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Wall Street has all eyes on the March jobs report due out this morning at 7:30 a.m. CST.
Most expect a gain of around +200,000 jobs for the month, versus +275,000 in February.
A lot of attention will be focused on “average hourly earnings” which have continued to rise at an annual clip of more than +4% since May 2021. The Fed has made it clear that it’s uncomfortable with wage inflation running this high because it might allow consumer demand to stay strong enough to keep inflation elevated. Most inside the trade believe the Fed wants to see wage growth back at pre-Covid levels of around +3.0% to +3.5%.
Keep in mind, investors are already extremely nervous about where inflation might be headed right now and how that will ultimately impact the Federal Reserve’s policy moves this year.
Climbing oil prices have only fanned those fears this week with front month Brent crude futures topping $90 yesterday and the WTI contract not far behind after settling above $86, the highest levels for both since October of last year.
The rally has partially been driven by rising tensions between Israel and Iran, as well as Ukraine’s continued bombing of Russian oil infrastructure.
Traders are now penciling an oil deficit of close to half a million barrels per day in the second half of the year with demand climbing and OPEC+ maintaining its production cuts, meaning there is really no room for a big chunk of production or key infrastructure to get knocked offline.
US gasoline prices have now climbed to an average of $3.57 per gallon nationwide, also the highest since October of 2023, according to AAA. The possibility of higher energy prices has bears increasingly questioning whether the Fed will be able to cut rates at all this year.
That sentiment has also been echoed by some Fed officials this week that indicated the central bank would likely need to leave rates on hold if inflation remains stalled at current levels. Specifically, Federal Reserve Bank of Minneapolis President Neel Kashkari said yesterday that interest-rate cuts may not be needed this year if progress on inflation stalls, especially if the economy remains robust. Wall Sreet’s jitters about inflation are also pressuring bond yields higher, adding yet another obstacle for bulls that have received little help from the headlines this week. Still, most bulls remain confident that the overall “disinflation” trend remains in tact and think oil prices will settle so long as the Israel-Iran situation doesn’t escalate.
Bulls hope an as-expected or softer read from today’s jobs report and key inflation reports next week, as well as excitement about Q1 2024 earnings season can breath new life into this year’s rally. Earnings season “unofficially” kicks off next Friday with results from big Wall Street banks Citigroup, JPMorgan, and Wells Fargo.
On the data front next week, top highlights include the Consumer Price Index (CPI) on Wednesday; the Producer Price Index (PPI) on Thursday; and Consumer Sentiment on Friday.
For what its worth, the Powerball jackpot on Saturday night will be over +$1.2 billion,
Can Gold Push to Over +$3,000 Per Ounce? Founder and president of Rosenberg Research, David Rosenberg, sees gold headed to $3,000 or even higher, and not just driven by the Fed. “With an easing cycle on the horizon, global growth weak and looking weaker, and inflation on its last leg of decline, we’re of the view that the tailwinds blowing gold to new highs are about to get a lot stronger,” said Rosenberg, in a note to clients. He points to increased demand by global central banks fretting about China’s yuan and an overreliance on the dollar, and strong appetite by retail gold markets, such as a booming India. And western investors have yet to turn bullish, pulling money out of gold exchange-traded funds. Others have also noted how big money managers are underinvested in the commodity sector overall. Tight supply conditions and gold’s haven reputation are also positives, said Rosenberg. The veteran strategist offers up a handful of price scenarios. Under the first, a recession-free “soft landing” sends global real interest rates back to their long-run average since 2000, knocking 12% off the dollar and boosting gold by 10%. In the second, a “typical” bear market sends interest rates back to the 2014-2024 average and the dollar 8% lower, meaning 15% upside for gold around $2,500. The ultra-bullish scenario that would push it to $3,000 or beyond hinges on a few key factors. First and foremost, a further ratcheting up of geopolitical tensions — Taiwan, Middle East, Russian borders, Korea, Venezuela/Guyana, just the “predictable ones,” would send investors fleeing for the perceived safety of the commodity, said Rosenberg. “The conclusion for investors is simple: any well-diversified portfolio should contain some gold Source Market Watch
