When Powell Talks, Markets React

Another session that I chalk up to consolidation of big-time gains.  Still, there is no doubt the broad market is looking for a spark.

There were five winning sand six losing sectors, although only Consumer Discretionary was off more than one percent.   

Energy stormed back after government data pointed to a drawdown.

Communication Services rocked paced by Twitter (TWTR), which posted strong gains in the most recent quarter and higher users.  I often ask investors not to invest based on their politics, and this is another example of what I mean.

Twitter has erased a ton of users, and yet, its total count surged during the quarter:

• US m-DAU 37.0 million from 31.0 million
• Intl m-DAU 155 million users from 121 million

It was the top percentage gainer in the S&P 500 but still a woeful investment from the IPO opening trade to $44.90 back in 2013.

Determined Buyers

There were slightly more decliners than advancers but up volume on the NASDAQ continues to tell a story of feverish demand for the hottest stocks in the market.  The notion of 7.1 billion up volume is remarkable.   The purists are upset, but at this point,  its mostly jealousy.

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Mary Jane

I'm in love with Mary Jane
She's my main thing
She makes me feel alright
She makes my heart sing

Rick James

There is no doubt the rally in marijuana stocks will have a lot of folks playing their favorite odes to weed, including the classic from Rick James. These stocks are doing more than making hearts sing – they are making wallets belt out a few tunes as well.

There could be a lot more room to the upside considering highs established during the 2018 rally.

Broad Market Gains

When the market busted out of the gate in January, this looked like it would be a more inclusive rally, as new winners piled up each day. Then it kind of reached a plateau.  Then it began to plunge in that last week, which took the S&P 500 from a sure fired up January to a loss.

Winners are on the move again with 336 components up an average of 10.03%.   This is great stuff for a market that continues to be scorned by so many experts.

While the S&P 500 list of gainers are impressive, it pales in comparison to the 818 winners on the NASDAQ, which have powered higher an average of 21.1% already. Yes, most professional money managers would take that for an annual return.

When Jay Powell Speaks, People Listen (and markets react)

Yesterday Fed Chair Jay Powell spoke to the New York Economic Club and stayed the course on keeping rates low the foreseeable future. 

His comments were largely as expected, but three really stood out. 

• Inflation headlines will increase but won’t mean much.
• Rates will not automatically go up even with full employment
• The real unemployment number is 10.0% not 6.3%

I was thrilled to hear the head of the Federal Reserve admit we should stop using the official unemployment rate derived from the U3 reading.  When the unemployment rate can decline as people leave the labor force, then it’s a farce – plain and simple.

Powell is correct that the current employment data does not properly reflect the carnage of last year and its lingering effects. 

Powell needed on lay it on thick because his mission requires a sense of emergency with remedies that go farther than the past.   With that in mind, the Fed will keep buying bonds at the rate of $120 billion per month.  And yes, the economy will be allowed to heat up well above 2.0% inflation.

Buckle up boys and girls, it is getting hot in here.  Meanwhile, the market liked the news.  But something tells me there are still folks holding out for negative rates or buying stocks.

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Today’s Session

The major indices are in the green at the start of trading.  The cannabis volatility continues, and this morning they are headed lower.

Initial jobless claims remained elevated at 793k vs consensus of 760k. Continuing claims held steady at 4.54M; consensus 4.42M. Ohio saw a huge surge in jobless claims, as Florida saw the biggest drop.