The Treasury Rules

Treasury yields drop after U.S. jobs report signaled that the labor market may take longer than expected. The 10 year yield which tends to rise when investors expect periods of growth and… inflation has spent several months stalled near 1.6%. The yield for the ‘benchmark 10-year Treasury note finished Friday’s session at 1.559%, according to Tradeweb, down a bit from 1.624% (at Thursday’s close). That marked the third straight week of declines. The WSJ Dollar Index, which measures the U.S. currency against a group of others, slipped 0.5%. The Labor Department said the economy added 559,000 jobs in May up from 278,000 added in April, but short of the 671,000 jobs that economists surveyed by the Wall Street Journal had anticipated. The jobless rate came in slightly below their expectations of 5.9%, falling to 5.8% in May from 6.1% in April. Shares of Meme stocks, namely AMC Entertainment and GameStop Corporation and other stocks popular with individual investors swung sharply again Friday after a furious advance over the past two weeks, with some tremendous gains. AMC changed directions at least two dozen times before ending the day down 6.7%. A minor blip considering the massive run up. Things were much closer in the broad stock market, which edged higher after the release of the employment report showed the labor market continued its slow recovery in May.

The Indices all edged higher Friday as the Dow Jones Industrial Average gained 176 points or 0.5% to 34,756, finishing just below its all-time closing high-hit last month. The S&P 500 added 37.04 points or 0.9% to 4229, also just missing a record, while the tech heavy Nasdaq Composite advanced 199 points or 1.5% tio 13,814. For the week the Dow added 0.7%, the S&P 500 climbed 2.6% and the Nasdaq gained 0.5%. Trading volumes have been lukewarm during the Holiday- shortened week. About 11.4 billion New York Exchange and Nasdaq-listed securities have changed hands on average each day this week, down from the 2021 average of 12.5 billion. Interestingly during the height of the previous meme stock frenzy (via reddit) on January 27, more than 23 billion shares changed hands.

Banks, a quiet sector that is awakening… Loan Growth is Building. Loan growth has been hard to come by for the banks for a good long time, but it could be the catalyst for their next move…higher. Banks have been ‘stuck’ since March, 2020, as they wait for something to catch investor attention again. That something is loan growth, the ‘bread and butter’ of successful banking–the backbone of sustained bottom line growth. Many households and businesses are flush with savings and stimulus, which will take some time to be spent. For investors this is an opportune time to look at the banking sector and all related aspects.

Oil…once left for dead, is making a strong comeback–and that could be good news for investors in energy stocks. The price of a barrel of oil hit its highest level in two years this past week, as OPEC signaled a slow return to normal production and fuel demand continued to climb. Crude is also getting a ‘lift’ as activist shareholders push Big OIl companies to drill less and support climate-change goals. Brent crude futures, the global benchmark, settled at $71.35 a barrel on Wednesday, their top closing price since May 2019. OPEC and its allies , including Russia, have tamped down production to keep prices high as the world recovers from the pandemic. There are 457 active rigs operating in the U.S., down from more than 700 before the pandemic. Goldman Sachs projects that Brent will trade in the range of $70 to $80 a barrel later this year and into 2022. Automobile and air travel are exploding, as the pandemic slows.

CryptoAntics with Elon Musk…Bitcoin and other cryptocurrencies skidded Friday (6-4-2021) extending their month long rout, following more rants, and thoughts by Mr. Musk. Bitcoin has slid to $36,177, a far cry from the record $64,802 it traded at in mid April. Nearly all crypto currencies have taken a beating during the dramatic downturn, even another Musk favorite, Dogecoin. He and Mark Cuban have ‘played’ enough to drive Dogecoin to majical height of 74 cents, a rocket from 5 cents, only to now float in the 37 cent range. “Elon Musk is the gorilla in the room,” said Stephen Kelso, head of brokerage ITI Capital. “The culture of personality that is such a big part of the internet is going to be something that moves bitcoin around,” Mr. Kelso remarked. As Musk basks in his glory and investors relish his comments on cryptocurrency, the beat goes on and on, but where?


Matt Peron, director of research at Janus Henderson, Barron’s “The ‘down the middle’ jobs report shows an economy that is healing quickly–but not too quickly,” Mr. Peron wrote. “This gives the market more time before Fed tapering (or worse), whereas a ‘too strong’ jobs report would have brought forward fears of tapering sooner rather than later.”

Jim Bianco, the head of Bianco Research, Barron’s “You have negative real yields with rising and high inflation, he says. Bianco says that consumer prices may climb at close to 4% this year: “The problem is that high-threes CPI doesn’t sit well with a 1.6% 10-year.” Bianco thinks the 10-year treasury is heading toward 2% in the coming months, which could cause “indigestion” for the stock market, just like the rate rise in the first quarter that hit growth stocks. “The S&P 500,” he notes, isn’t cheap, “trading for about 23 times projected 2021 earnings.”

Jonathan Waite, senior research analyst at Frost Investment Advisors. WSJ “The Meme stock rally is not too dissimilar to a typical pump and dump, which tends to hurt a retail investor,” said Mr. Waite. “These stories don’t tend to end well.”

AMC Entertainment CEO, Adam Aron, on his plan to connect with his three million shareholders. Barron’s “We intend to communicate often with these investors, and from time to time provide them with special benefits at our theaters. We start with a free large popcorn on us…”