Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Wednesday, March 6. The Bottom Line segment of today’s podcast starts at (5:19) for listeners who want to skip ahead.
State of Play
Stocks dropped yesterday for the second straight day, continuing their retreat from all-time highs. Tech got beaten up a bit, but encouragingly regional bank stocks (a cause for concern in yesterday’s briefing) rallied. After the close, positive earnings from CrowdStrike (CRWD 0.00%↑) helped sentiment. As we look at our board of indicators at 0340, risk appetite appears to be returning:
Stock index futures are pointing to a higher open, with tech leading the way. The Nasdaq is up 0.6% while the S&P 500 is up 0.3%;
Cryptos have been all over the place. Bitcoin briefly hit a new all-time high, then promptly dropped 10% before recovering. Right now BTC trades around $67,400;
Commodities: Speaking of all-time highs, a little less noticed was gold’s ascent to a record $2141/oz. Gold is right now dropping a tiny bit from these levels, down 0.4%. WTI crude oil is up <1% to trade around $78.75/barrel. Copper is up 0.4%;
Bonds are unchanged. The 2-year yields 4.56%, the 10-year 4.17%.
Today’s Known Events
Jerome Powell returns to the spotlight today at 1000, testifying before the House Financial Services Committee. This will be closely watched for any hints on future monetary policy. Specifically, investors will be looking for clues on when, if at all, the Fed may cut rates. Unfortunately you can’t expect the politicos in DC to ask him any kind of educated questions on any of this as they will just be looking to hog the spotlight for themselves. Still, Powell’s commentary should be useful if only to see how his prepared statements differ from what he said in his last public comments on this topic.
The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey for January is also due at 1000. Economists who were surveyed expect 8.8 million job openings, down a bit from the 9 million seen the previous month. But arguably more interesting is what’s in the details of this report. The ‘quits levels’ which tracks the number of people willingly leaving the labor force each month is a personal favorite. At last count, it was still holding steady at 2.2%, though down from the year-ago level of 2.6%.
Earnings today: Abercrombie & Fitch (ANF 0.00%↑), JD.com (JD 0.00%↑), Foot Locker (FL 0.00%↑), EVgo (EVGO 0.00%↑), Campbell’s Soup (CPB 0.00%↑), and United Natural Foods (UNFI 0.00%↑) report before the open at 0930. After the close we’ll hear from Victoria’s Secret (VSCO 0.00%↑).
The Bottom Line©️
It’s all about Powell today. You’re going to want to keep an eye on Fed Fund Futures. At the time of this writing, these are pricing in a 21% chance of a rate cut at the FOMC meeting on May 1 (there’s a meeting before then, on March 20, but virtually no chance of any movement on rates then). For the subsequent meeting on June 12, chances of a rate cut are seen at 57%. It’s still a ways until June, but there’s a chance this is a tad optimistic.
Our guest this week got into this at some length. Mark Higgins is the author of a recent book on financial history and he makes the point that the 1970s inflationary period has perhaps the greatest bearing on present day Fed policy — which would mean that Jay Powell & Co. are not as close to cutting rates as some might expect. But give this episode a listen as it’s available to you premium subscribers at this point exclusively:
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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