The Buzz on Business for July 16th, 2024

In one of the best political-slash-economic presentations we have ever seen, Federal Reserve Board Chairman Jerome Powell appeared before the Economic Club of Washington DC on Monday. Powell was interviewed by David Rubenstein, the founder of the Carlyle Group hedge fund and the owner of the Baltimore Oriels. We thought the interviews was interesting and informative and entertaining. We’ll put a link in the show notes if you’d like to see for yourself. Good stuff

During the interview, however, Chairman Powell, said the quiet part out loud. In response to a question about what keeps him awake at night, he said that the fiscal deficits and debt, while not the responsibility of the Fed, they are the portfolio of Congress, are not sustainable over time.

Of course, this is not news. The problem is obvious and eventually devastating. At some point, the sovereign debt of the United States—US Treasury Bonds, Bills and Notes will fail to find buyers. When that happens, all the rate hikes, rate cuts, Quantitative Tightening or Easing, all of the Press Conferences and Dot Plots in the world will keep the doors open or the lights on.

If David Rubenstein had interviewed us, we’d have added that Congress is the last place we might look for a solution and that we’d have never gone down this path, we would have never been able to go down this path, without a compliant, enabling Federal Reserve.

Stock Market Report

The rotation out of the Magnificent Seven and into small caps continued apace on Monday. Market darling NVIDIA was down, down on an up day, while the Russell 2000 hit the cover off the ball.

• The Dow Jones Industrial Average was up one half of one percent, that’s 211 points and it closed at 40,212, a new all-time high.
• The S&P 500 gained three-tenths, that's sixteen points, and it closed at 5,531. The S&P peaked its head into record territory before settling back into the close.
• Likewise, no record high for the NASDAQ Composite. It was up seventy-four points, four tenths of a percent and closed at 18,473.
• Gains but modest gains among the large cap stocks. Not so much the small caps which have been on a tear lately. In the four trading sessions since July 9^th, the Russell 2000, which has lagged this entire rally, is up almost eight percent. On Monday, it was up 1.8%, that’s thirty-nine points and it starts the day today at 2,187.

Bond Market Report

Bonds were mixed.

• The yield on the 2-year treasury closed essentially flat. It stands at 4.455%.
• The 20-year was up five ticks and now yields 4.556%.

Oil, Gold, and Bitcoin

• Oil was down $0.31, and a barrel now changes hands at $81.90.
• Gold managed a gain of $8.30 and a troy ounce will now set you back $2,426.00 even.
• And Bitcoin had a great day. It was up $5,777.66 and at 4:00 PM ET stood at $63,437.51.

Are We Seeing a Sales Shortfall?

There was one data point on yesterday’s Economic Calendar, that was the NY Empire State Manufacturing Index. It came in well below expectations. Manufacturing. Yeah.

Investment banks Black Rock and Goldman Sachs reported earnings before the bell yesterday. Both had really good earnings for the 2^nd quarter although Black Rock missed on revenue. Is this a trend? Or are we just imagining things? Today is the biggest day for earnings so far this quarter. We will be watching.

The Retail Sales complex rolls out at 8:30 AM ET this morning. Expectations are for a hefty increase from last month’s number. We’ll be watching that too.