The Charging Bull

Stocks Hit New Highs on Strong Jobs Data…U.S. stocks rose to fresh new highs Friday and posted weekly gains after the Labor Department data showed job growth rebounded in October, following a summer slowdown. Stocks have climbed to a series of records in recent weeks, bolstered by very solid economic data and strong earnings from the biggest U.S. companies. About 82% of the S&P 500’s companies that have reported results this earnings season have topped analysts’ forecasts, according to FactSet data. Data on the labor market have also been reassuring to investors. Friday’s employment report showed the U.S. economy added 531,000 jobs in October, more than the 450,000 jobs that economists surveyed by The Wall Street Journal had expected to see. Meanwell, the unemployment rate fell 4.6% from 4.8% in September. Friday’s job’s report gives credence that the Fed has some justification to initiate tapering its monthly asset purchases, echoed several economists. “It doesn’t get any better than this for the stock market–and that means it’s time to bet on a rip-roaring rally into the end of the year,” wrote Ben Levisohn, ‘The Trader Column,’ for Barron’s. Everything went right that could have gone right this past week. The Federal Reserve did exactly what everyone thought by announcing plans to ‘start winding down’ its bond-buying program, but standing firm on leaving interest rates unchanged. Even the Bank of England, surprisingly, left rates unchanged. Covid continued to fade into the background, at least as a ‘market driver’ after the Centers for Disease Control and Prevention recommended that children ages 5 to 11 get vaccinated. The stock loved all the alkaloids, and proceeded to act more bullish. “The U.S. equity market can continue to surprise,” said Remi Olu-Pittan, a fund manager at Schroder. She added that she believes stocks will be able to withstand volatility in short-term bonds, but that the market may become bumpy if yields on 10-year Treasury notes rose next year. The Dow Jones Industrial Average climbed 203 points or 0.6% to 36327, and advanced 1.4% for the week. The tech heavy Nasdaq Composite gained 31.28 points or 0.2% to 15971 and added 3.1% for the week–its best weekly performance since April. The S&P 500 rose 17.47 points or 0.4% to 4697 and added 2% for the week, marking its highest weekly percentage gain since June. The small cap Russell 2000, up 6.1%, left them all in the dust. The little-looked-at Russell is a strong indicator of market direction, as it is composed of quality value companies, smaller in size, representing many market sectors.

Drought conditions in the U.S. and elsewhere are behind the tight supplies and price gains for a ‘range’ of commodities, including oats., wheat, soybeans, coffee, and even livestock. That has contributed to “food price inflation.” Food-at-home prices, referring to retail-store purchases have climbed 2.1% this year compared with last year, according to the U.S. Department of Agriculture, with pork seeing the largest relative price increase at 5.4%. The USDA also expects food-at-home prices to climb 1.5% to 2.5% in 2022. “Weather has always been a source of uncertainty in agriculture,” says Taylor McKenna, analyst at Kopernik Global Investors, and “weather extremes appear to be increasing.” Among the regions hardest hit by drought this year is the Western third of the U.S., extending across the Northern Plains and around the world Canadian Prairies, says Dale Mohler, AccuWeather senior meteorologist. Corn and soybeans are the two major crops that have been severely affected by drought as “both are key food commodities for the world’s largest buyer:China.” The increased demand from China has led to one of the tightest-supply-and-demand situations for soybeans since 2013, according to Darin Newsom, president of commodity analysis provider Darin Newsom Analysis. That has also resulted in high soybean prices around the world, he says. In May U.S., soybean futures touched their highest level since 2012, before pulling back to trade 6.6% lower for the year. Hogs and livestock, meanwhile,”typically are stressed and don’t eat as well during drought and heat, so they aren’t as healthy or meaty compared with a normal season,” says AccuWeather’s Dale Mohler, senior meteorologist. Commodities are about “supply and demand, and this can change over time, just not as suddenly as some would have us believe,” says Darin Newsom of Darin Newsom Analysis.


Greg Valliere, chief U.S. strategist at AGF investments, Barron’s Mr. Valliere ‘opines’ that, even after months of back-and-forth negotiations, the White House Ways and Means Committee could modify the framework further. Indeed there is a 40% chance that the whole package could “crash and burn,” he writes in a client note. So, fiscal policy uncertainty will persist.

Aneta Markowska and Thomas Simons, Jefferies economists, Barron’s “Regardless of future spending and tax plans, one thing is certain: The federal deficit is certain to shrink, albeit from the record levels produced by measures used to offset the pandemic’s economic effects. That will mean that the Treasury will be tapering its sales of notes and bonds, just as the Federal Reserve is likely to reduce its purchases, ” Ms. Markowska and Mr. Simons write.

Randall W. Forsyth, Lead writer of, Up and Down Wall Street, Barron’s “It’s all good, at least insofar as the stock market is concerned. The major indexes again ended the week at records amid continued good news on the economy and Covid-19, along with no surprises from the Federal Reserve and no bad effects from the shock waves of Tuesday’s off-off-year election results. All of which fits the definition of a bull market.”

Brian Moynhan, CEO, Bank of America, speaking to The Wall Street Journal on the transition to a carbon-free economy. Barron’s “If there’s a revenue stream, then the funding is infinite.”