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By Amanda CooperLONDON (Reuters) – Global markets have kicked off the week in full selloff mode, with measures of volatility shooting up by the most on record in a single day, while equity futures and cryptocurrencies plummet, reviving memories of past crises.There is no lone trigger for these moves, but data on Friday that showed the U.S. economy did not generate as many jobs as expected in July has been a major catalyst.A rise in Japanese interest rates on July 31 has made bets on a cheap yen – many of which funded purchases of assets with better returns – less profitable. The unwinding of these trades has accelerated the decline across global stocks.Tokyo’s Nikkei index finished Monday with a 12% loss, the largest one-day drop since the aftermath of “Black Monday” in October 1987, when a stock market crash stripped nearly 15% off this index and 20% off the S&P 500.The excess volatility and the brutal nature of the selloff have prompted a number of comparisons with past market storms, – the 1987 Black Monday stock market crash, the global financial crisis of 2008, and the panic that the onset of COVID-19 lock-downs unleashed in 2020.A VOLATILE SITUATIONThe VIX index, which reflects changes in implied volatility on options on the S&P, is starting to signal distress. The index has shot up by 170% since Friday, set for its biggest one-day rise on record, after February 2018’s 115% gain on the back of spiking bond rates and the threat of a surge in inflation.The measure, often referred to as “Wall Street’s fear index”, did not rise that much in a day during the March 2020 COVID crisis – when it posted several 40%-plus daily jumps – or even during the depths of the global financial crisis, when it rose 35% a few days after the U.S. government stepped in to bail out Wall Street.TAKING STOCKThe S&P 500 and the Nasdaq Composite are down around 3% and 3.7% in early trading, respectively. Futures on the two indices fell between 4% and 5% before the market open. Monday’s drop marks a fairly hefty daily decline for the two indexes. The S&P has already lost 9% since hitting a record high on July 16, while the Nasdaq has shed 14% since its record high on July 11.On Oct. 19, 1987 – the Black Monday – the S&P lost 20% in a day, while the Nasdaq shed 11.5%. During the COVID crisis, the S&P lost 12% at one point, while the tech-heavy Nasdaq fell 12%.So the market is a long way from repeating what it has done during past bouts of turmoil.THE HEART OF THE MATTERThe Japanese yen is the star of the currency markets right now. Years of rock-bottom interest rates in Japan encouraged investors to borrow in it in order to fund other positions in a multi-trillion dollar bet known as “carry trades”. Now that Japanese rates are rising, many of those positions are getting closed, meaning that the cash the carry trades generated to buy other assets is now exiting those markets – the technology sector is one of the standout casualties, along with cryptocurrencies.The yen has its own thing going on, thanks in part to authorities in Tokyo stepping in to prop it up when it hit its weakest in 38 years in late July, at 161 to the dollar. It now trades around 142, having strengthened by over 7% in a week.It has also been a traditional safe-haven asset and strengthened around 7% on a weekly basis in both 2008 and in 1998, at the height of the Asian financial crisis. But the current move is likely more linked to an interest-rate play than down to risk appetite.The Swiss franc, a carry-trade funding currency and also a safe haven, has strengthened 4.2% since last Monday. But this kind of move is not uncommon in the currency.GOLD, OR SILVER LINING?Gold has come under pressure, even if it is perceived to be a safe haven. The price has risen by 16.5% so far this year and hit successive record highs. Typically, a lower U.S. rate environment favours gold, but intense volatility means it can get swept lower along with everything else.Back in 2020, gold had been down by 3% on multiple days, while during the financial crisis, it fell by more than 7% in October 2008, as failed bank Lehman Brothers finally imploded.Silver often moves in synch with gold, but lacks the same safe-haven appeal. It is down 5% on Monday, but, much like stocks and gold, this is a relatively modest decline compared with numerous double-digit down-days in 2020 and a near 16% fall in a single day in October 2008.(Reporting by Amanda Cooper; Graphics by Sumanta Sen and Kripa Jayaram; Editing by Tomasz Janowski) Continue reading →

By Harry Robertson and Ankur Banerjee(Reuters) – U.S. Treasury yields tumbled on Monday as traders moved to price in big rate cuts from the Federal Reserve, after weak jobs data stoked worries that the U.S. economy could be heading for a recession.The two-year U.S. Treasury yield, which is sensitive to Fed rate expectations, dropped to 3.691% in European trading, its lowest since May last year. It was last down 10 basis points (bps) at 3.77%.The yield, which moves inversely to the price, plunged 53 bps last week.Friday’s nonfarm payrolls data – which showed the U.S. unemployment rate unexpectedly rose in July and jobs growth slowed – followed a slew of disappointing earnings results from major tech firms, setting off a global stock selloff and driving investors to safe haven assets.Investors are also grappling with a dramatic rally in the Japanese yen which has rocked the country’s markets, helping send the Nikkei 225 stock index down 12.4% on Monday in its biggest one-day drop since 1987. U.S. S&P 500 futures were down 2.7%.The yield on the benchmark U.S. 10-year Treasury note was down 5 bps at 3.742%, having touched a one-year low of 3.678% earlier in the session. The yield sank nearly 40 basis points last week, the largest weekly fall since March 2020.Michael Weidner, co-head of global fixed income at Lazard Asset Management, said the rally in bond markets was being amplified by investors worrying about their positions in tech stocks and by thin summer markets.”The move over the last two days in particular, that’s not as much driven by fundamentals as it is by the correction in U.S. equity markets,” he said.”We believe still that a soft landing (for the economy) is more of a base-case scenario.”Markets are now anticipating around 125 bps of U.S. rate cuts this year, up from around 90 bps on Friday and 50 bps at the start of last week.Traders now think a 50 bp cut in September is a near certainty, according to derivative market pricing.The closely watched U.S. 2-year-to-10-year yield curve narrowed its inversion, to 2 bps, the least since July 2022, reflecting expectations for a sharp easing of short-term yields.(Reporting by Harry Robertson in London and Ankur Banerjee in Singapore; Additional reporting by Chibuike Oguh in New York; Editing by Kirsten Donovan) Continue reading →

