The Dividend Cafe - The DC Today - Thursday, November 30, 2023

Episode Date: November 30, 2023

Today's Post - https://bahnsen.co/4115jTU A BIG divergence today between the more value oriented DOW which jumped 520 points today, and the more technology heavy Nasdaq down .23% as interest rates broke the trend and rose today. Coincidently, I wrote yesterday about the sensitivity in the part to the market that has had the most multiple expansion tethered to falling rates as having potential for disappointment. Both PCE inflation data coming out in-line with expectations and a stronger growth print in the Chicago PMI’s moved rates up today as much as yesterdays decline in continued bond market volatility. 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. Hello and welcome to DC Today. It is Thursday, November the 30th, so the day before the first day of December. We had a great day in the market today, actually for the Dow. The Dow was up 520 points on the day, big move up, and it just sort of melted all the way into the close. We closed right at the highs of the session. And it was a big divergence today between basically value stocks and growth stocks. The NASDAQ was actually down on the day. And I wrote yesterday a little bit coincidentally just about the sensitivity to part of the market that's really just had the most multiple expansion and run up with the fall in interest rates, which is tech, which is fine. But we sort of saw that come off today.

Rates moved a little higher. A couple of reasons. We had an inflation read on PCE that came in basically in line. Headline was actually a little bit lower. We were expecting 0.1. We got a totally flat number for the month, which put the year about 3% flat versus 3.1 expected. So headline, including food and energy, was actually a little bit better than expected, a little lower inflation. Core, which is really what the Fed pays attention to, was right in line. It was up 0.2% on the month, which is what we expected, and then 3.5% year over year. So not quite 2% yet, but getting there really fast. And we've written about this a whole lot and spoken about it. But if you took out and normalized

the owner's equivalent rent inside of that, you'd really already be in the twos. So I think the Fed knows that, obviously, as we do. And that's why you're getting a lot of these Fed speakers and officials basically just saying they're restrictive enough at this point. And Fed futures pointing to when things will be cut, not when the next increase will be. Fed speakers and officials basically just saying they're restrictive enough at this point and Fed futures point until when things will be cut, not when the next increase will be. So all that to say I had a little piece in there I thought was interesting. We kind of know just as consumers, the reason why there's been resiliency in housing, the reason why consumers have still been in good shape, it's because a lot of us refinanced our largest liability over 30 years at 3% last couple of years.

And so new mortgage rates have not really affected some of the housing market and some of the consumer spending, really. The government didn't do that. Obviously, they've got about 31% of all of the government outstanding debt is going to roll over in 12 months. So that's $7.6 trillion will get reissued at double the interest rate. So those interest expense payments are going to go up a ton. $7.6 trillion will get reissued at double the interest rate. So those interest expense payments are going to go up a ton. So we sort of know that, but on the corporate side, I thought it was interesting. If you think about the fact that corporate America termed out its debt, just like the

US consumer debt, new interest rates were basically as low as they were going to go and wanted to push out maturities and wanted to lower interest expense as good corporate stewards. And again, in the private sector, in large companies in the US, about 60% of total debt in large cap corporate America matures all the way out past 2030. And so they've got lots of runway. Presumably interest rates will be lower when that step rolls over or maybe not where they were, but not as high as they are now. But I think it's interesting to look at the amount of cash. We all hear about companies, these big tech companies or any company that just has so much cash now, and there's an interest earnings amount that they're getting on that. So if a company has, call it $10 billion in debt they issued two years ago, and they didn't do

anything with the debt. They just took the money that they borrowed and stuck it in a cash account. They're now earning 5% on it. So there's a 2% arbitrage between the amount of expense that they have to pay in interest and the amount that they're earning in cash. And so that's actually added to earnings a little bit, believe it or not. I don't know that it gets talked about a ton, but coming into the coming years, I guess you could say the opposite will be true if interest rates go down, but I don't think it will be as true. So I'm not overly worried about that. But headline PC, we talked about the jobless claims today were about in line. They came in at 218 for the month. We were expecting 215, so a little bit higher on jobless claims. But the real story inside of that, I guess, was the continuing claims,

which were significantly higher at 1.927. So the people that are unemployed basically are staying that way for a little bit longer. So I guess if we read into that, it's a little bit cooling down of labor again, and we've seen that. But the numbers today out of Chicago. Again, it's just one region, but a decent one from a manufacturing index number. So the Chicago PMI number came in significantly better than expected. We got a 55.8, which is anything over 50s expansion. So this area hasn't been an expansion area for over two years. And this is the biggest jump since September of 2020 coming out of COVID. So it's pretty significant. And I wrote a little thing in there about must be an inverse correlation between the bears no longer having a spot at the wildcard in NFL. And so people are going back to work or something like that. But I'm just kidding. But the economic numbers were quite good out of

Chicago. There was a cut in oil production from OPEC plus plus today so they reduced by a million barrels a day saudi had already done that so this is in addition to that so we've got a reduction again oil prices have come down and so they're curtailing some of the production and we saw oil move lower today by about three percent uh on on some of that but tomorrow we've got um some ism data you know first day of de, you know, David will be back with you on Dividend Cafe for tomorrow. And we'll have some good things over the weekend for you. With that, I will send it off to you tonight. And I hope you have a great evening and reach out with questions as always. Thank you very much. Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment

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