How Far $100 Goes at the Grocery Store After Five Years of Food Inflation: In grocery stores, a Benjamin just isn’t what it used to be. The Wall Street Journal analyzed NielsenIQ data reflecting a selection of commonly purchased items that were valued at a total of $100 in 2019. Today, that same grocery list costs +36.5% more. Prices for hundreds of grocery items have increased more than +50% since 2019 as food companies raised their prices. Executives have said that higher prices were needed to offset their own rising costs for ingredients, transportation and labor. Inflation-weary consumers have pushed back, and food makers have begun offering more deals or reducing the prices of goods such as coffee and margarine. The price of food and household staples continues to weigh heavier on consumers’ minds than other economic concerns, although survey data indicate that those fears are ebbing. Some food-company executives have said that shoppers will adjust over time to higher prices, as they have in the past. Source WSJ
US Trade Deficit Widens Despite Record Exports: The U.S. trade deficit widened for a second straight month in February as an increase in exports to a record high was offset by surging imports, suggesting trade could be a drag on economic growth in the first quarter. The trade deficit increased 1.9% to $68.9 billion, the Commerce Department's Bureau of Economic Analysis said on Thursday. Data for January was revised slightly to show the trade gap rising to $67.6 billion instead of $67.4 billion as previously reported. Economists polled by Reuters had forecast the deficit little changed at $67.3 billion in February. When adjusted for inflation, the goods trade deficit increased 1.2% to $87.0 billion in February. Most of the imported goods likely ended up as inventories, which could offset the anticipated hit on gross domestic product from the widening trade gap. Exports jumped 2.3% to an all-time high of $263.0 billion. Goods exports accelerated 2.9% to $176.7 billion. There were increases in exports of industrial supplies and materials, which include crude oil. Food exports rose $1.7 billion, boosted by soybeans. Capital goods exports increased $1.5 billion to a record high $53.0 billion, amid a rise in civilian aircraft. Exports of services rose $0.8 billion to an all-time high of $86.4 billion, lifted by travel and transport. Source Reuters
Some Retailers Chronically Late Paying Bills: Data from business intelligence firm Creditsafe shows Peloton, Saks, Express and Bath & Body Works have routinely failed to pay their vendors on time. Plenty of companies, including many that are healthy, leave bills unpaid for weeks or months. But when companies have sudden fluctuations in unpaid bills, at the same time their sales fall or debts rise, late-payment rates help to build a picture of which businesses could face financial risks in the coming months and years if their operations don’t improve. In some cases, Peloton, Saks, Express and Bath & Body Works were later on their bills than usual, indicating they could be struggling to manage cash flows or planning for revenue fluctuations. To be sure, late payments don’t always signal financial troubles. Some large retailers with many vendors could have a healthy balance sheet, but because they have leverage they could decide to pay their suppliers when it’s convenient to them, according to Perry Mandarino, the head of restructuring at B. Riley Securities. Those instances are bigger issues for vendors than for retailers. Source CNBC
Ford Delays Production of New Electric Vehicles Amid Disappointing EV Demand: Ford said Thursday it'll push back the release of its upcoming three-row electric vehicles by two years — from 2025 to 2027. At the same time, the company said it is working on expanding its hybrid offerings, with more models expected across its lineup in North America by the end of the decade. Ford's already-established hybrids have become something of a saving grace for the company as EV demand softens. The company has pulled back from some bigger EV ambitions while placing more emphasis on the hybrids that customers are clamoring for. In the end, whether a customer drives off with an EV or a hybrid, "They are buying a Ford," product development exec Jim Baumbick previously told Business Insider. "and what excites us is bringing new customers to the brand." Ford said the EV delays, announced Thursday, would give it additional time to incorporate emerging battery technology. Despite the latest delays, the company said it is still ramping up EV manufacturing across other facilities. Source Business Insider
Over 500 Small Businesses Apply For Federal Disaster Loans Following Baltimore Bridge Collapse: Over 500 businesses affected by the collapse of the Francis Scott Key Bridge in Baltimore last week have already applied for long-term, low-interest loans to help cover their costs, the Small Business Administration told Forbes on Thursday—one of the Biden administration’s first efforts to aid the thousands of workers and businesses left stranded as the port remains closed. SBA Administrator Isabel Casillas Guzman told Forbes in an interview “the immediate impact [of the bridge collapse] has really been felt by those supply chain, logistics and transportation companies that really focus their businesses on the port and the activity that was happening at the port,” but also noted other small businesses in Maryland, Delaware and Pennsylvania are already facing “additional ripple effects.” The SBA is offering 30-year loans with interest rates at 4% for businesses and 3.25% for nonprofits—and payments and interest accrual do not start until a year after the first disbursement. Source Forbes
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