|Dow||-74.61 to 18,035.53|
|S&P 500||-7.91 to 2,106.85|
|Nasdaq||-32.03 to 5,023.39|
|10-YR Yield||+.062 to 2.035%|
|Gold||-$9.50 to $1,204.40|
|Crude Oil||+$1.45 to $58.51|
Well, that settles it. The U.S. economy is officially “less good”! Just look at what we learned from the first-quarter Gross Domestic Product report this morning …
==> GDP grew just 0.2 percent in the quarter. That was much worse than the 1 percent forecast of economists, and less than one-tenth the 2.2 percent growth rate in last year’s fourth quarter!
==> Corporate fixed investment plunged 2.5 percent, a huge reversal from the 4.5 percent growth in Q4 2014 and the worst reading since late-2009.
==> Nonresidential structure investment plunged 23.1 percent. That was the worst drop in four years, dragged down by a massive 49 percent implosion in energy and mining expenditures.
==> Exports also tanked at a 7.2 percent rate, courtesy of the strong dollar. Plus, core inflation slowed to a 0.9 percent annualized rate — the slowest in more than four years.
|Exports fell 7.2 percent in the first quarter, courtesy of the strong dollar.|
So what have I been forecasting for months? That policymakers would do all they could to counter those forces! That (along with other factors) would help lead to major “Big Reversal” trades in a wide variety of assets, trades you should position your portfolio to profit from.
Sure enough, the Federal Reserve came out today and noted in its post-meeting statement that the economy slowed and inflation remained below its objective. Policymakers cited declining exports, and falling energy and non-energy import prices, for the downgraded economic assessment. Those are basically direct consequences of the dollar’s move, and I think it’s significant the Fed is calling them out — and “punting” on the timing of its next move.
|“The U.S. oil glut is starting to top out — perhaps for a long, long time!”|
As if that weren’t enough, the Energy Information Administration (EIA) said earlier today that crude oil inventories rose just 1.9 million barrels in the most recent week. That was less than HALF the 4.4-million barrel build that analysts were expecting.
Not only that, but inventories at the major supply facility in Cushing, Oklahoma actually FELL by more than 510,000 barrels. That was the first decline in 21 weeks, and it underscores the fact that the U.S. oil glut is starting to top out — perhaps for a long, long time!
As a result, we saw a nice rally in oil and a sharp decline in the U.S. dollar against pretty much every major and minor currency. The euro alone surged almost two full cents at one point, before pulling back. But the standout winner was the Swedish krona, which soared against the dollar after that country’s central bank was a little less aggressive with its latest easing move than markets expected.
Bottom line: The Fed is probably tickled pink by the dollar’s recent reversal, and I believe that move has further to go. Invest accordingly!
But that’s enough from me. What do you think? Is the Fed pushing back against the buck’s advance? Or is it fine with letting it appreciate? Does the improvement in foreign growth, and easing of U.S. growth, have you shifting your investing strategy? Why or why not? Hit up the Money and Markets website and weigh in when you can!
|Our Readers Speak|
Let’s be honest. When something like the Baltimore riots happens, passions are going to run high and opinions are going to be strong. I would just ask that everyone keep a cool head when discussing this week’s events, and that we all try to stay focused on figuring out ways to prevent these kinds of tragedies in the future.
With that said, Reader Mel L. said: “The death of a black man in police hands is a tragedy. The officials must get to the bottom of what happened and inform the public ASAP.
“In the meantime, I can’t help but think that the whole welfare system is ultimately responsible for this unrest. Making people dependent on government handouts just gives youths time to form gangs and get into trouble instead of being productive. Decisions made by these youths follow over into adulthood making them less employable. Jobs are unavailable because of many factors but certainly all the illegal immigration puts a further burden on the availability of jobs for these poorer communities.”
Reader S.J. believes the blame lies with police, saying: “Don’t lose focus. This is all about the militarization of our police with powers of life and death over us — Gray was murdered because he was ‘running while black.'”
But Reader Auggie countered that: “The people in Baltimore doing the rioting and burning are not protesters. They are criminals and thugs using an unfortunate death of a person in police custody to rob and loot and just be the thugs they are, as an excuse.
“It is a shame that they give a bad name to the peaceful protesters while burning the community they live in. If you don’t want the police to treat you like criminals, stop acting like one.”
As for the big-picture causes of the rioting, Reader Dr. D.S. said: “Baltimore is a good example of what happens when social despair is all people know, and they feel resigned to an economic state with absolutely no hope of a better life. When hope becomes crushed by the system, all that’s left is fear and anger. Everybody has a breaking point, and more and more people are starting to reach theirs. That’s what we’re seeing in Baltimore.”
Finally, Reader LG said to expect more tragedies like Baltimore if we don’t change economic and social policy in this country:
“This country needs to realize this will only get worse if we don’t address these many sad issues for a goodly portion of this country. Do the uber rich and 1 percent seem to turn a blind eye? Have the Koch brothers ever gone into an impoverished area and given huge sums of money to help out a food bank, or helped to rebuild parts of Detroit or the schools or other areas?
“How many millions are they willing to spend to try and elect a Far Right President who will probably look the other way? Everyone should be ashamed for the number of children in this country who live in extreme poverty, are hungry every night, and live in areas that offer them no hope, and no jobs, just druggies on every corner, and no employment.”
Again, these are weighty issues that have no easy answers. But we owe it to our fellow citizens to try to find them, and to continue to discuss them in public forums like we have at the website. So feel free to keep the conversation going there.
|Other Developments of the Day|
Speaking of Baltimore, calm returned to the city streets thanks to the influx of National Guard troops, a heavy police presence, and ordinary residents and community leaders who all urged protestors to ease off. Everyone from former Baltimore Ravens linebacker Ray Lewis to Rep. Elijah E. Cummings asked residents to refrain from more violence.
Tensions rose in the Persian Gulf, however, after Iranian naval forces diverted a container ship called the Maersk Tigris to a region deep within its territorial waters. Flagged in the Marshall Islands, the ship had no U.S. citizens aboard. But the U.S. Navy sent the USS Farragut destroyer to the region to monitor the tense standoff.
What a mess at Twitter (TWTR, Weiss Ratings: C-) huh? The social media company not only missed first-quarter earnings estimates and slashed its sales outlook, but it also botched the release of the figures! They were discovered online early by a research company called Selerity. That caused the stock to tank before the market close, and the company to scramble to get its official results out early.
Elsewhere in the corporate earnings world, one of my favorite restaurant chains, Buffalo Wild Wings (BWLD, Weiss Ratings: A-), went wild to the downside after missing targets.
Net income climbed to just $29.1 million, or $1.52 per share, from $28.3 million, or $1.49 per share, in the year-earlier period. That missed forecasts for $1.63 per share, with the firm’s results hurt by a jump in labor expenses and 41 percent surge in chicken wing prices.
Can Twitter get it back together? Will U.S.-Iran relations sour further as a result of the Middle East nation’s provocations in the Persian Gulf? Do I need to get out there — stat — and order more wings before BWLD falls even further? Weigh in over at the website when you have a minute!
Until next time,