The Buzz on Business for April 12th, 2024

The Producer Price Index complex, which measures inflation at the wholesale level, came in a tick better than expected Thursday morning. More on that in just a moment. And while speeches from two Federal Reserve Board members, which seemed coordinated and harmonized to us, attempted to hold out hope that rate cuts in 2024 were still very much on the table, let’s face it, that ship has sailed. Stocks are not going to get a boost from the Fed anytime soon. Not in 2024, and as we’ve said many times on this podcast, maybe not, probably not, in 2025, either.

But that doesn’t mean stocks are now irretrievably in decline. Oh no! There is the other side of the stock valuation calculation: earnings.

First quarter earnings season kicks off today. Profits are expected to have grown by 2% over the same period last year. That’s not great, but it is a whole lot better than decreases—or losses!

What is interesting to us is that the outlook is low and has been cut in recent weeks, leaving room for earnings to exceed expectations. And as we never tire of saying, Wall Street is an expectations game.

We watch earnings closely here at World Headquarters. Given the inflationary and interest rate environment, we expect earnings to be even more in focus here at the Ministry of Truth and on Wall Street over the next several weeks.

Stock Market Report

In three out of the last four days, stocks finished essentially flat. Falling or rising less than one-tenth of 1%. That was the case for the Dow on Thursday, while the rest of the broad market rallied. But don’t be fooled, volume was very low, and advancing stocks and declining stocks fought to an even draw. These are signs that whatever happened in the market happened without much conviction.

• After being up most of the day, the Dow Jones Industrials closed down just 2 1/2 points. That’s less than one-tenth of 1%. It closed at 38,459.
• The S&P 500 was up .75% of a percent. That’s 38 points, and it closed at 5,199.
• The NASDAQ Composite was up 272 points. That’s 1.7% and closed at 16,442.
• The Russell 2000 was up seven-tenths of one percent. Fourteen points, and it starts the day today at 2,043.

Bond Market Report

Rates were mixed.

• The yield on the 2-year treasury was off three basis points, and it closed at 4.952%.
• The 20-year was up five ticks and closed at 4.8% even.

Oil, Gold, and Bitcoin

• Oil was down $0.67, and a barrel will now set you back $85.52.
• Gold was up a stout $45.40, and a troy ounce now changes hands—within reach of 2,400—at $2,393.80.
• Bitcoin had a small gain but managed to get back above 70,000. It was up $612.79 and closed at $70,466.88.

PPI Report is a Little Anticlimactic

The Producer Price Index for March came in with an increase of 0.2%. That’s versus expectations of 0.3% and last month, when it was 0.6%. The rest of the PPI complex came in as expected. Forgive us for thinking that after Wednesday’s Consumer Price Index numbers, the whole thing was a little anticlimactic.

More interesting to us was the labor market report. Initial jobless claims came in at 211,000 last week versus expectations of 216,000 and 222,000 the week before. Good news. But continuing claims ticked up a bit. Not good.

The Inflation Fight Demands a Strong Economy

It wasn’t that long ago that the labor market consistently exceeded expectations. That’s not been the case in recent weeks. It won’t be until the first week of May before we get another comprehensive look at the labor market in the United States.

If unemployment ticks up to or above the 4% level, it’s at 3.9% now, the Fed will be under tremendous pressure, perhaps unbearable pressure, to cut rates even in the face of higher inflation. If that’s the case all bets are off. I guess we can then all party like it’s 1978.