Stocks sold off yesterday as markets adjusted their attitude toward the Fed – maybe Fed policymakers mean business? Bonds fell and dragged down stocks leaving no safe haven for investors yesterday.
Time heals. It’s Friday, so I am going to throw something completely arcane at you to start your morning. I saw a completely flattened rat in the middle of a New York street the other day. It wasn’t messy at all, and it almost looked fake, like a gag-toy… but it got me thinking . First off, please don’t turn this into a reason not to visit my beautiful city. New York’s rat problem is well known, but there is something interesting going on. My regular readers know that I have mentioned the cunning rodents before, especially during the height of the pandemic when we were all shuddered in.
These days, New York City feels very much back in business. The streets are mobbed with workers and tourists alike. Apartment rents are up by double digits. I was walking with my son one weekend, and we saw a long line of younger folks. I assumed that they were queued up for some internet-famous donuts or something. He informed me that line was for an apartment-for-rent; they were hoping to snag a rare opening on the spot… cash in hand!
The subways, though ridership is not quite back to pre-pandemic levels, feel jampacked as ever. Getting a restaurant reservation at even a B-list eatery takes connections, very long-term planning, or the ability to sit down for dinner at 9:50 PM… on a Tuesday. Yes, the city is back. With all the crowds, how is it that the rat population seems to be thriving when they typically avoid crowds? You may already know the answer to that question. It’s all about timing. When I wrote about my daughter and I walking to Grand Central Terminal back in 2020 and sharing the street with more rats than humans, apparently those rats were doing more than just strolling about the city. It was their time to explore, migrate, and… um, procreate . Wouldn’t you know it, a year or two later, the rat population has exploded… just in time for all of us non-rodents to get back to business. The mayor, Eric Adams, has even set up a special task force to deal with the problem… he famously hates rats.
The message in all this Friday madness is one of timing and patience. Today’s New York rat problem is a result of events that occurred a few years back. Similarly, inflation today is a result of supply chain issues from 2020 and 2021 combined with a consumption boom in 2021. The Fed stepped up its battle with inflation last year and the results are just starting to show now, albeit in a small way. Though we keep on hearing about layoffs, they have not yet shown up in the monthly numbers, but they will. Nothing in the economy happens in an instant. Inflation will ultimately come back down to its long-run average. The Fed will ultimately stop raising rates and possibly even lower them… maybe just now, right this second. This is a time to be pro-active and not re-active. Maintain your long-term focus and plan for that time… it will come. With regards to my flattened-out muse, rats are considered by many eastern cultures to be a symbol of wisdom, prosperity, and fertility. And for the record, there are no rats the size of cats in New York.
WHAT’S SHAKIN’
Expedia Group Inc (EXPE) shares are lower by -2.55% in the premarket after announcing that it missed EPS and Revenue targets by -28.89% and -3.39% respectively. The company attributes the miss to bad weather in Q4 but reported that demand is growing steadily and sales for the current year are off to a strong start. Potential average analyst target upside: +13.8%.
Newell Brands Inc (NWL) shares are lower by -5.82% in the premarket despite announcing that it topped EPS and Sales estimates by +40.13% and +2.43% respectively. The company offered full year forward guidance that was below analysts’ targets. The company reported that it is experiencing a slowdown in consumer demand and inventory reductions in retail. Dividend yield: 0.92%. Potential average analyst target upside: +14.2%.
Treasuries fell overnight, and yields are higher, once again, across the yield curve. Yield on the 10-year note is up by +4 basis points to 3.7%. The yield curve between the 2-year and 10-year notes is the most inverted since 1981 with a spread of -81 basis points, though +2 basis points steeper than yesterday. Rising yields will continue to put pressure on equities.
YESTERDAY’S MARKETS
Stocks fell yesterday as markets adjusted to the reality that the Fed is not going to pivot anytime soon. The S&P500 fell by -0.88%, the Dow Jones Industrial Average traded lower by -0.73%, the Nasdaq Composite Index dropped by -1.01%, and the Russell 2000 Index declined by -1.40%. Bonds fell and 10-year Treasury Note yields climbed by +4 basis points to 3.65%. Cryptos lost -4.00% and Bitcoin gave up -4.80%.
NEXT UP