caracterdesignIt would be concerning if it weren’t so predictable. When disinflation stalled during the first quarter of this year, the bear camp insisted that the Fed would have to keep short-term interest rates higher for longer. They raised doubts about any rate cuts this year, due to “sticky” inflation and an economy that was far too strong. The signs that growth would slow, and that the disinflationary trend had reasserted itself were clear then, but not convenient for those who had a more negative outlook for the markets and economy. Fast-forward to today, when both have come to pass, and the bearish narrative has pivoted to assert that the Fed has waited too long. Overnight, the economy is weakening so rapidly that a recession may have already started, and the summer pullback in stock prices is the beginning of a bear market. I could not disagree more, so let me persuade you otherwise, as I warned several months ago that fearmongering about inflation fears would shift to warnings about economic growth on the cusp of the Fed’s first rate cut. Finviz On Wednesday, investors celebrated the fact that Chairman Powell did not push back on market expectations for rate cuts to begin in September, and the major market averages soared. Yesterday, the major market averages gave back all those gains, plunging over concerns that the Fed did not cut rates this week. Bond yields also plunged, with the 10-year Treasury yield (US10Y) falling below 4%, while the 2-year (US2Y) fell to just 4.16% in response to two economic reports that were weaker than expected. Bloomberg Initial unemployment claims rose last week by 14,000 to 249,000, which was 5% above the four-week moving average of 235,000 and the highest number since last summer. Additionally, continuing claims rose by 33,000 to 1.877 million. This caused major concerns, but claims have been rising, as we should expect with a softening economy, which is necessary to bring the rate of inflation down to target. Regardless, this number instigated fears that the economy is now weakening too rapidly. DataTrek Those fears were compounded by another dismal reading on the manufacturing sector, which has been idle for months. The ISM Manufacturing Purchasing Managers Index (PMI) fell from 48.5 to 46.6 in July, which takes it back down to levels last seen in October and November of last year. This reflects contraction in the sector, but it only represents 10% of economic activity, and it has been below the 50 level that marks growth for 20 of the past 21 months. I don’t see this as a fresh warning sign of impending doom for the economy. TradingEconomics To the contrary, the S&P Global Services Purchasing Managers Index (PMI) rose to a 28-month high of 55.3 in June, and the service sector dwarfs manufacturing in terms of its importance to the economy. TradingEconomics Lastly, I’d rather focus on real economic activity to gauge strength than the surveys that are conducted. On that note, consider that the four-week average of gasoline demand in the US is running 4% higher than it was a year ago. That is a real-time pulse on consumer activity, and it shows strength rather than weakness. It also falls in line with the service sector survey conducted by S&P Global for July. EIA We are still in the process of a summer pullback instigated by the exodus from overbought technology stocks, due to disappointing earnings reports and outlooks from the Magnificent 7, as well as other AI-fueled momentum plays. This is coming at the same time the Fed is about to ease monetary policy, which is raising fears that the central bank has made a policy mistake and waited too long to ease. Yet, the selloff in technology stocks is not indicative of an economy in trouble, as investors have rotated from growth to value where earnings growth rates are just starting to improve. This morning’s jobs report carries tremendous weight in the short term, given the concerns about economic growth. Yet, this initial estimate of how many jobs were created last month is far less important than the consuming activities of the existing labor force of 168 million. Continue reading →

