Category: Monday Morning Kickoff

Last week we saw the S&P500 fall – by just 87 points (about 1 1/2%). The total trading range was around 200 S&P500 points–just shy of a 4% range. Have we seen the bottom? Have we seen a ‘flush’? I don’t think the bottom is in and with continuing talk of tariffs and global threats of more and more tariffs I think the pain is likely to continue. But of course this is just my guess, but I think it is more likely to continue to see the affects of the tariffs and we could easily get unemployment numbers or inflation figures that shock some folks and then we see a flush. Last Friday watching the index grind lower and lower without even an attempt to bounce higher it reminded me a bit of the Friday before black Monday in 1987. Friday was bad–if I remember down 90 Dow points (massive at the time)–but nothing compared to the Monday drop. Let’s hope we don’t see the same result tomorrow. Who knows? We’ll see.

The 10 year treasury closed about flat with the yield the previous Friday–4.26% last week versus 4.25% the week before, but rates did trade up to 4.39% during the course of the week. As one of our commentor’s noted last week there seemed to be a flight to safety (from equities to U.S Treasuries). Yields falling sharply after fairly hot inflation numbers released seemed a bit odd.

This week we employment data on Wednesday (ADP) and official government numbers on Friday.s At what point do the numbers start to worsen with various DOGE activities? This will happen, but when it will ‘hit’ – I have no idea. Can’t forget we have the JOLTs report hitting Tuesday. The big market mover this week will be tariff news–supposed new tariffs hitting Wednesday–who knows for sure?

The Fed balance sheet fell by $15 billion last week as it continues lower, albeit at a pace which should slow substantially over the coming months as the Fed announced a slowing of the ‘run-off’ at the last FOMC meeting.

In spite of flat interest rates last week investors tossed many of the preferreds and baby bonds out with the bath water as the average $25 share fell by 22 cents. Investment grade issues fell by 30 cents, banks by 27 cents with mREIT issues off just 7 cents and shippers off 2 cents. So we had quality issues sold off while high yield held up better.

Are you ready for another week with big moves in equity markets? I am pretty darned certain we are going to see some big moves, which make me nervous, but there is nothing I can do about it—not going to sell, but probably will be doing a little buying—in fact I have a target in mind for today. Of course I will post anything I do.

Last week the S&P500 moved higher by a measly 1/2% (or thereabouts) and the range it traveled in was ‘relatively’ mild compared to the recent past. The range was only in the neighborhood of 1%. This week we have the personal consumption expenditures (PCE) number being released on Friday which we all know will be important, but we also have durable goods and consumer confidence numbers being released and markets will decide if they are important or not.

The 10 year Treasury wanted to push lower all week long and hit a low of 4.17% on Thursday before bouncing to close the week at 4.25% which was 5 basis points lower than the 4.3% close the previous week. Housing release numbers last week were mainly strong–building permits and housing starts BUT at the same time builder confidence fell to low levels. You have to ask if housing permits and starts were so strong why are the builders feeling poorly? Existing house sales were quite a bit above expectations–contrasting with recent consumer confidence numbers which have been pretty weak. Once again these contrasting numbers lead me to believe that folks are somewhat confused as to what direction this economy is taking.

Of course we had the FOMC decision to leave interest rates unchanged–and chair Powells presser left me with the impression he is a bit confused as well–what will tariffs do to inflation etc? There are no firm answers and more data will be needed to have a firm conviction.

Maybe the largest economic announcement last week was that quantitative tightening was getting a little looser as the FOMC announced they were cutting the run-off to around $40 billion/month from $60 billion. I had suggested this could happen last Monday on the ‘weekly kickoff’–I was thinking maybe they would cut the runoff in 1/2, but 1/3 works. We’ll see if it helps move interest rates a bit lower.

The Fed balance sheet fell by just $4 billion last week–we’ll see if this starts to show the average monthly at $40 billion right away–no doubt in my mind this will happen instantly. If this helps rates down 5-10 basis points it will keep a little of the political pressure off the Fed – FOR NOW.

