Critical information for the U.S. trading day
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As the market heads into the new week, the attention is still very much on Friday’s jobs report showing an unexpected 528,000 increase in nonfarm payrolls. “It was quite a surprise to me,” said Dennis Gartman, the retired publisher of the Gartman letter and now the chairman of the University of Akron’s endowment and investment committee, in an interview with Bloomberg Radio.
He said the jobs numbers show there’s no Fed pivot in sight. Gartman said he expects not just a 75 basis point rate hike in September, but another 75 point hike in November and possibly a half-point increase in December. Stocks, however, moved off their lowest level of the session after the report was released, with the Dow industrials (DJIA) actually ending in positive territory, while the S&P 500 posted just a 0.2% decline.
“I must admit that the rally has been a little more exuberant than I had thought. I was a little surprised by the response on Friday. Maybe it’s just a rally in a bear market, which I think is what it is, but I have to admit I have been somewhat taken aback by the fact the market has remained as strong as it has, given the fact that the yield curve is inverted and will continue to invert even more,” he said. He added he’s now “less amenable” to his previous prediction that the stock market would be down another 20% by the end of the year.
Gartman had advised the Akron endowment to take 12% of the portfolio out of equities at the end of December, and then recommended taking another 3% out of stocks, and into gold, in March. The S&P 500 (SPX) has dropped 13% this year, while gold (GC00) has slipped 2%.
He acknowledged not everyone is seeing the world his way. “When Warren Buffett buys, one has at least to pay attention, but one doesn’t always have to follow him. You have to balance, here’s one of the greatest investors of all time doing something on the bullish side,” said Gartman. And he does see stocks worth buying. “I very much like dividend paying stocks,” he said. “I like things that if I dropped them on my foot, it will hurt. I like copper, I like trains, I like ships, I like things with movement.”
Gartman said the bond market is more likely to be right than the Fed on long-term growth. “I’ve only been doing this for 45 years, so I’m still a newcomer,” he said. “The bond market reversed over the last week. We had a new high in price, made a new low in yields, and suddenly on Friday, after the numbers came out, you had a technical reversal. I learned to pay attention to reversal days, and I pay real attention to reversal weeks, which are rare.”
The mood is positive albeit not ebullient in the early going. U.S stock futures (ES00) (NQ00) were higher, bitcoin (BTCUSD) was moving up, and the dollar (DXY)was a touch weaker.
The Senate over the weekend narrowly passed the roughly $740 billion Inflation Reduction Act, setting the stage for the climate and prescription drug bill to get approval in the House later in the week.
Fed Gov. Michelle Bowman said over the weekend that she supports 75 basis point hikes until inflation is subdued. “My view is that similarly-sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” she said.
China recorded a record trade surplus in July after exports surged 18% year-over-year while imports grew just 2%.
CVS Health (CVS) is trying to buy Signify Health (SGFY), a home health services company, according to The Wall Street Journal. Pfizer struck a $5.4 billion deal for Global Blood Therapeutics (GBT).
Vaccine maker BioNTech (BNTX) recorded worse-than-forecast profit and revenue in the second quarter.
Buffett’s Berkshire Hathaway (BRK.B) reported a $44 billion loss due to the declining value of its stock investments, though its operating profits rose.
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