On Monday, Wall Street was ready to scour remarks from Jerome Powell for hints he might deliver a much-anticipated interest rate cut in September. The hint never came.Today, the stock market is feeling the consequences.This week the Federal Open Market Committee (FOMC) met to discuss the base interest rate, which currently sits at a more than two-decade high.While analysts were largely prepared to hear a cut of the rate—currently targeted at 5.25% to 5.5%—wouldn’t come this month, they were waiting on a veiled nod that the committee’s next meeting would bring such relief next month.Wall Street is hankering after a rate cut for a range of reasons, but the key concern is that if the Fed cuts rates too late — keeping the supply of money too tight for too long — it will stifle consumer spending and business capital expenditure, grinding the economy to a halt and leading to a rise in unemployment.On the flipside, lower rates would mean cheaper borrowing and higher levels of consumer consumption.But instead of Powell dropping hints about a Q3 cut, analysts got a “baby step,” said Santander’s chief U.S. economist, Stephen Stanley.”Chairman Powell emphasized in his press conference that recent data on inflation have ‘added to’ the Fed’s confidence that inflation will return to the 2% target, but the Fed is not there yet,” he wrote in a note seen by Fortune.While the market had priced in a September cut, Stanley believes the news will come in November. “I am skeptical that the key economic data over the next seven weeks are going to add to the FOMC’s confidence,” he wrote.Likewise, Bank of America—even prior to the Fed’s July meeting—is not pricing in a rate cut until December.Yesterday credit strategist Yuri Seliger wrote in a note seen by Fortune that while Powell’s comments “largely agreed” with a September cut, there is a key caveat: that timing is “assuming no big surprises on inflation.”A day prior, Seliger’s colleagues—U.S. economist Michael Gapen, rates strategist Mark Cabana, and FX strategist Alex Cohen—wrote: “In our view, the main message from the July FOMC meeting is that the Fed is getting closer to a rate cut, but needs more evidence that inflation is under control before it does.”[Powell] indicated that there was increased confidence within the committee that a September rate cut could happen, but data between now and then would have to validate the Fed’s expectation. We think the Fed can be patient and wait for more evidence.”The less emphatic evidence of a September cut is likely one of many reasons the global stock market took such a heavy hit over the last few hours.At the time of writing the S&P500 is down 1.4% over the past 24 hours, while the Nasdaq is down 2.3% over the same time period.While some of this slump may be given a lackluster earnings call from Magnificent 7 stock Amazon, traders are also likely getting the creeping sense that the Fed may hang on too long.’Hedging bets is standard practice'”We haven’t made any decisions,” Powell told reporters in a press conference following the FOMC meeting this week. “I don’t know what the data will reveal or how that will affect the appropriate path of our policy.”While such a statement may have taken the wind out of other analysts’ sails, Mike Pugliese, senior economist at Wells Fargo, told Fortune he had a more balanced outlook.”I am confident that the FOMC will cut rates in September,” he said. “It is true that Chair Powell and the rest of the FOMC are hedging their bets, but that is standard practice in this kind of situation. It would be highly unusual for them to explicitly commit to a rate cut a full meeting in advance.”When reading between the lines, the signals were there yesterday, and the recent data for both the labor market and inflation suggest that a rate cut will be warranted at the next meeting.”The stock market’s overnight tumble might look tame compared to the upset that could come in September if the cut doesn’t materialize.”It is hard to speculate on what the impact would be if the Fed did not cut rates in September because we do not have the economic data that will be released between now and then,” Pugliese added. “For example, if the employment reports to be released on August 2 and September 6 are exceptionally strong and the next two CPI reports are also very ‘hot,’ then that would have different implications compared to a scenario where the economic data were generally weak between now and the Sept FOMC meeting but the Committee still chose not to cut rates.”Based on what we know now, no rate cut in September would come as a major surprise to us and to financial markets. Financial conditions likely would tighten if the FOMC adopted an unexpectedly hawkish stance over the next seven weeks.”Over at UBS Brian Rose, senior U.S. economist, is maintaining a milder stance on his previous statement that the market is pricing in “a near-100% chance of a September cut.”Yesterday in a note seen by Fortune, Rose added: “Our view remains that the upcoming data will be soft enough for the Fed to start trimming rates by 25 basis points quarter, but not so bad that they would want to cut at a more aggressive pace. However, risks are asymmetric.”This story was originally featured on Fortune.com Continue reading →

Two separate data releases highlighted signs of softening in the economy on Thursday as the Federal Reserve mulls over when to cut interest rates.Weekly jobless claims once again rose more than expected last week in the latest sign of a cooling labor market. New data from the Department of Labor showed 249,000 initial jobless claims were filed in the week ending July 27, up from 235,000 the week prior and the highest level since August 2023.Meanwhile, the latest reading on activity in US manufacturing showed the sector sank further into contraction during July. The ISM’s manufacturing PMI registered a reading of 46.8 in July, down from June reading of 48.5 and the lowest reading since November 2023.“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions,” Chair of the Institute for Supply Management Timothy Fiore said in a press release.The weaker-than-expected economic data sent the 10-year Treasury yield (^TNX) down about 12 basis points to 3.98%. This marked the first time the 10-year yield has fallen below 4% since February. Meanwhile, all three of the major stock indexes turned lower.”The ongoing deterioration in the economic data as evidenced by today’s rising initial jobless claims, low unit labor costs, and abrupt slowing in global manufacturing activity suggest that we are getting to a point where bad economic news is bad for markets,” Renaissance Macro’s head of economics research Neil Dutta wrote in a note on Thursday. “Until the Fed begins cutting, they are going to look behind the curve. In my view, the upshot is that this is a small policy mistake that can be undone very quickly.”The data comes less than 24 hours after the Fed held interest rates steady at the conclusion of its latest policy meeting. Chair Jerome Powell noted the central bank is still seeking further confidence in inflation’s path lower but also acknowledged a September interest rate cut is “could be on the table.”Powell noted the Fed is now more attentive to not only the risk of inflation not falling, but also the risk of unemployment continuing to tick higher. For now, Powell said the Fed still believes the labor market is in the process of a “gradual normalization.””If we start to see something that looks to be more than that, then we’re well positioned to respond,” Powell said.Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board Building Tuesday, Wednesday, July, 31, 2024, in Washington. (AP Photo/Jose Luis Magana) (ASSOCIATED PRESS)The concern among economists remains that there are already signs of slowing in the labor market that warrant a closer look from the Fed. In Thursday’s ISM report, the employment index tumbled to a reading of 43.4 in July, down from 49.3 in June.Capital Economics North America economist Thomas Ryan wrote in a note on Thursday that the decline in the employment index will likely “raise some eyebrows.” He added, “it suggests there is a risk that the labour market softens beyond the normalisation we have already seen.”Jefferies US Economist Thomas Simons noted that the rate cuts could help the sagging manufacturing sector but “it is looking more and more like it’s going to take more than a handful of 25 basis point moves.”Investors appeared to agree with Simons, as markets are now pricing in a 20% chance of a 50 basis point interest rate cut in September, nearly double the odds seen just a day prior, per the CME FedWatch Tool. Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.Click here for in-depth analysis of the latest stock market news and events moving stock pricesRead the latest financial and business news from Yahoo Finance Continue reading →

