Last week the S&P500 closed at 4105 which was just barely off from the previous Friday close of 4109–off course the week was a short week with the Good Friday holiday.
The 10 year treasury closed the week at 3.29% which was a full 20 basis points lower than the previous week, The employment report which was one of the important economic data points on the week was a mixed bag–softer than forecast new jobs created, but a lower unemployment rate.
This week we have a number of important economic report–in particular the consumer price index (CPI) release on Wednesday. In addition to the actual data releases we have Fed Presidents talking almost daily–I think they will begin setting the path for a 1/4 point rate hike in May after the FOMC meeting.
After a giant $400 billion move higher in response to the banking crisis the Fed’s balance sheet fell for the second week in a row – down $74 billion on the week. The balance sheet is off $100 billion in 2 weeks.
Last week surprisingly the average $25/share preferred and baby bond was virtually flat – plus 3 cents. Investment grade issues were up 16 cents, banks down 12 cents, mREITS dead flat and shipping issues down 2 cents.
From later last week there were a couple of headlines of interest.
1st off First Republic Bank announced the suspension of dividends on their preferred. The announcement is here.
2ndly CHS (Cenex Harvest States), the giant agricultural cooperative, announced earning for the quarter ending February 28, 2023. The earnings overall were stellar –although energy drove the earnings, with ag looking a bit softer. The earnings release is here.
This is a laundry list of issues I currently own. No recommendations here–just what I own now.
As I have noted I will be mostly adding to current positions–versus starting new positions–but there are areas that intrigue me such as lodging REITs and as such I may start new positions (but not many).
Well not much market action today being Good Friday and for the most part markets are closed.
Employment numbers were released for March and I guess I view them as somewhat Goldilocks. 236,000 new jobs were created versus a 238,000 forecast and much slower than the previous month of 326,000. At the same time the unemployment rate fell to 3.5% down 1/10%. Wages were up .3% from a month ago, while up 4.2% year over year. It seems to me whether the Fed raises at the next meeting, which is May 2nd and 3rd, will be determined, in large part based on will be determined by 3 things–of which employment is one, consumer prices (CPI) is the second and personal consumption expenditures (PCE) is the 3rd.
As of this minute I think it is a coin toss as to whether they raise rates—too much data yet to be seen before a decision is made. Beyond ‘data’ we still have the banking event to deal with – and how much is this going to factor into decisions–and we will never know the answer to this because the Fed will want to show economic confidence–don’t think they are going to say ‘we need to pause because of the weak banking situation’. Well that decision is near a month away yet so lots of data to come before that time so we will have to take it one day at a time.
Well I am going to spend some time this weekend working on my portfolio – lay out what I own and what I want to own. I’ll post the info here – I hope tomorrow.
Today we had 1st time unemployment claims come in at 228,000 versus a forecast of 200,000 and last weeks number of 246,000 – I guess that is slightly softer than expectations, but seems quite a long way from where it will need to go to have the Fed back off of interest rates (lower them). If I were a guessing person I would guess that the Fed will ‘pause’ at the next meeting and then step back and watch the data–BUT that is what I guess knowing what we know today–and next week we have the CPI and PPI data so who really knows–everyone is just a ‘guesser’.
This morning I added another Good til Cancelled buy order to my ever growing list of outstanding orders. This time I entered an order for the Apollo Asset Management 6.375% perpetual (AAM-A) for a buy price of $21.50–which would translate into a current yield of 7.4%–pretty decent for a investment grade issue. I already had a current very modest position in this issue so this would be additive.
So I think it has been clear that thus far I have been adding to current positions–all of them were much larger positions until the end of January when I trimmed everything back locking in some capital gains and deploying substantial funds into CDs and treasury bills. Through January I had maybe 30-35 preferreds and baby bonds–I was very happy with my portfolio make-up so I continue to simply add at great prices when (if) they present themselves.
Fed yakker Bullard was speaking at 9 a.m. (central) today and I didn’t see any wild market swings so I guess he wasn’t too bombastic in his appearance. The rest of the day should be free from big news.
I am confused that on a continuous basis Fed folks claim to be data dependent yet when the ‘have the stage’ they say rates need to be higher (or lower) – are they data dependent or not? Yesterday Cleveland Fed President Mester said rates need to go above 5% and stay there for some time–I guess she has a super crystal ball and knows future data better than anyone else. Oh well these folks have shot their mouths off for years and they aren’t likely to stop anytime soon–all I can say is ‘we’ll see’.
How about the 10 year treasury yield–off 10 basis points today to be trading around 3.32% – down 17 basis points from last Fridays close. Of course we are in a period of time where preferreds and baby bonds don’t move in lockstep with interest rates–over time they will, but we have too many other influences that are driving prices up and down.
The ADP jobs numbers were soft today coming in at 145,000 new jobs created in March versus 261,000 forecast. Does any one really care? Not me because these numbers have had little correlation with the ‘official’ jobs numbers (which come out on Friday) – not sure why these still make the news each month – guess CNBC has to fill air time.
I don’t plan to do a thing today–as far as buying or selling, mainly because I need to head out the office soon and won’t be back until markets close–but my GTC orders will be there for anyone who wants to sell me some shares at a wholesale price.
