Weekly Economic and Stock Market Commentary: April 18, 2022
As for the stock market specifically:
The bears continued to eat the bulls last week, with all of the major market averages falling for the week. The “tech wreck” of 2022 continued to mirror the tech wreck of 2000, although the names are no longer the Four Horsemen of the Internet. I cannot state the names, but I do remember the joke “I am diversified. I own (chip company), (computer manufacturer), (software company), and (networking company).” If you call me, I will name names. The computer company is now private, and it is not a fruit. The software company fell on hard times, but the stock price now is higher than in 2000, but the other two companies are lower now than at the height of the internet bubble.
In the past 2 weeks, the markets gave up nearly all the gains since mid-March. The major market averages all made consecutive sell signals, not merely reversing a first signal. In a nutshell, I don’t have much positive to say about the market – which may (I know it’s a weasel word) be a good contrary indicator.
Two of the three bullish percent indicators did go on defense last week. The OTC is hanging on the offense by the rules of rounding, and is likely to flip on a market decline. The interesting thing I noticed regarding this week’s number comparted to a month ago, is that they are reasonably close. That suggests that we have a market where the strong stay strong, and he weak stay weak, and get tossed around like a sailboat in a hurricane. We enter the week with WEALTH ACCUMULATION on the OTC, and WEALTH PRESERVATION on the NYSE side.
Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.
Below is where our indicators stand as of April 14, 2022 (Courtesy Dorsey, Wright, and Associates).
On a general note:
The Department of Labor had inflation news week. It would be a good guess if you said the report “showed the highest rate of inflation in 40 years.” It also would be an accurate statement regarding consumer prices, which rose 1.2% in March, and 8.5% when measured from March 2021 to March 2022. In a world where we don’t use energy or eat, inflation was 6.5% for the 12-month period, which also is the highest annual core rate of inflation in 40 years. Food prices rose significantly, with low grade meat cuts such as hamburger and hot dogs showing a 14.8% jump in March compared to February. Apparently, substitution is having little effect.
Meanwhile, the Labor Department also reported the Producer Price Index for March. This measurement came in at a record 11.2% price change since March 2021. That is a record 1-year price gain. The records go back as far as 2010. March also was the fourth consecutive double- digit inflation increase. The February number was revised in the up direction, also. The core rate of producer prices rose 0.9% for the month of March.
The Commerce Department told us March Consumer Spending rose 0.5% compared with a revised 0.8% gain for February. Much of the gain was attributable to a rise of 8.9% in gasoline sales during the month. Since it was not stated explicitly, I will infer that refers to the dollar value of gasoline purchased, as opposed to the total number of gallons. Consumer spending rose each month of the year so far. That said, when the gains attributable to gasoline are factored out, March saw a decline of 0.3%.
In a related report, three major credit card issuers reported first quarter credit card purchases rose an average of 28% in dollar terms. They said credit purchases returned to pre-pandemic levels. The report noted that these banks saw balances increase 12%. The good news is that delinquencies remain low.
The Treasury Department gave us an update of the budget for March. The budget deficit for March 2022 came in at $193 billion dollars. That was a 71% decrease from March 2021. Tax collections rose 18%. More importantly, however, is that spending decreased 45% from March 2021.
Please contact me if you have any questions about this week’s Economic and Stock Market Commentary.