It now looks like silver has completed a classic 3-wave correction from its May highs, following its strong advance in the Spring. On its latest 6-month chart we can see that it appears to be conforming to a classic Elliott wave pattern which consists of 5 waves up in the direction of the primary trend, as numbered, followed by a 3-wave correction or reaction that once complete is followed by another series of up waves.

The correction phase is considered to be complete or very close to complete – while it could react back further short-term towards the support level shown in the vicinity of the 200-day moving average which would not cause any technical damage, the overall pattern is strong and given that we will soon enter a seasonally favorable time of year for the Precious Metals, there is a good chance that it won’t react back much further, if at all.

Thursday’s breach of support will have thrown some investors and triggered stops, and may turn out to be the sort of “head fake” that frequently precedes a sizable advance. The dynamic in play here is that “Big Money” whacks the price through a support level to trigger stops and then they mop up the disgorged holdings ahead of renewed advance. If this is what is going on then it is of course very bullish.

So, whilst acknowledging the possibility of a little more downside short-term, the main message here is that silver is now in buying territory again with a major advance to a point way above the May highs on the horizon.

End of update. Continue reading →

(Reuters) -The Federal Reserve held interest rates steady on Wednesday but opened the door to reducing borrowing costs as soon as its next meeting in September as inflation continues coming into line with the U.S. central bank’s 2% target.The central bank’s Federal Open Market Committee ended a two-day policy meeting by keeping its benchmark overnight interest rate in the 5.25%-5.50% range.Inflation, according to the Fed’s statement, was now just “somewhat elevated,” a key downgrade from the assessment that it has used throughout much of its battle against rising prices that inflation was “elevated.”MARKET REACTION:STOCKS: The S&P 500 held a 1.59% gainBONDS: The yield on benchmark U.S. 10-year notes ticked higher but was still down on the day at 4.122%. The 2-year note yield rose to 4.381%FOREX: The dollar index pared a loss to -0.13% with the euro slipping from unchanged to -0.09%COMMENTS:TRAVIS KESHEMBERG, SENIOR PORTFOLIO MANAGER FOR THE SYSTEMATIC EDGE MULTI-ASSET TEAM, ALLSPRING GLOBAL INVESTMENTS, SAN FRANCISCO“Our base case is for the Fed to make its first cut in September and remain neutral from a forward guidance perspective, analyzing incoming data to inform future rate-cut decisions. Growth and jobs are not yet at a point that justifies a prolonged cutting cycle and less-restrictive monetary policy. We expect to see conditions deteriorate and thereby support further rate cuts later in the fourth quarter of 2024.“We continue to favor bonds, which benefit from moderating growth and moderating inflation, particularly internationally. We also continue to like equities. We expect broadening of the equity rally, and any relief from perceived looser monetary policy would likely support equity prices in the medium term.“Geopolitical uncertainty in the U.S. has increased in July, and we expect the Fed will take this situation into account in its decision-making.”DON CALCAGNI, CHIEF INVESTMENT OFFICER, MERCER ADVISORS, DENVER, COLORADO”It’s certainly what the market expected which is the right thing for the Fed to do, to sit tight.””They’re not telling you timing. What I’m seeing here is the Fed acknowledging that the risks are balancing … if you were going to make a case to cut rates, those are the data points you better cite in order to manage market expectations.””The fact that they are emphasizing that data in their communications, tells me that we’re closer to interest rate cuts in the future and the next meeting naturally would be September.””The market reaction is positive. The expectation coming into today was that the Fed is going to signal it’s closer to cutting rates. The Fed today delivered everything the market expected. There’s nothing here that in any way suggests the Fed delivered anything other than what the market expected.”JEFFREY ROACH, CHIEF ECONOMIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA (in an email)”The Fed used today’s statement to prepare markets for upcoming rate cuts. As inflation rates improve and unemployment increases, the Fed can cut rates yet keep the nominal funds rate above the inflation rate. Markets will likely respond favorably to the subtle shift in tone.”BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“The Fed is tiptoeing towards being confident enough to cut. Adding that they are attentive to the risks to both sides of their dual mandate tees them up to cut in September if the next two CPI reports are well-behaved.”JAKE DOLLARHIDE, CEO, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA“It was the worst kept secret on the planet that the Fed was not going to cut in July. The Fed is going to have its day in the sun in September with a 25 or 50 basis point cut, but I would not be surprised if that is already priced into stocks. We may actually see the market down significantly the day the Fed actually cuts rates in September.”MICHELE RANERI, HEAD OF U.S. RESEARCH AND CONSULTING AT TRANSUNION IN CHICAGO (in an email )“There continues to be positive indicators that this may be the last meeting before we see an interest rate reduction at the next Fed meeting in September, with the possibility of a second rate reduction for 2024 still on the table.“As it applies to consumer demand for credit around large purchases such as homes and autos, this will likely begin to increase if, and when rates eventually begin to fall. Indeed, we are even seeing some early indicators that consumers are becoming more interested in new mortgages. Until rates do drop meaningfully, however, consumers should continue to use credit wisely and only to the extent that they know they can make their minimum monthly payments on.”(Compiled by the Global Finance & Markets Breaking News team) Continue reading →

