Years too quickly must pass
Rivers too rapid must flow
Face reflected forever in glass
Things I really just can't know
Mind races, please make it stop
Stuffed monkey against the wall
Change in things past, too late to swap
Stupid monkey, why wouldn't you call?
Miss you, Monkey.
Wednesday's child, they say, is full of woe. Losers did beat winners at the New York Stock Exchange by more than two to one, and at the Nasdaq Market Site by almost two to one. Aggregate trading volume expanded for names listed at both of New York's primary equity exchanges, but the tale told was quite different at each locale.
Down on Wall Street, there was some blood in the streets. Declining volume more than tripled advancing volume while the Dow Industrials nearly gave up 1% and the Dow Transports backed up more than 2% as the airlines melted. Meanwhile, up in midtown, declining volume just barely edged advancing volume as both the Nasdaq Composite and Nasdaq 100 squeezed out minute gains, and the small to mid-cap indices took a fairly severe beating.
Sector performance told a similar tale. The two "growthy" type sectors were the only two closing the day in the green -- Communication Services, led by internet stocks that were themselves led by Facebook (FB) and Snap (SNAP) , and the Technology sector, which was led by semiconductors. That had something to do with Sarge fave and now somehow newly minted meme stock Advanced Micro Devices (AMD) .
Because markets traded generally lower, someone or something must be blamed. You all know I think that markets are more than likely headed for a late summer/early autumn correction scare. This was not that. This was partly a reaction to still softer-than-projected economic data, that at least on Wednesday conflicted, and partly an algorithmic reaction to words spoken by Federal Reserve Vice Chair Richard Clarida.
Clarida was in no way "aggressive" in his assessment of either economic conditions or in the trajectory of future monetary policy. What he did do was acknowledge that the economy has made progress, and inferred that should the FOMC's median forecasts that were published with the June meeting prove to be accurate, that maybe more than a year out, the Fed could get the ball rolling on short-term interest rates.
Give me a break. Have you ever seen this Fed, or any past Fed prove accurate in their economic projections? Me neither. These guys are not exactly a bunch of seers.
"If the outlook for inflation and outlook for unemployment I surmised earlier turn out to be the actual outcomes for inflation and unemployment realized over the forecast horizon, then I believe that these three necessary conditions for raising the target for the federal funds rate will have been met by year end 2022."
You know what kind of outlook he's talking about? GDP growth of 7% for this year. Possible, but as we know, not at all organic. Unemployment dropping to 4.5%, and then 3.8%. Not with the Delta and other variants likely to force at least regional school closures this autumn. Core inflation of 3%. Well, that horse is already out of the barn.
The Real Deal
The deal is this: Economic data has been coming in either weak, or conflicting.
Wednesday morning, the ADP Employment Report for July printed at just 330,000 private sector jobs created, where almost 700,000 had been expected. What was extremely disturbing was the severe lack of job creation across the service sector.
Less than two hours later, the ISM Non-Manufacturing Index, which is really a fancy name for what is a service sector PMI, printed at a headline level of 64.1, well above expectations, and get this... with the Employment component moving from contraction in June to comfortably above the threshold for expansion in July. Bottom line? Both the ADP data and ISM survey for service sector job creation cannot be correct. They are in direct conflict on the same issue.
Listen, July was a down month for employment back in pre-pandemic America. Hence, July comes bearing an upside seasonal adjustment. We know that half of U.S. states have tried to force folks back into the labor force through the withdrawal of the weekly federal stipend to state-level jobless benefits.
I expect a big number tomorrow (Friday) for Non-Farm Payrolls. Maybe 1 million. Maybe more. Bear in mind that, while the ADP Print and the BLS number for NFP often do not jive on a month-to-month basis, they don't have to, as long as they average something close over a rolling 12-month basis and they usually do. Heck, the Household and Establishment surveys, both administered by the BLS, rarely run close to each other.
Recent data from a number of studies show that the Delta variant now makes up 93% of all new infections of the SARS-CoV-2 coronavirus in the U.S. New infections of children and teenagers in the U.S. are up 84% week over week. Florida COVID-related hospitalizations, as of yesterday, were running 13% above that state's 2020 peak. A new study out of the U.K., where Delta is also the dominant strain of the virus, shows that 5 to 24 year-olds make up 50% of new infections, despite the fact that this demographic makes up 25% of the population.
In other words, Delta does not discriminate by age as previous variants had. The children are not safe, and they are not vaccinated. On that note, we also know that the effectiveness of our current arsenal of vaccines ebbs over time, and that the most vulnerable members of our community were vaccinated first. This sounds like a recipe for disaster.
The children need jabs now. The elderly need booster shots. We figured this out weeks ago. The administration, the CDC, and the FDA have to act with some urgency here or schools will not open, urban areas will lock down, labor markets will continue to face shortages on the supply side, and economic activity (velocity) will continue to slow quarter after quarter in sequence... which is what we have seen.
Did I mention that people will die? Hello?
On That Note...
The San Francisco Department of Health has decided to administer the available messenger-RNA vaccines developed by Moderna (MRNA) and Pfizer (PFE) to those already vaccinated by the single-jab Johnson & Johnson (JNJ) vaccine if so desired.
Do you think maybe something needs to be said on the national level? Why does one municipality appear to doubt one vaccine more than the other two to the point of allowing individuals to cross vaccinate? Dr. Walensky? Dr. Woodcock? Joe? Knock knock. Anyone home? Speak up. We can't hear you.
Imagine if the SEC did not prohibit underwriters from lending out shares to short-sellers for 30 days after an IPO? Imagine if that didn't make getting the borrow practically impossible? The stock might not have gone bananas the day prior to, and the day (Wednesday) that options were launched tied to the company's shares. That's what.
All retail investors knew ahead of that launch was that the high-profile Cathie Wood, who runs Ark Invest, had bought the dip. The stock closed on Wednesday at $70.39, up 50% for the session.
September 17 $70 calls went out at $17.90. September 17 $70 puts went out at an even $21. Write both and hope the underlying stock moves less than $39 from here over six weeks? Not with my money.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 377K, Last 400K.
08:30 - Continuing Claims (Weekly): Last 3.269M.
08:30 - Balance of Trade (June): Last $-71.2B.
10:30 - Natural Gas Inventories (Weekly): Last +36B cf.
The Fed (All Times Eastern)
10:00 - Speaker: Reserve Board Gov. Christopher Waller.