Fedspeak Weighs on Markets in Both Directions… On Wednesday morning, Minneapolis Federal Reserve President Neel Kashkari said that he is open to raising his terminal rate estimate above 5.4%. On Thursday, Atlanta Federal Reserve President Brian Bostic said that the Fed could pause by late summer.
What it means— Without much to drive the markets either way this week, investors took their cues from things like comments by Kashkari, who said that he projected a 5.4% terminal rate in December and is open to a 25–basis point or 50–basis point hike this month. The Federal Open Market Committee (FOMC) members record and release their economic estimates once a quarter and will do so at the March meeting. Kashkari was the latest FOMC member to suggest that rates will move closer to 5.5% than investors previously thought, which puts pressure on growth equities. Still, Kashkari pointed out that he will be closely evaluating the economic reports, such as those covering jobs numbers and inflation, that will be released between now and the next Fed meeting.
Bostic suggested that the Fed could pause by mid to late summer. His comments drove the markets higher, even though he also said that the Fed has a ways to go in raising interest rates. What makes investor reaction to Bostic’s comments more (or perhaps less) interesting is that he’s currently not a voting member of the FOMC, so his opinion doesn’t matter. Perhaps the trading algorithms didn’t pick up on that fact.
Durable Goods Orders Fall 4.5% due to Boeing, but Business Investment Turns Higher… Excluding transportation, durable goods orders increased 0.7%.
What it means— Parsing the number even more, excluding transportation and military spending, a proxy for business spending, durable goods orders increased 0.8%. That’s the fastest growth rate for business spending since last August, which sound great, but it’s just making up lost ground, as business investment declined in the closing months of last year. It looks like manufacturers remain nervous about where the economy is headed and want clear signs that consumers are still spending.
China Posts Positive Economic Numbers as the Country Emerges From COVID Lockdowns… Manufacturing, non-manufacturing, and property sales measures all surprised to the upside.
What it means— The Purchasing Managers Index rose from 50.1 to 52%, while a non-manufacturing gauge increased from 54.4 to 56.3. A construction-only index jumped from 56.4 to 60.2, as local governments provided funding for property sales and completion of existing projects. The turnaround drove property sales up 14% over this time last year, the first annual gain since July 2021. The good news from China drove equity markets in Hong Kong and Australia higher and also gave the energy markets a boost. If China is on the mend, the nation soon will be importing more commodities and supplies from abroad. Unfortunately, that could spell more inflation in the U.S. and other nations, as we vie for the same resources.
ISM Manufacturing Survey Below 50, at 47.6, While ISM Services Survey Above 50, at 55.1… Readings below 50 imply contraction, whereas readings above 50 show growth.
What it means— The direction was as expected, with manufacturing easing while services grow, but the services survey was a little hotter than expected, up 55.1 instead of 54.3. While that might suggest more economic activity than the Fed wants, it comes with a caveat. Even though the employment sector of the services survey showed growth, managers in several industries reported a better employment situation and a few were even downsizing.
The numbers are good enough to signal stability but aren’t strong enough to tip the scales on what the Fed will do next.
Ford Files Patent That Lets Company ‘Repossess’ or Otherwise Disable Your Vehicle Remotely… Titled “Systems and Methods to Repossess a Vehicle,” the system covered by the patent can disable one or more of the components of the vehicle, including everything from the engine to the air conditioning. For vehicles with autonomous or semiautonomous driving capability, the system can be used to put the vehicle in a more convenient spot for towing or even drive it to a repossession agency of a junk yard if cheaper. This is yet another reason to keep old vehicles operating as long as possible. At least the tow truck drivers won’t be involved in confrontations with late-paying owners.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
Our plan is “the plan will change.”
What is your plan?
Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Investor Resources, Inc. (“Investor Resources”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Investor Resources. Please remember to contact Investor Resources, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Investor Resources shall continue to rely on the accuracy of information that you have provided. Investor Resources is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Investor Resources’ current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at https://www.investorresourcesinc.com/. Clients Please Note: Advise us if you have not been receiving account statements (at least quarterly) from Charles Schwab & Co.™