Good morning contrarians! It is Wednesday, Dec. 7.
Stocks sold off again yesterday, apparently due to recession fears. These were voiced from authoritative sources, in the form of two major Wall Street bank CEOs: Goldman Sachs’s David Solomon and JPMorgan’s Jamie Dimon. The former spoke at a conference about a slowing economy and the latter went on CNBC to talk about how inflation would erode consumer confidence next year. Dimon also expressed concerns about geopolitical issues.
Tech stocks saw the worst of it this time, with the Nasdaq dropping 2% on the day. Other US indexes were down a little less.
State of Play
Some news overnight from China, which has decided to loosen Covid restrictions. There are no economic data releases to speak of today other than the weekly mortgage applications at 0700. As of 0620 it doesn’t look like the China news has helped sentiment much:
Stock futures are down a bit, with the Russell 2000 which tracks small caps off 0.3%. Other US indexes are closer to the break-even point;
Commodities are trending lower, with WTI crude oil down 1% to trade around $73.50/barrel, its lowest level of the year. Copper is down ~1% as well;
Cryptos are dropping a bit, with Bitcoin down about 1% to trade around $16,800;
Bonds are effectively unchanged with the 2-year at 4.35% and 10-year at 3.53%.
Corporates
Campbell’s Soup (CPB), Olli’s Bargain Outlet (OLLI), and United Natural Foods (UNFI) report earnings before the open at 0930. After the close at 1600 we’ll hear from GameStop (GME), Rent the Runway (RENT), and Sportsman’s Warehouse (SPWH).
Lowe’s (LOW) and Southwest Airlines (LUV) hold investor days today.
The Bottom Line©
Again few known catalysts. The last two days investors took the opportunity to sell stocks. Three in a row? Jamie Dimon is one individual worth listening to when it comes to economic forecasts. As the CEO of the country’s largest lender he will be keenly aware of the kinds of issues that consumers in particular might have to deal with. Some context is necessary here as Dimon did hedge his comments (watch the video).
Still, inflationary pressures are real. Hard to believe we’re only one year or so away from hearing actual arguments from smart people about how inflation was transitory. It now looks like the Fed has a real fight on its hands with this inflation business. In fairness, this is what they’ve been telling us the last four months or however long it’s been since Jay Powell’s Jackson Hole speech.
So what if CPI is not running as hot as it was earlier? If the CEOs from Goldman and JPMorgan are telling us they’re worried about inflation, we probably need to listen. This is the new emerging (emerged?) narrative as we enter the final weeks of the calendar year.
Our podcast guest this week, Kyrill Asatur, has a lot to say about this. The actionable highlights clip is available for premium subscribers. The full podcast episode will be posted later today or tomorrow for premium subscribers. If you were holding out on becoming a premium subscriber, here’s your chance to get on board:
Recession Fears, China Re-Opening