Yesterday, the ‘Dynamic Duo’ came to the rescue once again. The rally is like a superhero that exhibits mortality, but always finds ways to prevail.

Technology (XLK) and Communication Services (XLC) led the charge again, while the rest of the market, led by Financials (XLF), pulled back.

Buyers Stepped Up

The Department of the Treasury issuance and fiscal money printing will continue to hinder the Federal Reserve’s efforts to cool down inflation (you know, the old “too much money chasing too few goods” canard).

There is always a buyer for U.S. debt, but they have become fickler and demanding. I worry about the day one of these auctions fails, and all hell breaks loose, as the U.S. government decides it must print money as the only alternative.

Yesterday, a strong Treasury auction of ten-year notes staved off a market looking to “chuck in the towel.” Direct bidders (deep-pocketed U.S. institutions) were a little short of recent auction averages, but overall, it was a good auction.

• Dealers: 11.6% versus 16.0%
• Direct Bidders: 13.8% versus 18.0%
• Indirect bidders: 74.6% versus 66.0%

Unbeatable

It's been 322 days since the last -2.0% down day. This is remarkable.

Interestingly, the Fear & Greed Index moved closer to ‘fear’ despite another up day.

Market Breadth

The deterioration of market breadth is another reason the market is lurching toward ‘fear’ despite being higher.

For me, the New York Stock Exchange (NYSE) decliners stood out the most.

Market Breadth	NYSE	NASDAQ
Advancers	993	1,784
Decliners	1,831	2,397
New Highs	52	81
New Lows	63	132
Up Volume	982.88 million	2.25 billion
Down Volume	1.7 billion	2.05 billion

An Apple Today

Apple (AAPL) got into the Artificial Intelligence (AI) game and immediately reaped the rewards. Oracle Corp. (ORCL) is also enjoying the AI wave.

Consumer Price Index

the Consumer Price Index (CPI) number out this morning will come in at the consensus or slightly above or below it.

The financial media will report it as “inflation coming down” instead of the “rate of inflation growth is slowing down.” Inflation has been a juggernaut that is crushing a majority of Americans.

FOMC

Senator Elizabeth Warren (below) sent a letter to Fed Chairman Jay Powell on Monday urging the Fed to cut rates. She noted that high interest rates are already slowing the economy while failing to address the remaining key drivers of inflation. 

On that, she has a point.

Jay Powell & Co. have their hands full. They must reel back the enthusiasm they unleashed when the Fed’s ‘Dot Plot’ showed three rate cuts. The question is, do they lower the count, and by how much?  Would that be considered a signal for no rate cuts in 2024?

In the last Summary of Economic Projections (SEP).

Today’s Session

Consumer Price Index (CPI) for May has come in below consensus and the market is breathing a sigh of relief. 

Unchanged from a month ago, the street was looking for +0.1%.

Prices were up +3.3% from a year ago, the street was looking for +3.4%.

There still remains some shocking increases from a year ago including motor vehicle insurance +20.3%, shelter +5.4%, and food away from home +4.0%.

Used cars and trucks plunged 9.3%.

This gives Powell & Co some wiggle room, but not sure they are breaking out their erasers. 

Comments

Hey Charles. Sure miss you posting your sector breakdown and how many holdings you have in each in this newsletter. Think you can start posting it again at least once a week? Thanks for all you do. Chuck on 6/12/2024 1:04:35 PM

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