The Dividend Cafe - The DC Today - Tuesday, August 29, 2023

Episode Date: August 29, 2023

Today's Post - https://bahnsen.co/3L3fHUy The third up day in a row in markets today in a broad-based rally that closed at the high. The S&P 500 is still down 2% for the month, but with three trading days left in the last week of summer, we’ll see if we get a little more back before Labor Day weekend. Yields were lower across the entire curve today, with treasuries rallying following a much lower-than-expected July JOLTS new jobs report. Following yesterday’s underwhelming market response to stimulus, China is considering having its major banks decrease mortgage rates on about 38 trillion yuan ($5T) worth of existing loans which moved markets there up 2% on the day. Whether those efforts will prove effective will have to be seen, but I do think it’s putting a bid in global energy prices, which were up again today. 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 Tuesday, August 29th. It's good to be back with you today. Good day at markets. In fact, it's the third day in a row in August that we've been up here, which is nice. August has been a negative month in equities. So far, we're down about a little less than 2%, probably 1.8% or something on the month on the S&P 500. But a couple of days in a row I'll take before the last week of summer here ends and we hit Labor Day.

There was news today. The biggest news was the JOLTS report, which is a new job opening report that comes out. It was expected to have something like 9.5 million, roughly 9.478 million. And we got much lower than that, about 8.827 million. So if you're, and I'm not necessarily, frankly, but if you're looking at something like the Phillips curve, where you need more unemployment or a lousy or a weakening jobs picture, in order to have inflation come down, then this was a tip of the hat for that happening today a little bit. I do think the Fed is looking at that as one of their metrics. Fewer job openings,

potentially with the same amount of people looking for work, could potentially mean a little higher unemployment. It's basically one of the things the Fed wants to see. There's other things too. This week, we have the official jobs number will be on Friday, but we've got ADP payroll tomorrow, which was $324 last month, so it's much better. And so we're looking for something below $200,000, I think would be market-friendly. Maybe a $170,000 would be think would be market friendly. Maybe a 170 would be good. But if you've got a combination of the JOLTS report today, ADP tomorrow that comes in somewhere below 200, and then a PCE number on Thursday, that is something around 0.2% for the month. If all those things line up, I do think you'll have Fed futures start to move a little bit

back towards a peak rate narrative on the Fed. Right now it's 80% for September, they'll pause, but then November and December are both about a 50-50. So we'll see if that stuff all comes in. But for today, there's pretty big news out of China. Again, I spoke about it yesterday, but they are doing different things to try to stimulate their economy. It's a slowing economy. And today they are proposing lowering mortgage rates on existing loans for first loans for existing mortgage holders in China to try to help alleviate those payments and then hopefully drive some consumption in the country. And while I don't

know if these things will ultimately work, just like we would say, don't fight the Fed and the US, I think it's fair to say if they're going to be committed to stimulating their economy, they'll probably eventually in some form get something out of that. One of the things we've seen is a pretty strong energy sector. Oil was up today again, about a percent and a half, 1.39% on the day. And so you've seen some strength in oil and energy. Gasoline prices in the country are back above right at $4 a gallon. And the sector itself is the only sector in the S&P 500 that has 100% of its constituents, meaning the stocks inside of the sector, up over its 50-day moving average and over 90% that are up over its 200-day moving average.

So there's been a broad-based rally in these energy stocks. And just based on the flows, I don't know that's the ninth inning. I think we're somewhere in the middle there. There's probably more to go. And I don't think that's necessarily a bad thing, although it is a core component inside of, or non-core component, but it's a component inside of inflation and CPI. So we have to remember that higher energy prices can keep inflation a little bit higher for longer.

You got to remember that higher energy prices can keep inflation a little bit higher for longer. I think the bigger picture will be housing that comes down in that CPI figure will offset some of the energy that goes up a little bit. But on the day, great day. We finished right at the highs. So it was basically we opened up and we just built on gains throughout the day. I think it was the jobs number, like I said, that was a little bit better. Rates came down as a result. Two-year rates are now under five. In fact, they're 490 and they were 510 a day ago. So it's a pretty big move lower, at least intraday a day ago. So a big move lower on short rates,

move lower on long rates as well. And broad-based rally, top sector of the day was communication services. There was a couple upgrades or one notable upgrade on some of those two big names in telecom that helped on the day two, but all sectors were high on the day. Utilities were up a quarter of a point on the day two. So that's what I have for you as a recap for the day. I'll keep it concise. And like I said, tomorrow, we've got an ADP figure out and some other data that we'll be able to go through with you tomorrow. Oh, there's a GDP revision tomorrow, too. So we're expecting it to just basically be in line. So 2.4% is what we have, and I suspect it'll end up being about the same.

But with that, I will be back with you. I wish you all a good evening and reach out with questions. Thank you. The Bonson 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.

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