestingly, spreads rose during the 2000 – 2002, 2007 – 2009 and 2020 bear markets. They fell during last year’s, but we don’t think this says much. Rather, we think it is an after-effect of the fact that the Fed cut rates during those prior three and raised them during last year’s. That ancient and beyond widely known information is highly, highly unlikely to predict stocks, which are forward-looking and have long since priced Fed activity.

Exhibit 1: S&P 500 Earnings Yield Vs. 10-Year Treasury Yield


Source: FactSet, as of 2/16/2023. S&P 500 12-month forward earnings yield and 10-year US Treasury yield (constant maturity), 12/31/1995 – 2/15/2023.

Exhibit 2: S&P 500 Earnings Yield Vs. 6-Month Treasury Yield


Source: FactSet, as of 2/16/2023. S&P 500 12-month forward earnings yield and 6-month US Treasury yield (constant maturity), 12/31/1995 – 2/15/2023.

We also hesitate to read into the earnings yield at the moment. Now, we think it is still too early to say for sure that October 12 was the bear market’s low. Turning points are clear only in hindsight. But it is true that stock prices have bounced while earnings have fallen, which tends to happen in new bull markets. Earnings usually don’t recover until a quarter or two (in), registering the improvement that the new rally pre-priced. So, it is normal for P/E ratios to spike early in a bull market—which means earnings yields get temporarily depressed early on. It has the perverse effect of making stocks seem expensive when they are actually cheap, and the effect usually doesn’t even out for a few months.

If October 12 does indeed prove to be the low, then we would now be in the phase where stocks have bounced ahead of earnings. With about four-fifths of S&P 500 companies reporting, earnings fell nearly -5.0% y/y in Q4.[ii] Analysts presently project a slight Q1 decline as well. That means the P is up while the E is still falling—inflating the P/E and shrinking the earnings yield. We saw similar conditions after each of the prior three bear markets. And those subsequent bull markets did a fine job of compensating investors above and beyond Treasury returns. Needless to say, low earnings yields then didn’t predict low returns or inferiority to bonds. We doubt they do now."

MY COMMENT

I have never seen anything during my lifetime....other than a short time in the late 1970's and early 1980's where Treasuries had the chance to beat the stock markets.......especially for the long term. I think I will stick with stocks and funds.....especially at the current Treasury yields.

 

I mentioned this......DELUSIONAL.....target a few days ago.

The curious history of the Federal Reserve’s 2% inflation targeting, explained

https://www.cnbc.com/2023/02/20/the...ent-inflation-targeting-policy-explained.html

(BOLD is my opinion OR what I consider important content)

"The 2% inflation target is key to the Federal Reserve’s vision for stable prices in the U.S. economy, according to the Federal Reserve Bank of St. Louis.

Canada, Australia, Japan and Israel are among the many economies that include 2% in their inflation rate targets, according to the International Monetary Fund.

But, “the 2% inflation target, it’s relatively arbitrary,” Josh Bivens, director of research at the Economic Policy Institute, told CNBC.

Then, where exactly did this 2% inflation rate dream originate?

“You would think that ... maybe somewhere in the Bible, God says he wants 2% inflation,” Laurence Ball, professor of economics at Johns Hopkins University and a consultant for the International Monetary Fund, quipped to CNBC.

“It was invented, oddly, in New Zealand,” said Ball.

So, CNBC called up some New Zealand economists.

“We led the way in inflation targeting,” Arthur Grimes, professor of wellbeing and public policy at Victoria University, told CNBC.

In the late 1980s, New Zealand was facing incredibly high inflation when freshly minted Ph.D. economist Grimes started his work at the central bank, which at the time was not independent from the government.

“We were saying, ‘OK, if we have independence, what should we target? Interest rates or the money supply?’” Grimes said.

“And I just one day, I said, ‘Well, actually, what are we trying to achieve? We’re trying to achieve price stability. Why don’t we just have an inflation target?’”

The Reserve Bank of New Zealand Act of 1989 introduced inflation targeting and that policy is being used today in economies around the world. Canada announced its inflation target in 1991, and the United Kingdom followed suit in 1992. Then, Sweden and Finland declared inflation targets in 1993, according to the Organization for Economic Cooperation and Development.

It took until 2012 for the U.S. to declare its 2% inflation rate target.

And since then, there has been controversy over whether that target is justified.

For example, in 2017, some economists wrote a letter to the Federal Open Market Committee, making the case for a higher target.

“There’s no evidence that 3% or 4% inflation does substantial damage relative to 2% inflation,” said Ball, one of the economists who signed that letter.

Now, though, as the world shifts to a new post-pandemic normal, the inflation targets of central banks across the world have faced new scrutiny.

“It is, I think, an error to say 2% is somehow magically the right number,” former Federal Reserve Bank of Kansas City president Thomas Hoenig told CNBC."

MY COMMENT

This inflation target is even more MORONIC than it seems. So in reality.....it is a totally arbitrary number....adopted from New Zealand....in ONLY 2012.

This matches my memory. I remember very well back in the old days that inflation of 3-4% was considered a healthy economy. The 2% target is simply arbitrary and LOW by historical norms for our economy. Financial foolishness. Nothing more than an empty number thrown out there by the....."experts"......with absolutely no basis to anything. What a joke......on us.....of course.