The Dividend Cafe - The DC Today - Thursday, December 1, 2022

Episode Date: December 1, 2022

December has launched and I have some things to tell you … MARKET ACTION Dow: Down -195 points (-0.56%) S&P: -0.09% Nasdaq: +0.13% 10-Year Treasury Yield: 3.50% (- 19 basis points); down 72bps from the 4.22% high of just five weeks ago! Top-performing sector: Communication Services (+0.29%) & Health Care (+0.24%) Bottom-performing sector: Financials (-0.71%) WTI Crude Oil: $81.28/barrel (+0.91%) Key Economic Point of the Day: The Fed’s favorite inflation measurement (PCE) came in up just +0.2% on the month, less than the +0.3% expected, and known to be tainted by the misleading contribution of housing’s lag effect (which I have written about extensively). The September gain had been +0.5%, so the stock and bond market responded favorably to the disinflationary trend. Initial jobless claims came in at 225,000, actually lower than expected Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. All right, well, hello. Welcome to the very first DC Today of the month of December. It's Thursday. We are now through December the 1st and a few things to update you regarding the market and a few kind of news events and economic data points I want to go through today. Let me get the market data points out of the way. When you had a kind of rally like you saw yesterday that really wasn't rooted in a ton of fundamental logic, it's always interesting what will happen on the second day. And to have bound 750 points yesterday, and really it was 950 because you had been down 200, and then only get back 195 today, that's a reasonably strong sign technically.

The S&P was only down 9 basis points today, and the NASDAQ was actually up 13 basis points. So you basically more or less had a kind of flat S&P and NASDAQ, and you had a really not that much down Dow after this massive move higher. But the biggest thing to kind of give you an indication of the confirmation in financial markets, which is broader than just the stock market, but across financial markets is in the bond market. The 10-year treasury yield today closed at 3.5%, 3.5, down at 19 basis points today. I believe it was down 14 bips yesterday. it is down 72 basis points from the high that we had seen in many, many years of 4.22%. And that was just five weeks ago. So in five weeks, you've gone from four point, let's call it four and a quarter to three and a half. So that's a huge rally in bonds

in the last five weeks. And again, by rally, I mean the prices of bonds going higher as the yields have gone lower. On the equity side today, the top performing sectors weren't up a ton. Communication services was up 29 basis points and healthcare was up a quarter of a percent. The worst performing was financials and it was down 0.71%. Oil was up almost 1%, up to $81.28 a barrel. Okay, so by the way, that point on financials, the new vice chair of the Fed who is the head of supervision, Michael Barr, came out. I thought it was an utterly bizarre communication that they're

in the midst of a study on capital requirements for banks. And he came out and said, and I quote, we haven't finished our study yet, but things seem lower than they ought to be. And I don't know what that means, seem lower than they ought to be. But it suggested that some banks, that they intend to increase capital requirements. And so you saw some of the bank institutions drop today on this kind of vague, ambiguous, sort of a threat a little bit from the Fed. In terms of the economic data I was referring to, the PCE measurement. And by the way, this caused the Dow futures to rally earlier this morning. It didn't end up holding. But the Fed's favorite inflation measurement, which is the personal consumption expenditures, came in up just 0.2%

for the month. It had been up 0.5% last month. So you see that continued disinflation of the rate of growth dropping month over month. And again, that's even baked in with the realization that the markets know what the data can't yet reveal, which is something I've talked about over and over again, that actually that number is already deflating because the fact of the matter is the way that housing markets are reported is not accurate. I'll have some more charts and info on Monday's DC Today. Initial jobless claims came in at 225,000 for the week. That was lower than had been expected. And then ISM manufacturing came in at a small decline. Again, anytime is below 50, that represents contraction in the manufacturing sector. Anything over 50 represents expansion. And even though 49 isn't much contraction,

12 of the 18 sectors were in negative territory. So some slowdown you're seeing there on manufacturing. Equities are at a three-month high coming into today. The dollar was at a three-month low. So this is a theme that I've talked about for a long time. You should get the idea. It's important to realize, I think, about the market rally that you're not seeing risk takers just try to price in when the Fed pauses or when the Fed cuts or when the Fed slows down. That's a factor. But then there's also some degree of anticipation around the soft branding thesis. Does one believe that Fed is about to taper and will end up getting out of this without that they will get out of the tightening that they've done without having rocked the economy.

And so the market to really be bullish has to bet on two different things. One of two could be bullish. Two of two could be very bullish. Zero of two could be bearish. And so that's where we stand. I'm going to talk more about it on Monday, probably. But late in the day in the trading day, maybe it was midday

I did get the pop up that Austin Goolsbee has been named the new president of the Chicago Board of Federal Reserve Austin I've known for some time he and I have been on TV and radio together maybe as much as 10 times I know it's over half a dozen he and I obviously, he was the head of the Council of Economic Advisors under President Obama. I think highly of Austin as a person. He's articulate, thoughtful guy. I disagree with him on a lot of things,

but he'll be joining the Fed Board of Governors subject to approval. The Senate, I guess, approval. The Senate, I guess, has now voted to approve averting the strike on railroad. I think from what I saw, it was 85-15, something around there. So kind of expected it should be going to President Biden's desk now shortly. So we will not end up with the Fed, excuse me, with a railroad strike. But there's been some interesting kind of politicking around it all this week. So tomorrow you'll get the jobs number. You'll get a dividend cafe on the Fed. I was really hoping to have it written today and record it going into the Friday, but I'm more than likely going to have to record it on Friday morning, which is what I normally do anyways. But I do have a flight to San Francisco tomorrow. And

so I'm going to have to record before I go. But there's just a few more things I want to kind of tweak with it. But I like the way the piece is coming together. And I hope you'll read Dividend Cafe tomorrow on the Fed. That's all I have for you today. Reach out anytime. Any questions, we're here to answer every single day in the written the dctoday.com. I'm answering a question, a real question that has come in from

a real person and we don't cover those on the podcast video but um you know if you have a question uh that you would like to send send it to questions at the boston group.com thank you so much we'll leave you there have a wonderful thursday night the boston group is a group of investment professionals registered with hightower securities llc, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or

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