The Dividend Cafe - The DC Today - Wednesday, January 24, 2024

Episode Date: January 24, 2024

Today's Post - https://bahnsen.co/48MsRiD We experienced positive market sentiment throughout the morning until approximately 10:30 AM, driven by better-than-expected PMI data in both services and manufacturing. It’s noteworthy that typically, indications of economic expansion don’t lead to a decline in stocks. However, despite four days of gains on the Dow, the news of improving economic data led to a loss of some early morning momentum. This occurred on a day of relatively uneventful trading as interest rates edged slightly higher. One key metric closely monitored by the Federal Reserve, The Taylor Rule, suggests that the Fed Funds Rate should currently be approximately 1% lower at 4.5%. Looking ahead, futures indicate a balanced probability for a rate cut in March. However, there is a significant amount of economic data expected between now and then that could influence this outlook. As previously mentioned, it wouldn’t be surprising if there were more discussions in March about the conclusion of Quantitative Tightening (QT), potentially easing financial conditions and essentially resembling a rate cut. 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, welcome to DC Today. It is Wednesday afternoon here on the 24th of January, and the first month of the year is definitely flying by here. Pretty quiet day of trading, benign. We had earlier gains this morning sort of give way and lose a little momentum kind of late morning, 1030-ish, something like that. We had some PMI data that came out

actually better than expected. And we had interest rates move up a few basis points, call it four basis points on the 10-year. We closed the 10-year around 418. And the Dow, which had been up earlier, ended up down about 99 points in percentage terms. It's super small, 0.26%. NASDAQ and S&P actually did notch a small eeked out a small gain on the day. So that's the fifth day in a row for those indices, gain on the day. So that's the fifth day in the row for those indices, which is positive, but fairly quiet day in trading. And like I said, we had economic data come out in PMIs and both services and manufacturing were expanding. The numbers came out on services at 52.9 versus 51, which was a little bit better than expected, but services actually have been above 50, meaning expanding for quite some time.

Manufacturing, however, has been contracting now for 14 months, which is the longest period in history, the longest non-recessionary period in history outside of what was the same number of months in 1951. So we've had this sort of contractionary manufacturing data. We've written about it a little bit, but our expectation is that the evolution of near-shoring and on-shoring would bring some of that back. And you saw it today in the number, hard to attribute it to

just that one component, of course, but we were above 50 at 50.3 versus a 47.8 expectation. So a decent number there. And of course, sometimes good news ends up being bad news in stocks. But after on the Dow, at least four days of gains, interest rates moved just a little bit on the news. It just gave some back through the close. So again, real quiet day in the markets overall. With regard to manufacturing, particularly the PMI number, what I did is just looked around the world for the heck of it and saw where we were in expanding or contracting territory. If you look at the US, obviously now we're in an expansion territory, which is a good thing. The UK is expanding. Japan is expanding. India is hugely expanding.

And then contracting areas are China. And that segues into their stimulus effort on the day. They reduced the reserve requirement in their banking system by half a point today. And that adds, meaning banks have to hold a bit less in reserve. They can lend out a little bit more. That's going to inject about 140 billion into their economy in dollar terms, which is about a trillion yuan. Other places that are contracting, Eurozone obviously is pulling back here a little bit, and then places like Australia. But those are the big news points on the day. Most of it is good news. Tomorrow, we have a whole lot more data. So I'll be with you tomorrow in DC today.

We've got a preliminary number on GDP coming out. I'm expecting around 2%. Obviously we had 4.9% the quarter before, so still expanding, although off of the larger number we had the previous quarter. We've got durable goods out tomorrow and new home sales. So good amount to go through with you tomorrow in the economic calendar. I look forward to doing that. For today and for this evening, with a quiet day of trading, I'm going to go ahead and keep this particular recording on the shorter end of ones that I have done. But I will see you all tomorrow. I look forward to it.

Reach out with any and all of your questions. I love to get them. And I shall talk to you soon. 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.

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