Last week was pretty quiet in preferred stocks and baby bonds as the average $25 share price rose by 4 cents. Investment grade issues rose a penny, banking issues rose 7 cents, CEF preferreds fell a dime with mREITs off a nickel. Shippers popped higher by 6 cents.

Are you ready for the week? Economic news is somewhat minimal this week–a least until the official release of jobs numbers on Friday. We can get a good hint of the economy by focusing on the jobs numbers (we also have the ADP jobs numbers on Wednesday). Also we will once again face the tariff issue at least on Tuesday of not all week long.

Last week we saw the S&P500 was off by about 1% last week with a strong bounce coming Friday afternoon which salvaged the week. The coming week we will see tariffs be activated on Tuesday against China, Mexico and
Canada—will they go into effect or will be they be paused? We’ll see as they will likely be extremely important to markets.

The 10 year Treasury fell by a huge 19 basis points last week to close at 4.23% as compare to 4.42% the Friday before. With the employment numbers being released on Friday and other more minor economic reports will likely be scrutinized closely we will see if rates break lower yet.

The Fed balance sheet fell by $31 billion as the Fed continues the balance sheet runoff. With rates falling lately I wouldn’t expect the Fed to be motivated to discontinue stop the run-off.

As might be expected the average $25/share preferred and baby bond rose in price last week–although quite modestly–only 9 cents. Investment grade issues rose 9 cents, banks 9 cents, CEF preferred up 8 cents, mREIT preferred moved 6 cents higher and shippers continue fairly steady and up 2 cents.

Last week we had 1 new income issue come to market as Rithm Property Trust (RPT) brought a very high yield issue to market–priced at 9.875%.

Last week was a somewhat difficult week for the S&P500, although the index is just a tiny bit, around 2%, below an all time record highs. Have we seen the high for this cycle? Of course no one knows, in particular with all that is happening with the Trump administration.

The 10 year Treasury drifted lower last week and closed at 4.42% which was 5 basis points below the close the previous Friday. There is a fear of a return of inflation, pitted against softening economic news, which may be clarified a bit this week when on Friday we have the release of the personal consumption expenditures (PCE) which will point the way for interest rates for a week. Next week we will have the employment numbers released on Friday which will give further hints as to where the economy is going. As you can see below we have lots and lots of economic news so I think we will have lots of movement in equities this week.

The Federal Reserve balance sheet fell by a giant sized $31 billion last week–this followed a few small reduction weeks. It will be interesting to see if the Fed lowers the run-off in the months ahead–if interest rates continue lower likely they will continue the run-off at the $65 billion rate.

Even with interest rates moving lower last week the average $25 preferred and baby bond fell by 7 cents. Investment grade issues were off 4 cents, banks off 8 cents. CEF preferred were up 8 cents with mREIT issues were a penny lower with shippers up 2 cents.

We had 1 new income issue launched last week as Oxford Lane Capital (OXLC) sold a larger issue of 7.95% baby bonds.

Here we go again—it could be a relatively quiet week, although we do have FOMC minutes being released on Wednesday and this can always set off fireworks-one never knows.

The S&P500 moved higher last week by 3/4% and now just a tiny amount below a record level. This week is starting off looking some higher, but the future market gains can evaporate quickly.

The 10 year Treasury closed last week at 4.47% (down 2 basis points from the previous Friday). At this moment (5:30 central) the 10 year is at 4.52%–up 5 basis points. As noted the economic news is somewhat light this week, but we don’t know what kind of curve balls that the new administration will throw at the market. My thoughts are that the 10 year will continue in the relatively modest range until we get to next week when we have the PCE being released–we’ll see which way rates get pushed.

The Fed balance sheet grew by $3 billion last week–a rare increase which will be offset by falls in the weeks ahead no doubt. The chart of the balance sheet levels is an interesting chart–falling back front the highs quite dramatically.

The average $25 preferred and baby bond rose by 7 cents. Investment grade issues moved 15 cents higher with banks up a dime, mREIT issues up 6 cents and shippers continue to hover around the $25 area and down 3 cents.