Posted in
Newsletter
By: Tom Gentile
on August 28th, 2024
The Fed Minutes Were Released Today and the Market Barely Reacted
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The FOMC hasn’t performed an interest rate cut since they did an emergency easing in the early days of the Covid crisis.
On the economic front newly revised employment numbers were reported today. The Bureau of Labor Statistics said there was nearly 30% less jobs created than was initially reported. This is a reason the markets appear to be expecting their first rate cut since back then in their upcoming September meeting.
The Fed’s July meeting minutes were releases today.
Where one might have expected a strong reaction in the markets one direction or another, though the SPY traded both higher and lower than where it was at the release of minutes, it only ended up slightly higher on the day.
The anticipation now is a catalyst for a market move will be what Chairman Powell has to say when he speaks at Jackson Hole conference this Friday.
To your success,
— Tom Gentile
Markets in Focus: SPDR Gold Shares (GLD)
For those of you who have been learning from me for a while you know I talk about inter-market analysis.
Inter-market analysis is a method of analyzing markets by examining the correlations between two or more different asset classes.
When one asset class is doing well it may be to the detriment of another or because another isn’t doing well. Or it causes another asset class to underperform. That could explain the breakout on GLD.
It’s not that US equities are performing badly that money is flowing into GLD, but it could be a signal investors are taking the approach that if a recession is forthcoming (or because some feel we are already in one), this seems like a safer place to invest.
Tools and Observations
Last week I educated you all on where to find research and ananlysis on Sectors of the amrket in this software Toms Option Tools, (www.tomsoptiontools.com).
A great example of why sector analysis is important is what happened in the world of retail stores today. Specifically, retail apparel and household good retailers like Target Corporation (TGT) and The TJX Companies, Inc. (TJX).
Trading stocks in sectors is a way to find not only one stock to research for trading, but but a group.
A benefit for trading a sector, as in a an ETF of that sector, is that when one company has a hiccup in earnings let’s say, btu thers in the sector report a solid earnings number that one stock isn’t going to affect the ETF as muhc as it does for that stock on an infividual basis.
A meteaphor to think of is when one kid gets the measles, they all tend to. Or if one kid does well in school there is a good chance (not a guarantee) their siblings are doing well too.
Today in retail, a number of stores reported earnings.
Target Corporation (TGT) is classified as a Consumer Staple and is a holding in that ETF, the XLP.
Ross Stores, Inc. (ROST) is classified as a Consumer Discretionary and is a holding in the that ETF, the XLY.
The TJX Companies, Inc. (TJX) is also classified as a Consumer Discretionary and is a holding in the that ETF, the XLY.
Macy’s, Inc. (M) is part of the S&P 500 Retail ETF, the XRT.
TGT, ROST, and TJX had a positive earnings reports and popped up where M reported a miss and downward eps and revenue guidance and that stock dropped on the day.
The thing to notice though is the Consumer Discretionary and Staples ETF’s ended up higher as one might expect.
If you read the report from Macy’s where they are announced a slight miss by some estimates and you note they are stating their forward looking earnings and revenue is expected to be lower than originally reported you’d think that stock was going to trade down.
And it did as you can see in the chart below.
But look at the chart on the XRT, the retail ETF and though it trade lower than it opened, it still closed higher today than the prior day’s close.
Showing how trading a batch or setor of stocks as an ETF may be a safer approach at times.
To your success,
— Tom Gentile
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