U.S. equity markets have been bouncing up and down on interest rate expectations, period. It’s all about the cheap monetary methadone, nothing else counts for the money junkies who gamble in the markets… that the mainstream media calls “investors.”
Last month equities bounced up higher on The Street’s expectations, as with ours, that the Fed Bankster Bandits would jack interest rates up only 25 basis points on 1 February because inflation was easing. And the Fed Head, Jerome Powell, said after they raised interest rates that he believed the inflation rate would keep falling and signaled a dovish tone on future rate hikes which temporarily pushed equities higher.
Yes, as reported today, inflation did ease. The consumer price index rose 6.5 percent in December after hitting a 40-year high of 9.1 percent annual rate in June.
Reversing earlier gains, today U.S. stocks fell after the January consumer price index report showed that inflation grew at a 6.4 percent annual rate.
The Street was betting that it would rise by 6.2 percent… which is still above the imaginary 2 percent inflation rate that the Fed said is their target… which the previous Fed clown Ben Bernanke invented in 2012.
Yes, another arrogant Fed Head who was awarded the Nobel (Piece of Crap) Prize in Economics last October in celebration of his ignorant trend forecasts.
Bernanke was praised by Nobel Piece of Crap Prize winner Barack Obama who credited the former Fed Head for taking “bold action and out-of-the-box thinking.”
In a CNBC interview, July 29, 2005, Bernanke, the Harvard grad and former Princeton economics professor, was asked:
Q. “Tell me, what is the worst-case scenario if we in fact see [real estate] prices actually come down substantially across the country?”
A. “Well I guess I don’t buy your premise. It’s a pretty unlikely possibility; we have never had a decline in house prices on a nationwide basis.”
Speaking before Congress 18 months later (28 February 2007), as the subprime mortgage fiasco deepened, Bernanke said: “There is not much indication at this point that subprime mortgage issues have spread into the broader mortgage market which still seems to be healthy.”
Again, the nation is not near a 2 percent inflation rate. And rather than blame themselves and Washington for artificially inflating the economy with a zero interest rate policy and several trillion dollars of made-up money backed by nothing to fight the COVID War, the Fed Head Bankster Bandit Powell blames rising wages for the plantation workers of Slavelandia as being responsible for inflation.
Claiming that wages constitute a large share of the costs that increase the price of services is an inaccurate assessment. As we have reported, wages for workers in services that go into “supercore” prices were up just 4 percent in January.
And when, using www.Shadowstats.com data, which provides accurate inflation numbers before they were rigged, real inflation is double the official number which means real wages are in steep decline compared to inflation.
As Gregory Mannarino forecasts in this edition of The Trends Journal, “Today we stand peering into a global financial and economic abyss the likes of which has never been seen before in human history. We are all stealthily being pushed ever closer to an inevitable economic and financial meltdown on a worldwide scale by those who control everything.” (See “Global Financial Impact” in this issue).
Before today’s inflation number came out, as evidenced by the future markets, The Street thought it would take more time for the hot inflation number to cool down. A week ago, the bet was that interest rates would peak at around 5 percent in May followed by two rate cuts at the end of this year.
But now they predict that interest rates will move above 5 percent, with expectations of one rate cut by the end of 2023.
Indeed, as the talk from the Feds changed, so too has the expectations for rate hikes. Last Wednesday a member of the Fed’s Governor Board Christopher Waller said, “Some believe that inflation will come down quite quickly this year. That would be a welcome outcome. But I’m not seeing signals of this quick decline in the economic data and I am prepared for a longer fight to get inflation down to our target.”
Yes, the fake made-up, 2 percent bullshit target.
In concert with his Bankster buddy Waller, John Williams, president of the New York Federal Reserve Bank, echoed: “We need to retain a sufficiently restrictive stance of policy. We’re going to need to maintain that for a few years to make sure we get inflation to 2 percent.”
TREND FORECAST: Considering last week’s statements from the Feds regarding inflation rates staying strong, to us it is quite clear, considering that they run and control the nation’s economic system—as also clearly evidenced that the U.S. Treasury Secretary Janet Yellen was a former Fed Head—it is apparent that they knew the inflation numbers several days before We the People of Slavelandia were “officially” told them today.