MicroStockHubBy Kevin Flanagan Once again, the Fed kept rates unchanged at the July FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced exactly a year ago and still resides at a more than 20-year high watermark. For those keeping track, this represents the eighth consecutive FOMC meeting where the policy maker decided to take no action on the rate front. However, if the inflation and labor market data continue to “cooperate,” this may be the last meeting where rates are left unchanged, with expectations for the first rate cut building for the next FOMC gathering in September. This is exactly where U.S. monetary policy appears to be pivoting. While not explicitly stating that a rate cut is forthcoming at the September FOMC meeting, the voting members seem to be guiding the money and bond markets in that direction. Specifically, the FOMC is highlighting the Fed’s dual mandate of inflation and employment rather than solely centering on progress on the price pressure front. Indeed, the emphasis on “balance” when it comes to the risks going forward is the Committee’s way of providing forward guidance on the potential for a rate cut. Another rather important aspect of Fed signaling is Chairman Powell’s continued use of the notion of being “confident.” In other words, the renewed trend toward disinflation that became evident in the second quarter is providing the springboard for cutting rates without fear of easing policy too soon. By adding the employment aspect back into the equation, the Fed has reintroduced the concept that future decision-making is now data-dependent on not just inflation reports but upcoming labor market data as well. This is where things could get interesting. At the June FOMC meeting, policy makers dialed back their “dot plot” to show a forecast of only one rate cut rather than the three cuts that were in place beforehand. The release of better-than-expected CPI (and core PCE readings) rendered this “new” dot plot as being almost immediately obsolete. To be sure, heading into the July policy meeting, implied probabilities for Fed Funds Futures were now showing an expectation of moving toward three rate cuts in 2024. In fact, once we get that first rate cut out of the way, I continue to emphasize that the central part of the investment landscape going forward will quickly turn to what type of rate-cutting cycle this will look like. If future economic data (think labor markets) does not reveal any signs of visible weakening, then this easing episode will be based on the concept that the current restrictive policy stance is no longer warranted because of the progress on inflation. This backdrop would more than likely result in a more deliberate rate-cutting phase. However, if the Fed were to see higher unemployment rates and continued disinflation in the months ahead, this would arguably create the environment for a more aggressive easing stance. The Bottom Line An overarching theme from Powell & Co. in public appearances has been that while rate cuts seem like a reasonable case scenario in the months ahead, Fed officials would still like to see “more data” to get them over that final hurdle. If upcoming data does continue to “cooperate,” it is possible that Chairman Powell could provide such forward guidance at the Kansas City Fed’s Jackson Hole Symposium in the second half of August. There are risks involved with investing, including possible loss of principal. Foreign investing involves currency, political and economic risk. 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WisdomTree Funds are distributed by Foreside Fund Services, LLC, in the U.S. only. You cannot invest directly in an index. Kevin Flanagan, Head of Fixed Income Strategy As part of WisdomTree’s Investment Strategy group, Kevin serves as Head of Fixed Income Strategy. In this role, he contributes to the asset allocation team, writes fixed income-related content and travels with the sales team, conducting client-facing meetings and providing expertise on WisdomTree’s existing and future bond ETFs. In addition, Kevin works closely with the fixed income team. Prior to joining WisdomTree, Kevin spent 30 years at Morgan Stanley, where he was Managing Director and Chief Fixed Income Strategist for Wealth Management. He was responsible for tactical and strategic recommendations and created asset allocation models for fixed income securities. He was a contributor to the Morgan Stanley Wealth Management Global Investment Committee, primary author of Morgan Stanley Wealth Management’s monthly and weekly fixed income publications, and collaborated with the firm’s Research and Consulting Group Divisions to build ETF and fund manager asset allocation models. Kevin has an MBA from Pace University’s Lubin Graduate School of Business, and a B.S in Finance from Fairfield University. Original Post Continue reading →

