June 7, 2024

Special Comment – the next edition of the Daily Market Notes will appear a week from Tuesday, June 18th. (“fino ad allora”)

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After setting an all-time high for the 25th time this year, the S&P ended slightly lower by 1 point to 5353. NVDA turned an opening gain of 33 points into a fast negative situation and could not get it together and ended down a bit, which threw this index off as well.

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The Dow was the hero as after it started out lower, it sort of reversed positions with the S&P and ended higher by 78 to 38,886 led by advances in CRM, PG, V and AMZN.

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The Nasdaq also ended slightly lower after its record close the day before with a 14 point decline to 17,173 as AAPL also turned an early gain into a closing decline, so the fact that two of the big three ended slightly down prevented this index from gaining again.

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The Russell 2000 Index of small stocks, which has been more of a follower than a leaders, also ended slightly down with a 14 point loss to 2049 and the VIX also ended down which is somewhat unusual on a mainly lower day, and it finished at 12.56 which is right at the support level.

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BIG tumbled 18% after reporting a larger loss for the latest quarter than expected. The retailer said it missed targets for sales because its customers are continuing to pull back on their spending, particularly for things that aren’t essentials.

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Another retailer, FIVE, gave more discouraging comments about how its customers are doing. Its profit and revenue last quarter fell short of analysts’ expectations, and the CEO said that struggles for the company’s core lower- income customers dragged on results, even as it saw strong growth from its higher-income customers. As a result, its stock dropped by 10%.

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Many retailers and other companies have been highlighting a split between their customers making lower and higher incomes. Inflation is particularly hurting the lower end, who are struggling to keep up with a cost of living that is still rising, even if inflation is not as fast as before. That threatens to crack a linchpin that has kept the U.S. economy out of a recession despite high interest rates: strong spending by U.S. households.

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Another factor that has helped U.S. consumer spending stay so strong has been a remarkably solid job market. But the weekly jobless claims showed that 229,000 applied for benefits last week when economists were expecting to see a slight decline. The numbers are still low compared with history, but they could suggest some slowing in the job market.

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In a potentially discouraging signal for markets, a separate report on Thursday said the productivity of U.S. workers wasn’t quite as strong in the first three months of the year as economists thought. That’s key because strong productivity gains could allow wages for U.S. workers to keep rising without adding as much upward pressure on inflation.

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After the economic reports, Treasury yields held relatively steady. The yield on the 10-year Treasury remained at 4.28%, where it was late Wednesday.

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LULu rose by 5% after reporting better profit for the latest quarter than analysts expected, in large part because of strong growth in sales outside the Americas. SJM also rose after the company behind Uncrustables and Jif peanut butter likewise topped profit expectations.

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HOOD rose 6.4% after saying it agreed to buy Bitstamp, a cryptocurrency exchange. The company said that the deal, which still needs regulatory approvals, will bring in customers from around the world, including the European Union and Asia.

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And in the most ridiculous stock of all, GME soared by 47.5% in the latest whipsaw move for the video-game retailer’s stock. It has been particularly volatile since a central character from its initial supernova run in 2021 recently returned to social media after a yearslong hiatus. The online hero, who goes by Roaring Kitty among other nicknames, is scheduled to return to YouTube for a live stream on Friday.

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So in a sense, a young man basically has more influence on a particular stock than famed investor Warren Buffett or even the Federal Reserve Chairman Jay Powell, and it is difficult to believe that what he says could send the stock even higher, or if he said that he sold some of his holdings, back down again, and the regulators are certainly badly missing in action for this one.

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Now perhaps to undercut this character, the stock announced its earnings report this morning instead of Tuesday evening and said that they will issue additional shares. This has knocked the stock down to the 37 area from the 62 level that it was trading at last night after the insane rally yesterday.

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And what about all those “investors” who paid crazy prices for out of the money options for today’s expiration on the belief that this guy can wave the magic wand once again and now they are going to be stuck with worthless merchandise for the privilege of buying them on what this guy says or what is he now going to say? And this report was written ahead of his “press conference” so if anything materially changes, please take this into consideration, thanks.

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The jobs report came in much higher than what the “experts” said it would be, as the number came in at 272,000 versus the consensus for 180,000. Gains were most prominent in the healthcare and hospitality industries as the aging baby boomers need either medical services or travel. The unemployment rate rose to 4% which was the highest since January 2022. The average workweek rose to 34.4 and the labor force participation rate eased to 62.5.

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Policymakers have reasons to start feeling cautiously optimistic on the labor market front as wage growth is returning to a sustainable range while labor turnover is softening, so we will see how the report matched expectations.

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As of now, virtually no one expects the Federal Reserve to make any move on interest rates at its meeting next week. But the hope is still for the Fed to cut its main interest rate at least once this year, down from its highest level in more than two decades.

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The European Central Bank on Thursday became the latest in the world to cut its own interest rates. The bank’s president, Christine Lagarde, said inflation there had eased enough to begin lower rates but declined to say how the future path lower would look. Earnings this week include: yesterday – LULU, SJM higher and FIVE lower; today - DOCU lower and MTN higher.

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Economic reports will see: yesterday – weekly jobless claims rose to 229K, April trade deficit narrowed to 74.6 billion; today – the big one with May non-farm payroll report on 175,000 last month (see above).