Therefore, the higher interest rates rise, the deeper the economy will sink. And so too will gold prices since gold is dollar based and the stronger the dollar gets, the more it costs to buy as currencies from other nations weaken.
However, when the nation sinks deep into recession and economic dangers are seen on the near horizon, gold prices will rise as investors seek the safest of safe-haven assets.
And on a more dangerous note, as Gerald Celente warns, “When all else fails, they take you to war.” Therefore, as the economy sinks into Dragflation—declining economic growth and rising inflation—more war is on the near horizon… in a country near you.
TRENDPOST: As the data show, for the plantation workers of Slavelandia, it cost more to eat and live.
LAST WEEK: INTEREST-RATE REALITY DEFLATES MARKETS
Russia’s announced cut in oil production, a stunningly strong jobs report last week, and a glum expectation for today’s update on the U.S. Consumer Price Index were among factors that gave financial markets their worst week so far this year.
Investors had been betting that the U.S. Federal Reserve would pause its series of interest rate increases, or even begin to cut rates soon, a sentiment that had propelled the markets’ gains through much of the past month.
“While the recent move higher in [interest] rates is supportive of the notion that the Fed may remain restrictive for longer than appreciated, the equity market is refusing to accept this reality,” Morgan Stanley analysts wrote in a note to clients last week.
“The risk-reward [ratio in equities] is as poor as it’s been at any time during this bear market,” the note said. “The reality for equities is that monetary policy remains in restrictive territory in the context of an earnings recession that has now begun in earnest.”
Last week, investors began to pay attention, cashing out their optimistic bets as they began to take Fed chair Jerome Powell at his word that interest rates will not only move higher, but also probably will peak above what markets have been pricing.
Reining inflation back to the Fed’s 2-percent target “is likely to take quite a bit of time,” Powell said in a 7 February public comment. His remark reinforced his past warnings that the central bank will continue to raise rates.
For the week, the Dow Jones Industrial Average retreated 0.2 percent. The NASDAQ shed 2.4 percent to break its steady five-week rise that had taken it 11 percent higher in January. The Standard & Poor’s 500 index gave up 1.1 percent to post its worst week of 2023.
TRENDPOST: As we note above in ECONOMIC UPDATE, it is all about interest rates. Equities went up when The Street believed inflation was easing and the Feds would begin lowering interest rates later this year. But as more caution was sounded from the Feds that inflation would not be tamed soon, equities retreated.
Among companies that publicly report earnings, 58 foresee a negative profit outlook for this year’s first three months, according to data service FactSet.
The 10-year treasury note’s yield edged up to 3.743 percent on Friday from 3.682 percent Thursday.
Spot gold was down 0.8 percent on the week to $1,864.13 at 5 p.m. U.S. EST on 10 February.
Brent crude’s price climbed 7.3 percent this week to $86.39 at 5 p.m. U.S. EST on 10 February after Russia announced production cuts. (See “Russia Cuts Oil Output; OPEC+ Refuses to Make Up the Difference” in this issue.) West Texas Intermediate jumped 7.9 percent to $79.72.
“Lower Russian production, together with China’s reopening, should tighten the oil market over the coming quarters,” commodity analyst Giovanni Staunovo at UBS said to the WSJ.
Bitcoin moved down through the week by 5.1 percent to $21,610.50 at 5 p.m. U.S. EST on 10 February.
Abroad, stocks shifted little.
The London FTSE was down 0.4 percent, while the all-Europe Stoxx 600 lost two points, a fraction of a percent.
The Japanese Nikkei 225 shrank by 0.4 percent, while South Korea’s KOSPI gained that amount.
In China, the Hong Kong Hang Seng index fell by 1.1 percent. The mainland’s CSI Composite rose 3 points, a fraction of a percent. The tech-centric SSE Composite added less than 0.1 percent.