tadamichiThe US stock market is on a tear. Since the start of this year, January 2024, the Dow Jones , S&P 500, and Nasdaq have each repeatedly set new all-time records. Indeed, the trend in stocks has been strongly upward for the last two or three years. For instance, the S&P 500 is about 40% above where it was in January 2021, when Joe Biden became President [43% higher]. The price of gold has also shown a strong upward trend, reaching $2,470 an ounce on July 17, the highest in history. Why are these assets so elevated? The stock market and gold An increase in perceptions of risk due to recent political and geopolitical uncertainty, could explain the rising gold price. But it cannot explain the stock market. Anyway, the VIX has been declining during this period, not rising. That could explain the stock market, but not the price of gold. Prices for chip-maker Nvidia and other high-tech stocks have risen the most rapidly and have gotten the most attention, particularly inspired by the rapid emergence of artificial intelligence since late 2022. But even the rest of the stock market, with tech companies excluded, has seen a steady rise in prices. Prospects of an easier monetary policy in the future could, in principle, explain both the high stock market and the high gold price. It is well known that the stock market depends inversely on the interest rate, holding other things constant. One way to think about it is that an increase in the interest rate reduces the presented discounted value of future corporate earnings. (Another way to think about is that an increase in the interest rate induces investors to shift out of equities and into bonds.) Conversely, lower interest rates would explain the higher stock market. The real price of gold also depends inversely on the real interest rate, both in theory and practice. Prospects of easier monetary policy should raise demand for gold. But interest rates, including long-term rates, rose during this period, which works to lower stock prices and commodity prices, not to raise them. So, where should we look to explain recent financial markets, the rise in real interest rates that has taken place over the last two to three years, or the likely prospects of reductions in the near future? For an answer, let’s turn to the foreign exchange market. The foreign exchange market The foreign exchange market provides the most convincing evidence that recent movements in financial markets have come at a time when monetary policy is, if anything, tighter than had been expected two or three years ago, not looser. The dollar is 14% stronger than it was three years ago [=log 117/102, for the index of advanced-country currencies.]. If real interest rates during this period were low or expected to fall, the currency should be weaker, not stronger. One explanation that has been given for the run-up in gold prices is that many countries are diversifying out of dollars and into gold. This is likely to be especially true of the People’s Bank of China and other central banks of countries that don’t have good geopolitical relations with the US (for example, as reflected in voting patterns in the UN) and thus may fear future sanctions. But, again, the foreign exchange value of the dollar should have been weakening, if that were the explanation, which it is not. Furthermore, recent econometric evidence shows surprisingly little support for the hypothesis that geopolitical disaffection vis-vis the US is driving the global shift out of dollars. GDP growth can explain it all What can explain simultaneously high prices in all three markets, gold, stocks, and the dollar? The answer is strong demand for these three assets coming from a strong US real economy. Two or three years ago, professional forecasters as well as the general public thought there was a high chance of recession in the near future, if indeed the economy was not already in one. But, contrary to those expectations, real GDP over this period has continued to grow. Admittedly, in the case of the price of gold, one should look at global growth, not US growth. (Growth in Europe and China has lagged; but the IMF says that global output gaps are now closing in these places.) US consumer demand has been strong. Growth in 2021 and 2022 was boosted by the CHIPS Act, Infrastructure Investment Act and the Inflation Reduction Act. Members of neither political party are prepared to reverse the fiscal expansion in order to confront the rising national debt. And a global safe-haven demand for US assets, so far, has continued as strong as ever. True, US economic growth, registering 2.5% in 2023, has slowed relative to the rapid pace of 2021. But it is still higher than has been usual so far this century. (The average GDP growth rate since 2001 was 2.0%.) And, most relevant for asset prices during this period, economic activity has been stronger than had been expected at the beginning of Biden’s term. Not only was growth in 2021 unusually high, but observers’ forecasts that growth would disappear in 2022 and again in 2023 were repeatedly surprised on the upside. The advance GDP estimate for the 2nd quarter of 2024 last week came out, yet again, stronger than expected: a growth rate of 2.8% per annum. Presumably, each time that economic activity was higher than expected, the demand for American stocks, gold, and the dollar rose. This would explain the upward trends in all three sorts of assets. Whether this pattern of strength will continue after the November presidential election is anyone’s guess. Original Post Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →

