Markets Crumble as Fed Takes Away the Punch Bowl

If it is true, as is often claimed, that the job of the Federal Reserve is to take away the punch bowl just as the party is getting started, Federal Reserve Chairman Jerome Powell took away the punch bowl, turned off the music, sent home all the pretty girls, and then called the police, at 2:00 pm Wednesday afternoon.

And then, for good measure, he put a pink slip into Massachusetts Senator Elizabeth Warren’s permanent file and gave her two weeks of detention.

Stock Market Report

The only green number in a sea of red on the Giant Quote Machine Wednesday afternoon was volume, which soared after the Fed announcement.

• The Dow Jones Industrial Average was off 317 points. That's eight-tenths of a percent, and it closed at 38,150.
• The Standard and Poor's 500 was off 79 points. That's over 1.6% and it closed at 4,846.
• The NASDAQ Composite got crushed; it was off—are you sitting down?—346 points, almost two and a quarter percent, and it closed at 15,164.
• The Russell 2000 was off over 2 1/2 percent. It closed at 1948, off 53 points.
• The RSP, that's the Standard Poor's 500 Equal Weight Index Fund, was off 1.3%.
• The SOXL, that is, the Philadelphia Semiconductor Index, with three-to-one leverage. It was off four and a quarter percent.

Bond Market Report

Interest rates were down across the board and down strongly, which kind of surprised us. But then again, we don't know anything about finance.

• The 2-year treasury closed with a yield of 4.219%, which was off twelve basis points.
• The 20-year closed at 4.280% off almost nine ticks on the session.

Oil, Gold, and Bitcoin

• Oil was off because why not? It closed at $75.69 off $2.04 a barrel.
• Gold was a solitary bright spot. It was up $5 and closed it $2055. 80.
• Bitcoin was down $537.78; that's over 1 1/4%, and it closed at 42,449.

Wall Street & Senator Warren Ignore the Inflation Elephant in the Room

Six weeks ago on this podcast, the morning after the market went to the moon because of some twinkle in his eye during his regular press conference told traders that Federal Reserve Board Chairman Jerome Powell was going to cut rates. In March.

Six weeks ago, we said that we didn’t see any such twinkle. Anywhere.

Two weeks ago, on this podcast, we predicted that some politician, somewhere, was going to lay the wood to Chairman Powell and order him to cut rates.

Summoning his inner General Tony McAuliffe to both Wall Street and Pennsylvania Avenue, Powell exclaimed, “Nuts. Just nuts!”

Pardon us while we take the side of the Central Bankers and keepers of the fiat currency, but inflation is too high, and this economy is too strong to cut rates at present.

Unemployment is low; job openings are high. Retail Sales are strong. Manufacturing, the longtime deadbeat of the economy, appears to have slept off the pandemic hangover and is getting back to work. Even housing is strong. If housing is strong interest rates aren’t high enough. There, I said it.

Stock traders may want falling rates, and Senator Elizabeth may want housing to be more affordable, but the worst thing either the financial markets or first-time homebuyers need is inflation. Inflation is public enemy number one. While he deserves a good measure of the blame for these higher prices, I, for one, am glad he’s decided to ignore his critics and fight it!

Ministry of Truth Exposed: Dismantling the Myth of the Expectations Game!

In our continuing story, which is right out of the Ministry of Truth, more evidence emerges that Wall Street is not an expectations game. Who would ever even think such a thing?

We’ve discussed 3M, Netflix, American Express, and a bunch of others. Well, now we can add Google and Electronic Arts to the list.

Google parent Alphabet announced earnings on Tuesday after the bell. And it exceeded expectations. The company was expected to earn $1.59 a share. It earned $1.64. Revenue came in above expectations. Wall Street was expecting $85.23 billion in sales. Instead, we got $86.31 billion. Really good numbers.

The stock got crushed. It gapped down at the open, was off almost ten percent, and closed at its low for the day.

Oh yeah. Did I mention it exceeded expectations?

Madden NFL game maker Electronic Arts, on the other hand, wildly underperformed expectations. The company reported earnings of $1.07 a share versus expectations of $2.94! It missed on revenue as well. Wall Street was expecting $2.4 billion in sales. $2.37 billion was all they got.

Of course, the stock is trading up. Up in a down market.

Tomorrow, the Buzz on Business transitions to a podcast about beekeeping. You won’t want to miss it!