The Dividend Cafe - The DC Today - Wednesday, September 6, 2023

Episode Date: September 6, 2023

Today's Post - https://bahnsen.co/3LcqThy Oil is the story of markets yet again, with Brent now passing $90 and WTI Crude passing $87. The idea that oil was between $65 and $75 for months and we did nothing to help re-fill the Strategic Petroleum Reserve is just surreal to me. These prices at now 10-month highs are sure to exacerbate the delta between core and headline inflation in the months ahead. Just 37% of companies in the S&P 500 were above their 50-day moving average this morning as internal momentum continues to dissipate. China and Japan are not happy about the dollar’s recent rise and are pledging decisive action to arrest their own currency’s drop relative to the U.S. dollar. 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 Wednesday edition of DC Today. We're going to be going quick today. Interesting day in markets. I'll cover what took place and a couple other market news items. And then I am running into a client meeting and then running to an airport as I will be flying to New York City tonight. And I'll be in the New York office tomorrow, bringing you yet another DC Today. Look, I do think the big, I've talked about it already quite a bit. So the bond yield story really is the big story right now. It's already quite a bit. So the bond yield story really is the big story right now. It's hurting risk assets. It's keeping risk assets from catching much of a

bid right now, just in terms of the short term technical realities of what's happening in the markets that as yields have continued to go higher, it's very difficult for a market that is totally dependent upon multiple expansion to see stock prices move higher. You're not going to get multiple expansion when bond yields are moving higher. And yet you can see in the Fed funds futures market. And this was actually the question that came in today for Ask David, that the financial markets are telling you that they don't believe the Fed is going to be raising rates anytime soon. And so for bond yields to be going higher when the Fed will be very likely staying put for the foreseeable future and possibly for good. It really does suggest to me a very plausible conclusion, logically speaking, that there is a supply issuance issue with treasuries.

That when you have more supply, you get lower prices, which means higher yields. And I think that is what is forcing rates up really across the curve. And that is largely a byproduct of the current state of revenue collection relative to budget deficits. The other story though, so that's what I've already been talking about, but the other story is oil prices. You're very likely going to see quite a delta that will come in the months ahead between headline and core inflation. You're right now looking at Brent prices having passed $90 a barrel and WTI crude having passed $87, although it did close a little less. No, $87.58. So we closed above $87 as well.

I think that you're talking about about 10 month highs in oil prices. Expect a big delta between core and headline. And in the meantime, you just have to wonder why in the world with prices between 65 and 75 for so long that no further effort was made to fill out the Strategic Petroleum Reserve. It's very possible that we are looking at what was one of the great policy blunders of all time. China and Japan are both taking efforts to defend their currency as the dollar has continued to rise against the yen and against the yuan. And I think that they're pledging, quote unquote, decisive action to arrest this drop in their own currency is a significant event playing out in financial markets. As far as the state of market health, only 37% of S&P 500 companies were above their 50-day

moving average. And that was at four you know, four o'clock this morning, that number probably went lower here today as well. So the market was at one point down over 350 points, it closed down 198. So it made back almost half of what had been down, but nevertheless, still closed down over half a percentage point. The S&P was down 70 basis points and the NASDAQ was down over 1%. Technology was the worst performing sector today, down 1.37%. Utilities, which have been just an atrocious sector all year, were the leading sector today, up a whopping 0.2%. The 10-year closed up again, 2.8 basis points. So the 10-year yield closing at 4.29%, putting more downward

pressure on bond prices. ISM services came out with a good number. Services jumped up to 54.5 in August. 52.5 is what had been expected. New orders were all the way up to 57.5. All of this is well into expansion territory. That's the economic news today. That's the market news. Those are the things on our mind. I'll have more to say from New York City tomorrow, Thursday 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

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