(Bloomberg) — Stocks got hit by a selloff in the world’s largest tech companies ahead of key central bank decisions. Bonds and gold climbed as traders rushed for safety amid geopolitical risks. Oil remained lower.Most Read from BloombergIsrael’s military struck Beirut, aiming at a Hezbollah commander, in response to a rocket attack on Saturday in the Golan Heights that killed 12 people. Most shares in the S&P 500 rose, but renewed tech weakness weighed on the gauge — with Nvidia Corp. tumbling 6%. After a $2.3-trillion Nasdaq 100 wipeout, investors awaited Microsoft Corp.’s results amid concern that firms aren’t yet seeing returns from artificial intelligence. Its numbers will set the scene for reports from other heavyweighs this week, with markets also gearing up for Wednesday’s Federal Reserve decision.“If the Fed does not signal a September rate cut, markets could get a bit ugly given recent tech weakness — especially if earnings underwhelm,” said Tom Essaye at The Sevens Report.While the Fed is expected to hold benchmark rates at the highest level in more than two decades, traders will be closely watching for any hints that the start of policy easing is near. In the run-up to the announcement, data showed US consumer confidence rose on an improved outlook for the economy and job openings beat forecasts.The S&P 500 fell about 1%. The Nasdaq 100 slid 1.5%. A gauge of the “Magnificent Seven” megacaps sank 2.5%. The Russell 2000 of small firms was little changed. Microsoft is investigating outages of some Office applications and cloud services. CrowdStrike Holdings Inc. plunged on a report Delta Air Lines Inc. hired an attorney after a tech outage. Procter & Gamble Co. sank on a sales miss. JetBlue Airways Corp. soared on a turnaround plan.Treasury 10-year yields declined three basis points to 4.14%. West Texas Intermediate crude hovered near $75.The yen rose. Bank of Japan Governor Kazuo Ueda will be under intense scrutiny Wednesday when he unveils his plans for quantitative tightening and delivers a decision on the policy interest rate. Recent yen weakness has done more harm than good for the Japanese economy, according to Japan’s newly appointed top foreign exchange official.*BOJ BOARD MEMBERS TO DISCUSS RAISING RATES TO 0.25%: NHKThe continuing broadening of this year’s powerful stock market rally hangs on what the Fed does and says about interest rates after its two-day meeting wraps up on Wednesday. Since the latest consumer price index print showed signs of cooling inflation, traders have stepped up their rotation out of Big Technology shares and into everything from small-capitalization stocks to value plays.If the Fed is about to begin a rate reduction cycle, stock bulls have history on their side. In the six prior hiking cycles, the S&P 500 Index has risen an average 5% a year after the first cut, according to calculations by the financial research firm CFRA. What’s more, the gains also broadened, with the small-cap Russell 2000 Index climbing 3.2% 12 months later, CFRA’s data show.Goldman Sachs Group Inc. Chief Executive Officer David Solomon said one or two Fed rate cuts later this year are looking increasingly likely, after predicting just two months ago there would be no rate reductions in 2024.“One or two cuts in the fall seems more likely,” Solomon said Tuesday in a CNBC interview from Paris. “There’s no question there are some shifts in consumer behavior, and the cumulative impact of what’s been kind of a long inflationary pressure, even though it’s moderating, is having an effect on consumer habits.”The S&P 500 Index has probably already logged the gains it will see this year, but the benchmark still presents ample opportunities for investors, according to Bank of America Corp.While neutral on the index overall, BofA’s Savita Subramanian says there’s potential for strong returns in a few areas: among dividend payers, “old school” capital-expenditure beneficiaries like infrastructure, construction and manufacturing stocks, and other themes that don’t revolve around artificial intelligence.“In mid-2023, sentiment was deeply negative and our toolkit suggested that the direction of economic and earnings surprises was more likely positive than negative,” Subramanian, the firm’s head of US equity and quantitative strategy, told clients in a note dated July 29. “Today, sentiment is neutral and positive surprises are ebbing.”Corporate Highlights:Pfizer Inc. raised its profit expectations for the year, citing new cancer drugs, as it seeks to dig out of a Covid-related hole in sales.Merck & Co. got hit as light sales of its Gardasil HPV vaccine in China dimmed quarterly profit and sales that beat Wall Street estimates.SoFi Technologies Inc. raised its forecast for this year’s profit and revenue as the fintech benefits from both its newer technology businesses and its trademark lending operation.Archer-Daniels-Midland Co.’s quarterly profit shrank more than expected as the grain trading giant faces a downturn in crop markets.Airbus SE’s operating profit fell by more than half in the second quarter after the company booked a charge at its space unit, forcing it to cut costs amid lower-than-anticipated aircraft deliveries.L’Oréal SA reported sluggish sales growth in the second quarter as the world’s biggest maker of beauty products suffered from weakness in China.BP Plc maintained the pace of share buybacks and increased its dividend as strong second-quarter earnings from pumping crude offset weakness in other parts of the business.Grifols SA, the Spanish pharmaceutical company hit by a short seller attack this year, said it overstated the value of its stake in a Chinese firm and reported an accounting adjustment of €457 million ($494 million).Key events this week:Eurozone CPI, WednesdayBank of Japan policy decision, WednesdayUS ADP employment change, WednesdayFed rate decision, WednesdayMeta Platforms earnings, WednesdayEurozone S&P Global Eurozone Manufacturing PMI, unemployment, ThursdayUS initial jobless claims, ISM Manufacturing, ThursdayAmazon, Apple earnings, ThursdayBank of England rate decision, ThursdayUS employment, factory orders, FridaySome of the main moves in markets:StocksThe S&P 500 fell 0.8% as of 1:23 p.m. New York timeThe Nasdaq 100 fell 1.6%The Dow Jones Industrial Average rose 0.2%The MSCI World Index fell 0.5%Bloomberg Magnificent 7 Total Return Index fell 2.4%The Russell 2000 Index was little changedCurrenciesThe Bloomberg Dollar Spot Index was little changedThe euro was little changed at $1.0817The British pound fell 0.2% to $1.2837The Japanese yen rose 0.6% to 153.09 per dollarCryptocurrenciesBitcoin fell 2.2% to $65,906.04Ether fell 0.9% to $3,292.95BondsThe yield on 10-year Treasuries declined three basis points to 4.14%Germany’s 10-year yield declined two basis points to 2.34%Britain’s 10-year yield was little changed at 4.04%CommoditiesWest Texas Intermediate crude fell 1.1% to $74.94 a barrelSpot gold rose 1% to $2,407.08 an ounceThis story was produced with the assistance of Bloomberg Automation.Most Read from Bloomberg Businessweek©2024 Bloomberg L.P. Continue reading →

OpenAI seeks ‘vast quantities’ of nuclear fusion energy to power superhuman AI

OpenAI’s energy demands will be substantial. Not just OpenAI but this set off an AI arms race which will turn into an Energy Sourcing Stampede.Grids are already stressed out in USA. (Remember Texas, California, Mid Atlantic, East Coast and other regions where heat waves or impact weather created hundreds of blackouts and this summers heat has caused of 7,500 power interruptions)

Data centers in their rush to be first movers are developing pop up power plants (solar) but AI data centers are going to source even more so lets discuss Nuclear Energy.