YESTERDAY: DOW SEES ITS BEST DAY IN FEBRUARY BEFORE MUCH-ANTICIPATED CPI DATA
The Dow Jones Industrial Average was up 376.66 yesterday, or 1.11 percent, to 34,245.93, and the benchmark S&P 500 saw an increase of 46.83, or 1.14 percent, to 4,137.29. The tech-heavy Nasdaq was up 173.67, or 1.48 percent, to 11,891.79.
Traders were considering Tuesday’s Consumer Price Index (CPI) data from January that the Federal Reserve will weigh when determining future interest rate hikes. The optimistic feeling on the street reflects the underlying feeling that CPI numbers will show inflation is cooling and that the monetary tightening has been effective.
Stocks could easily give back gains if the numbers come in hotter than expected. Last week, stocks closed out their worst weekly performance of the year.
Peter Garnry, head of equity strategy at Saxo Bank, told The Wall Street Journal, “The key thing here is at what level will inflation begin to stabilize. If these inflationary factors are persistent, then the Fed will be in a position where they have to do more or keep rates up longer than the market is pricing.”
The CPI data is just the first government release for the week, which will also include the retail sales report on Wednesday, and the Producer Price Index (PPI) on Thursday.
Elsewhere, European stocks saw increases with London’s FTSE was up 65.15, or 0.83 percent, to 7,947.60 and the STOXX600 was up 4.14, or 0.90 percent, to 462.03. Asia trading was mixed. Japan’s Nikkei was down 243.66, or 0.88 percent, to 27,427.32, and South Korea’s Hang Seng was down 26, or 0.12 percent, to 21,164.42. South Korea’s Kospi was down 17.03, or 0.69 percent, to 2,452.70. China’s Shanghai Composite was up 23.49, or 0.72 percent, to 3,284.16 and the Shenzhen Component was up 136.75, or 1.14 percent, to 12,113.61.
TRENDPOST: The equities market could be up, but that does not mean that the economy is not headed down. Just look at all the recently announced firings across the U.S. Gerald Celente has noted that during the Panic of ’08, major companies started to announce the firing of temporary workers before the crisis began.
“The market will keep going up, as the economy is going down…they couldn’t give a shit about the people,” Celente said.
OIL: Brent crude was down 46 cents, or 0.53 percent per barrel to $85.93 and West Texas Intermediate was down 46 cents a barrel, or 0.56 percent, to $79.28.
Prices were impacted by the U.S. Department of Energy announcing that it planned to release additional crude from its Strategic Petroleum Reserve (SPR), Reuters reported. The report said the move defied expectations from some traders that the release could be canceled or delayed.
“Energy traders were expecting to hear news about refilling the SPR and not tapping them for more supplies,” Edward Moya, an analyst at OANDA said, according to the report.
Rebecca Babin, CIBC Private Wealth senior energy trader, told Yahoo Finance that she does not think the U.S. is “set up for a quiet, easy-going summer for prices at the pump.”
“I would enjoy it for now, and prepare for higher prices in the summer,” she said.
TRENDPOST: When all else fails, they take you to war. Oil prices continue to be our wild card because there are so many unpredictable outcomes. We’re seeing major protests in Israel against Prime Minister Benjamin Netanyahu’s government over its planned judicial overhaul. (See “NETANYAHU’S MOVE TO WEAKEN THE COURT GROWING.”) All the while, Israel and the U.S. have been conducting massive war drills and Iran’s the target. If war breaks out in the Middle East oil prices will surge.
GOLD: The precious metal was down $10.10, or 0.54 percent, to $1,864.30 as of 4:30 p.m. ET.
The feeling is that the Fed will keep interest rates higher for longer regardless of the CPI data. High treasury yields negatively impact the price of gold, which is a non-yielding asset.
TRENDPOST: Please see our gold Trend Forecast above in the Economic Update section.
BITCOIN: The world’s most popular crypto currency was trading down yesterday and was off $180.30, or 0.83 percent, to $21,609.50 as of 2:41 p.m. ET. Bitcoin is up on the year, but approached its three-week low.
