The Buzz on Business for May 17th, 2024

Thursday was a busy day on the economic calendar, and all of the data that was released—all of it—pointed to a weakening economy. Nothing but red numbers on the Giant Quote Machine yesterday! We’ll get to the specifics in just a minute.

Of course, a weaker economy helps make the case for lower interest rates. Yet, oddly, rates were up across the board during the session. This undercuts the case for corporate earnings, and stocks were down across the board.

We don’t get another look at inflation until the 30^th of this month, but it seems as if the outcome of the inflation sweepstakes is going to be critical. If inflation abates, as everyone seems to think it will—everyone except us—the Fed can and probably will cut rates.

But if this week’s Producer Price Index numbers rule the day, as no one thinks they will—no one, that is us, but us—the Fed will have painted itself into a corner in an election year, and all bets are off.

Stock Market Report

All three of the major indexes had a higher high and lower close, a Bearish Reversal, on booming—we mean booming—volume, in the face of a bunch of disappointing economic reports.

• • The Dow Jones Industrial Average after twice peaking its head up above 40,000 for the first time ever, closed at 39,869. That was off 39 points. Or about one-tenth of 1%.

• • The S&P 500 was off two-tenths of 1%. That's 11 points and it closed at 5,297.

• • The NASDAQ Composite closed at 16,698. That's off 44 points, or one-quarter of 1%.

• • The Russell 2000 was also off, but without first making a higher high. No bearish reversal for the small caps. They were off six-tenths of 1%, that's 13 points and start the day today at 2,096.

Bond Market Report

Interest rates were up across the board on Thursday, which kind of surprised us given the weakness of Thursday’s economic data.

• • The yield on the 2-year treasury was up 7 basis points. And it closed at 4.797%.

• • The 20-year was up two ticks and it closed at 4.621%.

Oil, Gold, and Bitcoin

• • Oil was down a minuscule $0.06, and a barrel now changes hands at $78.74.

• • Gold was off $6.90. And a troy ounce will now set you back $2,383 even.

• • Bitcoin, likewise, was down during the session. At 4:00 PM ET, it was closed at $65,129.56, off $901.24.

Roundup of the Economic News: TLDR/WEAK!

A lot of economic data was released before the opening bell on Thursday, and all of it was bad news. We're going to put a chart in the show notes that includes all of these data so you can check it out if you'd like. But we're going to go through them now, one at a time. Again, this is all bad news.

Just to be clear, while none of these data are good news to policymakers, one week or one month of bad news does not a trend make. And a mild weakening of the economy, especially in the labor market, might give the Fed room to cut rates without reigniting inflation.

But if inflation persists or accelerates, a position to which we are inclined to cut rates to fight a weak economy could and probably will make things dramatically worse.

The Fed is in a tight spot. They should have raised rates back in January, when economic strength was undeniable, even accelerating. Instead, they declared victory and took a bow.