by Tyler Durden
Taken together a much weaker-than-expected payroll and much higher-than-expected CPI report suggests
more than a whiff of stagflation.
Source: Bloomberg
Stagflation? Inconceivable?
Stocks are down for a third straight session, which hasn’t happened since March. Small Caps were the biggest loser on the day followed by Nasdaq after the plunge oin CPI and immediate bounceback failed (with stocks ending at the lows of the day).
Today was the biggest loss for S&P since Feb and Dow s worst day (-700) since January.
Small Caps are down 6% since Friday s close but the rest of the market is a shitshow too.
Is the inflation I’ve been writing about really all just transitory as Papa Powell claims it is? The Fed Head assures us he has this under control. Would that be just like Father Fed and friends had bank reserves under control right before the repo crisis blew up in late 2019? Or just like they had their Great Rewind under control right before the stock market imploded in late 2018 due to Fed tightening that was promised to be as boring as watching paint dry?
Or just like Janet Yellen, the author of paint-by-numbers boredom, now has everything under control, except apparently her yellin’ mouth:
Janet Yellen Panics the Market
Like a squall out of a clear sky… Janet Yellen sent investors under the awnings Tuesday:
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat.”
In reminder: Falling rates generally equal rising stocks. Rising rates generally equal falling stocks.
Ms. Yellen’s rains gave the Nasdaq a quick 300-point drenching.
That is because many technology stocks are “growth” stocks. These stocks have grown the stock market into a towering oak.
Growth stocks are uniquely sensitive to rising interest rates. Explains Mr. Peter Tchir of Academy Securities:
by Tyler Durden
Given that rates have stopped soaring and earnings have been red-hot, many have questioned
why
Source: Bloomberg
We may have found the answer. and it s a major problem for those hoping to buy-the-dip.
As momentum charged higher last year, riding a sea of liquidity,
every stock market guru bought the junkiest junk.
Source: Bloomberg
In fact,
hedge fund leverage - both gross and net - hit record highs in late April, according to Goldman s Prime Brokerage.
And that s a problem going forward, because, as Bloomberg reports, across the entire street,
.managers of
small hedge funds who lack the negotiating clout of trading whales are grousing. For the little guy especially, the saga will make it harder to borrow money from banks to finance bets.
To say we had an interesting few weeks in the uranium sector would be a massive understatement. We have seen new geopolitical support for nuclear power and a massive new catalyst in the form of the newly formed Sprott Uranium Trust (more on that later). There was also a new version released of the Bear Traps Report, a popular type of newsletter that in the words of John Quakes is “send to thousands of Wall Street money managers”. It is also believed that the initial run up was sparked by the sharing of a similar Bear Traps Report article around November/December of last year, sparking the first leg up with institutional capital positioning in the sector. There is a lot happening beneath the surface and the coming few months will, in my view, prove to be significant.