TRENDPOST: Bitcoin prices have rebounded and have shown strength at around the $21,000 mark for the year. We remain cautious due to the unpredictability of the Fed’s next move. Like gold, bitcoin is a non-yielding asset that faces pressure with high treasury yields.
TODAY: HOTTER-THAN-EXPECTED CPI DATA CHILLS MARKET
The Dow Jones Industrial Average fell 156.66, or 0.46 percent, to 34,089.27 while the benchmark S&P was off 1.16, or 0.03 percent, to 4,136.13. The Nasdaq finished the day up 68.36, or 0.57 percent, to 11,960.15.
All eyes were on the Consumer Price Index data from January that was due out today, which came in hotter than expected but cooler than the 9.1 percent reached last summer. The CPI from last month was 6.4 percent, which was just down slightly from December’s 6.5 percent reading, which means more tightening from the Fed.
The New York Times noted that the 6.4 percent number “remains more than three times as fast as was typical before the pandemic.”
PUBLISHER’S NOTE: So what now? See our Economic Update for our inflation trend forecasts and implications.
Elsewhere, London’s FTSE was up 6.25, or 0.08 percent, to 7,953.85 and the STOXX 600 was up 0.37, or 0.08, to 462.40. In Asia, Japan’s Nikkei was up 175.4 and South Korea’s Kospi was up 12.94, or 0.50 percent, to 2,465.64. Hong Kong’s Hang Seng lost 50.66, or 0.24 percent, to 21,113.76. China’s Shanghai Composite was up 9.12, or 0.28, to 3,293.28 and the Shenzhen Component was down 18.67, or 0.15 percent, to 12,094.94.
TREND FORECAST: As we have detailed, lower energy prices have brought down inflation with everyday items keep costing more as real wages fall compared to real inflation.
Thus, while the Inflation rate may be slowing, prices are still rising. As a result, consumers will continue to pinch their pennies, further crimping U.S. economic activity.
OIL: Brent crude was down 98 cents a barrel, or 1.13 percent, to $85.63 and West Texas Intermediate was down $1.02, or 1.02 percent, to $79.12.
The Petroleum Exporting Countries helped oil prices after announcing that it raised its oil demand forecast by 100,000 barrels per day in a monthly report. The report said the main driver in the increase was the reopening of the Chinese economy.
GOLD: The yellow metal was up $2 an ounce today, or 0.11 percent, to $1,865.50. Gold had a choppy day after the dollar rebounded after approaching new lows for the month.
The precious metal fell again in the immediate aftermath of the CPI data that showed an increase of 6.4 percent in January.
Two Federal Reserve banksters reiterated the bank’s stance on bringing down inflation, which slowed some early momentum for the precious metal.
Thomas Barkin and Lorie Logan, Fed presidents from Richmond and Dallas, respectively, said 2 percent inflation is still the target… which we note above in the ECONOMIC UPDATE, that it is just more Fed bullshit. See our gold forecasts in the ECONOMIC UPDATE as well.
BITCOIN: The world’s most popular cryptocurrency jumped over $400 today after the U.S. announced its CPI data. After struggling in early trading, and hitting as low as $21,611 a coin, bitcoin jumped $408.20, or 1.88 percent, to $22,196 as of 4:19 p.m. ET.
TRENDPOST: We have long noted that cryptos would suffer when governments announce plans to regulate the market, and, like anything, when it gets too big, the government will crack down.
CNBC noted that on Monday, New York State Department of Financial Services told Paxos, a technology company specializing in blockchain, to stop minting new Binance USD, or BUSD, stablecoins. Stablecoins are often tied to real-world reserve assets, the report noted.
“All BUSD tokens issued by Paxos Trust have and always will be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts,” Paxos told investors in a statement.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told the network, “The markets might take some time to consolidate here and wait and watch whether there are further events that play out in terms of regulatory crackdown, hence we could see a couple of weeks of sideways action.”
Insiders say the government crackdown is particularly troubling because there is a lack of clarity and well-intentioned companies simply do not know what government agencies like the Securities and Exchange Commission require from them.