OpenAI is seeking to purchase “vast quantities” of electricity from nuclear fusion to power its data centers.

The International Energy Agency (IEA) forecasts that total data center electricity consumption could reach more than 1,000 terawatt-hours (TWh) by 2026, which is roughly equivalent to Japan’s entire electricity consumption.

AI-related services are significantly increasing energy demands. For example, incorporating AI into search engines like Google could lead to a tenfold increase in electricity demand.

OpenAI’s ChatGPT uses about 2.9 Wh of electricity per request, compared to 0.3 Wh for a typical Google search.

The AI industry’s electricity demand is expected to grow exponentially, potentially increasing tenfold from 2023 to 2026.

Microsoft and OpenAI are reportedly working on a massive 5GW AI data center project called Stargate, which could cost up to $100 billion and come online in 2028.

In the US, data center electricity consumption is estimated to rise from about 200 TWh in 2022 to almost 260 TWh in 2026, accounting for 6% of total electricity demand.

OpenAI’s data centers energy needs will be enormous, likely in the hundreds of terawatt-hours range annually.

The fact that OpenAI is seeking nuclear fusion energy, which is still in development, underscores the magnitude of their anticipated energy requirements for future AI systems

Forget Uranium: Silver is a Much Better Way to Profit from AI & Nuclear Energy

Rod Cluster Control Assemblies (RCCAs)

Structure:

RCCAs consist of absorber rods attached to a spider assembly.

A typical RCCA has 24 absorber rodlets.

The spider assembly includes a brazed spider, spider springs, a spring retainer, and a spring tension bolt.

Dimensions:

While exact dimensions aren’t provided, we know that RCCAs are designed to fit within fuel assemblies in the reactor core.

For example, they’re available in configurations for 14×14, 15×15, 16×16, 17×17, and 17x17XL core layouts.

Materials:

The absorber rods are made of a silver-indium-cadmium (Ag-In-Cd) alloy.

The rod cladding is made of high-purity, partially cold-worked Type 304 stainless steel tubing.

The outer surface of the cladding is coated with industrial hard-chrome plating for enhanced wear resistance

RECAP:

AI data centers will use more energy than any other industry sector in USA.

The two prevailing sources of AI Data Center Energy Needs are Solar and Nuclear.

Solar panels use 500,000 ounces of Silver per gigawatt

Considering a project like Microsoft / Open AI Stargate

This table illustrates the silver usage for solar installations, comparing a standard 1 GW installation to the proposed Stargate AI data center project. The Stargate project, with its massive 5 GW capacity, would require five times the amount of silver used in a 1 GW installation, totaling 2,500,000 ounces of silver.

This significant silver requirement for large-scale solar projects like the Stargate AI data center underscores the growing demand for silver in the renewable energy sector. It also highlights the potential impact of AI and data center projects on silver consumption, as these facilities increasingly turn to solar power to meet their enormous energy needs

Silver: Best Way to Invest in AI and Silver could rival Uranium when considering Nuclear Energy based on the Rod Cluster Control Assemblies mentioned above

Uranium is relatively abundant in Earth’s surface due to its lithophile nature, which causes it to concentrate in the continental crust during geological processes.

Additionally, uranium’s long half-life allows it to persist in the crust over geological time scales. Unlike siderophilic elements that alloy with iron and sink to the core, uranium’s chemical properties prevent it from doing so, contributing to its presence in the Earth’s crust.

The Earth’s crust contains about 2-4 parts per million of uranium, making it more common than silver.

In contrast, silver is rarer in Earth’s surface, with an average crustal abundance of only 0.075 parts per million. There are only 33 deposits of Silver Globally with over 25 Million ounces and most of these are not of the highest grade compared to the 4 silver miners we endorse.

Silver is in high demand for various applications, including AI, aerospace, solar panels, electronics, robotics, jewelry, investment, and military uses.

This increased demand across multiple industries will lead to a massive spike in silver’s value and importance in the global market, making it a critical resource and its significant to report Silver’s relative rarity compared to uranium.

Outcrop Silver TSXV: OCG | OTCQX: OCGSF | DE: MRGOutcrop Silver is advancing the Santa Ana project, a high-grade silver deposit located near the town of Mariquita in Colombia’s Tolima Department. The project covers over 27,697 hectares and is situated approximately 190 km from Bogota.

Santa Ana is notable for its exceptional silver grades, with indicated resources averaging over 600 g/t silver equivalent

The company has conducted extensive exploration, completing more than 330 diamond drill holes and discovering seven mineralized veins within a 3.7 km area of the historic Santa Ana mines vein system.

Outcrop Silver’s focus on this primary silver project with world-class discovery potential positions it as a unique player in the silver mining sector Continue reading →