The Buzz on Business for June 4^th 2024

For some time now, we’ve taken note of the fact that good economic news is often bad news for the markets and vice versa. This is because, as the story goes, that good economic news undermines the case for rate cuts and the market, as the story goes, values low rates more than it values a strong economy.

So, for most of the last six months, unless we were talking about inflation data, the release of some bad news on the labor market, or manufacturing, or housing, seemed to lead to a rally in stocks, and often in bonds.

Until yesterday morning, that is.

We’ll get into the specifics in just a minute but before the opening bell on Monday, a couple of economic reports seemed to indicate a softening economy. Truth be told, we didn’t think the numbers were all that bad. Regardless, the news was taken as bad and, while they did manage to pare their losses in the afternoon, stocks sold off.

Everyone here at the Ministry of Truth is working overtime to scrub all uses of the phrase “Bad news is good news” because that is not true and has never been true. As a podcast, we’ve always been at war with good news.

Stock Market Report

Stocks opened lower, sold off throughout the morning but rallied back after the noon hour to finish mixed on below average volume.

• The Dow Jones Industrial Average finished lower on Monday. It was off 115 points. That's three-tenths of 1%, and it closed at 38,571.
• The S&P 500 was up six points, that’s one-tenth of 1% and it closed at 5,283.
• Likewise, the NASDAQ Composite finished with gains on the day. It was up six-tenths of 1%. That's 94 points on the NASDAQ and it starts the day today at 16,829.
• But the Russell 2000 was off. It finished at 2016, down 10 points, or one-half of 1%.

Bond Market Report

Rates were down and down sharply yesterday.

• The yield on the 2-year treasury was off 7 basis points and it closed at 4.812%.
• The 20 year was down eleven ticks and it closed at 4.615%.

Oil, Gold, and Bitcoin

• Oil was down for the third straight day. It finished at $77.12, off $0.69.
• Gold was up $19.60 and a troy ounce will now set you back $2,368 even.
• And Bitcoin was up $1,575.64 and at 4:00 PM Eastern Time stood at $69,235 even.

Economic News, Bad to Mixed: Selloff Overdone

So, what's all of this bad economic news everyone is talking about? Well, we got four economic reports that might be of some interest. Two of them perfectly contradicted each other and the others did miss expectations and did indicate a softening economy.

The first of those was construction spending for April. It was off one-tenth of 1% versus expectations of a 0.2% expansion. So, a pretty big miss for construction spending as higher for longer continues to impact that interest rate sensitive sector.

The Atlanta Fed also reported its GDP now number for the second quarter. It indicated the economy grew at a 1.8% annual rate versus expectations of 2.7%. This data it typically volatile, but this is, likewise, a disappointment.

There are two organizations that report on the manufacturing. Those are Standard and Poor's Global, the folks that brought you the S&P 500 and the Institute for Supply Management or ISM. Both release a  monthly report on data from purchasing managers across the country

Yesterday they both happened to both report on the same day. Let's set the ground rules here. A number above 50 is good. It indicates an expansion of the manufacturing sector. Below 50 conversely means a contraction—not so good.

The S&P numbers came in at 51.3 versus expectations of 50.9 and last month's 50.0. So good news. Not great, but good news from Standard and Poor's. But this upbeat report was perfectly offset by the ISM as its index came in below 50 at 48.7 versus expectations of 49.8.

Manufacturing has been in the doldrums for almost three years now. It has started to show some halting, hesitating, signs of life in the last three or four months, so this data is disappointing but so far as we’re concerned, not surprising.

To us, the selloff in stocks seems overdone.

Today, the JOLTS report is released as well as Factory Orders for April, which will give us another peak inside manufacturing.

And the economic reports continue throughout the week.

You just don’t have a choice. You’ve got to keep it right here, on the Buzz.