The Dividend Cafe - The DC Today - Tuesday, October 3, 2023

Episode Date: October 3, 2023

Today's Post - https://bahnsen.co/3RJ28h3 Markets were hit hard again today, and I do imagine we are getting closer to some short-term capitulation, but you never know. The way the regional banks have been acting lately is noteworthy. This bond rally has not let up and is basically 100% of the current market story. Why have oil prices gone up so much even as gas prices have not really gone up (and have, in fact, come down)? Refinery margins have collapsed, period. There is more than one input to retail gas prices at the pump. Cleveland Fed President, Loretta Mester, is the latest Fed head to say she believes another rate hike is needed. But she also said part of that would depend on … “the UAW strike” ?????? Yep. She is not a voting member of the FOMC, by the way. You’ve heard all the talk about record levels of credit card debt. It is currently 3.7% of nominal GDP. It was 3.9% of nominal GDP in late 2019. It was 4.2% in 2010 after the financial crisis. Sorry, but the numerator is not the only number in a fraction. Market rates are tightening without the Fed. The idea that the Fed would pour gasoline on top of this is surreal to me. But so is modern central banking. 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. Well, hello and welcome to the Tuesday edition of DC Today. It's a short one today, although not because it was such an uneventful day in markets. Markets were actually hit pretty hard. And the reason was, I mean, it was already a down day, so I don't want to overthink this. You know how I feel about trying to speculate on an exact reasoning.

But you can tell when bond yields moved higher, it was when the JOLTS data came out. And that's the job openings report where you get the data on how many jobs are open that have not been filled. It's sort of the inverse of people looking for jobs and don't have one. That's the BLS data, Bureau of Labor Statistics, what we think of as the monthly jobs report. The job openings is sort of on the employer side. Think of it this way.

The jolts is like the supply side, and the BLS is like the demand side. I just made that up right now, but I think it's accurate. The jolts data usually comes with a quit rate. You can tell how many people have quit a job to go to another one, things like that. So you would think in Dave land that less jobs open is a good thing because we like the idea of employers having their needs met, and we like the idea of needs being met for workers by them finding a job. So a lot of openings of a job, I don't know how really to say this, the number went higher and the bond yields flew up. And so I think it was 8.9 million expected. It was 8.9

last month and it went to 9.6. Now, in theory, I would think that seems like a bad thing. There's others who think it's a good thing or it points to a lot of slack, which means that there will be continued low unemployment. And their interpretation of what's bad about it is the belief that we need a lot of people to lose their job for the Fed to cut rates. that we need a lot of people to lose their job for the Fed to cut rates. I have no comment on that utter insanity, but I do think that's the way markets are viewing it, or viewing the way they view other people viewing it, if you will.

I would only say this. I think we're getting closer to a point of capitulation. I will note that bond yields, like the 10-year was up 11 basis points today. And as bond yields have gone higher, utilities have been what got slammed, and yet utilities are the only sector up today. So I think there's some internal positioning and whatnot that might indicate a capitulation is near. But you know how I feel about trying to time that. What I will say is this.

The JOLTS data is not super reliable month over month. And maybe the BLS data comes out on Friday and points to something a little different. The ADP and BLS data are frequently not in sync with each other. That's the private payrolls versus the total unemployment report from the Labor Department. So there's not always total congruence between different reports and data sets. But I think that's basically the story is we already have had big upward pressure on bond yields for reasons I talked about yesterday. That's put downward pressure on equity prices. And today the bond yields went even higher, the 10-year getting up near 4.8%, around 4.7 and change, and doing so as a result of people believing that there's more job openings and less people that are unemployed. We want more unemployed people.

That's the thinking here. It's a weird world we live in. So all that to say, the Dow was down 431 points. It had been down 520. It made back 90 points, not much in the last half hour of trading. The top performing sector, as I said, was utilities. The worst was consumer discretionary, down 2.6%. A real 2022 type day today.

NASDAQ down 1.87%. The Dow down 1.29%. A little better picture with a lot of dividend growth stuff, only down about 70 basis points, but be that as it may, a down day. Okay. Big client report coming tomorrow morning on Q3's portfolio activity. Brian, I have asked David in the DC Today today about preferreds, if anyone's interested in that. Brian Seitel will bring you the DC Today tomorrow as I'll be doing just an in-and-out trip for an afternoon speaking engagement tomorrow.

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