August 12: Mixed action in the markets, pre-market

By: Jeffrey Cohen, Investment Advisor Representative & President
Chicago Quantum (SM)
US Advanced Computing Infrastructure, Inc.

It's a 'so so' day in the markets pre-market. Not much action at all. Things trading in ranges, stocks up and down, commodities, interest rates and currencies all in range. Bitcoin up and down lately, but still in support ranges without much commitment in movements.

Just a slow morning on a Summer Friday.

A few things we saw:
The stocks are mixed pre-market. Banks are trading higher today. The recession must be over. Retail stocks were up too, showing that people have more cash to spend. Gasoline was down ~$0.06 pre-market (wholesale, 42k gallons), and so trucking firms were up pre-market. However, cannabis is up this morning, likely on Michigan's revenue read-out. I read that alot of people bought alot of cannabis last month. Medical was ~$21M, and recreational about 9x that amount. People cannot afford to drive or eat, but they can get high. Makes sense...and likely contributing to the significantly lower productivity rates in our non-manufacturing economy. (manufacturing you have to be there, and likely drug tested especially if operating heavy machinery).

Interest rates are up and down, but in the range. Lots of jerky movements, but not sure anyone is paying attention. We did see FRED Fed asset holdings INCREASE by $5B this past week. This is not quantitative tightening, this is quantitative easing at the margins. We were happy to see one month of inflation being under control, but it is definitely too early, in our opinion, for the FRB to start loosening the purse strings on monetary policy. Too early.

Good breadth yesterday in US equities, with more new highs than new lows, but the opposite in US corporate fixed income. New lows continue to outpace new highs, but high yield was more up then down, and investment grade was more down than up. This shows an increase of risk on the balance sheets of US companies.

We are still upset about the new corporate alternative minimum tax in the Inflation Reduction Act bill that passed the Senate on a party-line Democrat vote. It will hurt large corporations, and transform how companies report earnings. Gone are the earnings smoothing and earnings boosting accounting methods. Things will get a little gloomy on income statements over the next few years if the bill becomes law with this provision.

Market action over this past week has been consistent. Rise in the morning, then fade lower all day.