Markets Waver Amidst Fed Fears And Afghan Tragedy

Yesterday’s session was doomed out of the gate with angst over today’s speech from Jerome Powell. And of course, angst over Afghanistan, as the U.S. military death toll increased from the suicide bombing in Kabul.

There was never panic, but market breadth reverted to its ugly negative trend.

Keep an Eye Open

The U.S. Dollar (DXY) has gained strength and hints at a monumental breakout, as the recent double bottom looks more like it might have signaled a short-term bottom.

The Core Commodities Index (CRB) is also at a key point after staging a huge bounce off a double bottom. A strong dollar could cool sizzling commodities, but it is not great for multinational corporations.

Kansas City Fed Manufacturing Composite came in better than expected but had several issues.

Production swooned from supply chain issues and some labor problems as well.

Nevertheless, prices keep surging with the ‘paid’ trend (see Kansas City Fed chart below), rising to its second highest on record, and prices received hit a new record.

Consumer Power

The Consumer Comfort Index from Langer Research continues to edge higher, which is important as the consumer will have to do more heavy lifting to absorb higher prices. 

Personal finance continues to drive the Consumer Confidence Index (CCI), while households with less than $50,000 in their annual income saw the largest increase in comfort.

Earnings

After the close, there was a dramatic reaction to corporate earnings:

• Winners

Gap Stores (GPS) beat on revenue and posted earnings of $0.70 against the consensus of $0.46, as comp- store sales rose by +12% from the 2019 quarter.

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Strong guidance as management is confident the surge of 19 million new shoppers - primarily teens- means its 40 million total will keep showing up and spending.

• Loser

Peloton (PTON) saw its quarterly losses climb to -$1.05, more than double the -$0.45 expected.  Guidance is also less than expected, as the company has been forced to cut the price of its original bike by $400.

Pray for Our Troops

In Kabul, Afghanistan, up to 13 American soldiers lost their lives trying to help people in a foreign land flee an avalanche of unspeakable terror. Let's never forget their sacrifice.

Portfolio Approach

There are no changes to the Hotline Model Portfolio this morning.

Today’s Session

Personal Income rose 1.1% and Spending up 0.3%, reflecting a growing angst among households resulting in higher savings. Other $907.1b from $735.6b, wages $10,251 from $10,152.

Personal Spending

Savings Rate

Waiting on Consumer Sentiment and Jerome Powell (a parade of Fed officials making the rounds. I think I saw one on the Weather Channel, trying to potentially soften any blow from the chairman’s speech, which is not supposed to spook investors and shouldn’t since most are saying its time to start tapering).