401 – Economic Achievement Unlocked

Economic Achievement

Market momentum is Green. Investors and traders piled capital into the market after Jerome Powell spoke this afternoon. Markets cheered the 75 basis point hike, and short sellers had to cover their bets on a 100-point hike that didn’t arrive. Today was a big momentum day, with significant amounts of capital pouring off the sideline. We’re looking for a possible rally to 408.

I hope you could catch up with Jeff Zananiri, Lance Ippolito, and me during our Roundtable today. Great conversation about the state of the markets… We dug into the energy trade. Lance told me why he (smartly) doesn’t follow economic reports, and Jeff gave us a deeper understanding of why this market hasn’t found its bottom just yet.

And I seem to have predicted… one number would matter today. It was… a four… and a zero… and another zero…

Did I say SPY at $400 by the end of the day? Ah, yes… I did 🙂 Thank you, Federal Reserve.

With momentum positive and the odds of a 100-point rate hike at 23% today, all of the shorts had to cover their losses. Right after Jerome Powell spoke at 2:35 pm… this happened.

As I noted today, there has been a significant shorting of the S&P 500 Futures in July. Hedge funds and other money managers were deeply shorting this market. So, it only took a little pressure to uncork the shorts. 

Fed Chair Jerome Powell offered a little reassurance. He argued that we are not in a recession. And the markets took him at his word. All of a sudden, the rally took off. This is the third time we’ve witnessed a “Jerome” lovefest by the markets… and every time it happens at 2:35 pm.

Okay, So, About This Economic Recession?

I mentioned that the economic speech yesterday by Brian Neese, head of the National Economic Council, is driving me to drink. He said that two negative quarters in a row in terms of economic growth does not make a recession.

Apparently, I should sue not one, not two, but FOUR economics departments have taught me this basic definition since 2000. 

That said, my odds of a recession dropped sharply today after I saw the durable goods report emerge. For the last few months, we’ve seen a steady drop in manufacturing numbers across the nation.

But – WOO BOY – the durable goods numbers came in hot today. Durable goods were up 1.9% month over month… and increased by 11.8% year over year. Economies in recessions don’t usually show that type of future.

But then I dug under the hood. The biggest driver was in auto production. And then… MILITARY AIRCRAFT. 

There was $10.5 billion in new airline and airline parts orders. This is the third-largest order level ever… and not far behind the massive spending in the wake of September 11, 2001.

Now, these numbers don’t do squat for the consumer side of the economy, but economic growth does rely on government spending. Well, played, bean counters. Well played.

Ford Does It Again

Finally, let’s conclude on the solid numbers out of Ford Motor Company (F) this afternoon. Everyone else was eyeing Meta Platforms (META). NO! Trucks!!!!

The company reported non-GAAP earnings per share of $0.68. The nerds on Wall Street thought we’d see $0.44. Revenue was really strong… beating estimates by more than $2.7 billion. And that was on top of supply chain problems across China. 

The company maintained its forecast, despite recessionary and low growth concerns and despite headwinds in the semiconductor space. Plus, a 50% hike in dividends. 

Now, it wasn’t all rainbows, as it anticipates a $4 billion headwind in higher commodity prices for the foreseeable future. But this was a very solid earnings report and should provide some much needed enthusiasm. 

I don’t think that the bottom is here yet, but I can see Ford stock blowing through $14.00 quickly, and providing traders with a nice momentum move.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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