Stocks started the week upbeat, but ended with two straight sessions on the downside, save for the NASDAQ, which was the only major to manage a gain on Friday. This lackluster performance was likely the result of competing factions of rising long-term interest rates, the ongoing tech wreck, and anticipation of millions of $1400 checks being slowly doled out to Americans earning less than $75k per year, some of which (10-15% overall, or roughly $50 billion) is expected to be invested in equities.
While the bump from retail investors has yet to materialize, Mr. Market seems to be indicating that this could be a near-term top, as retail always comes in late, often too late, after stocks had legged up. If stocks sink a bit through April, it would be a normal happening for consume bag-holders.
Rising yields on 10-year notes and 30-year bonds are a screaming signal for at least a slowdown if not an outright correction. By almost any calculation, stocks are overvalued, though that sentiment is partially obscured by ongoing Federal Reserve QE and those juicy stimulus checks and added unemployment benefits being rolled out.
While the higher yields might not exactly be in competition with dividend yields on stocks, they're close enough to have people paying attention, plus, if they're treasuries, they're considered almost risk-free, and, smart bond buyers can have them at a discount, making them quite attractive to high-income individuals and funds. The flow hasn't reversed just yet, but the effect of high yields at the long end of the curve is beginning to become a worry for markets.
Yield on the 10-year note rose 10 basis points, from 1.64% to 1.74% over the week, while the 30-year rose five basis points, from 2.40% to 2.45%, both of which are the highest in more than a year. The last time rates were at these levels was roughly from June of 2019 through mid-January 2020, during which stocks gained, though we all know what happened in February 2020, when the pandemic struck and stocks sank.
It appears that current interest rates won't likely be enough to cause a stampede out of equities, though levels with the 10-year over 2.5 percent and the 30 above 3.0% might. With Fed talking down inflation every chance they get, it's almost a certainty that interest rates will continue rising and stocks will flounder over the medium term. Spring and Summer may turn out to fall into the "sell in May and stay away" category and by fall, the inflationary overhang of relentless QE and government overreach in terms of largesse, deficit, and stimulus (congress is already discussing the next round) will be unmistakable.
A shift from risk assets to fixed income to cash and then to parts unknown is an emerging pattern, though, like all things financial, is not yet obvious to most and won't occur in a straight line pattern. There will be bumps, grinds, euphoria and despair aplenty along the way. From a purely irrational, unattached perspective, stocks would seem to be unable to reproduce this year the outsized gains from March 2020 through the present. Using year-end figures, there doesn't seem to be a discernible pattern for gains or losses in stocks overall. WIth the NASDAQ an outlier, the main indices are up five to six percent overall year-to-date. Even the NASDAQ is holding onto a slim gain just over two percent, having closed out 2020 at 12,888.
If indicators are a friend of the investor, perhaps the price of oil was showing the way this week as WTI crude took a nosedive this week. After reaching what appears to be a double top ($66.09 on 3/5; $66.02 on 3/11), the price of a barrel fell below $60 briefly on Thursday before rallying Friday to close out the week at $61.42. While the United States seems hell-bent on reopening schools, businesses and the economy, Europe is struggling with a third wave of COVID, and that seems to be putting some pressure on demand, along with warming Northern Hemisphere temperatures following what was, in total, a relatively ordinary winter, outside of Texas, of course.
Slack demand and oversupply usually equates to lower prices, so, at a time in which oil was rocketing higher (up from the high $30s to low $40s in November and December to over $60 in just four months), some pullback was to be expected. The price ran ahead of projections for both economic recovery and return to normal patterns, which is happening at a snail's pace.
Cryptocurrencies spent the week hitting the pause button after Bitcoin nearly topped $62,000 last Saturday. It spent the week grinding lower, currently pricing at $56,000-$58,000. While this price level may be disappointing to some true believers, it's still good for an 800% gain from a year ago, so nobody is as yet pulling their hair out.
For the Week:
Dow: -150.67 (-0.46%)
NASDAQ: -104.63 (-0.79%)
S&P 500: -30.24 (-0.77%)
NYSE: -152.95 (-0.97%)
Precious metals had a productive, if uninspiring, week, with gold rising from $1726.85 to $1,749.60, while silver took it on the chin, dropping from $26.60 per ounce to $26.39. Silver seems to be stuck in a range between $25 and $27, with seemingly no escape from the clutches of the LBMA and futures trading, which has managed to meep a lid on prices despite widespread reporting of shortages and shipping delays from online dealers.
An interesting story is still developing out of Perth Mint, which recently ran out of finished silver products for sale at retail. The reddit crowd over at r/wallstreetsilver wants to believe that its efforts are having some effect on global inventories, and, undeniably, to an extent, they are, but Perth Mint answered its critics in a blog post on Wednesday, March 17.
While claiming there was in fact no physical shortage of the metal, and that Perth Mint was focusing on producing one ounce Aussie Kangaroos, there are, in fact, no 2020 or 2021 Kangaroos available for sale. The seemingly conflicting information has prompted a lively debate. In the grand scheme of things, silver is still significantly undervalued and finished products continue to fly off shelves at super premium prices, when even available.
Here are the most recent sale prices for common one ounce gold and silver items for immediate delivery on eBay (numismatics excluded, shipping - often free - included.
Item: Low / High / Average / Median
1 oz silver coin: 35.50 / 44.00 / 40.92 / 41.25
1 oz silver bar: 36.78 / 49.99 / 42.38 / 42.86
1 oz gold coin: 1,881.52 / 2,021.63 / 1,951.39 / 1,949.14
1 oz gold bar: 1,829.95 / 2,050.73 / 1,873.96 / 1,854.20
What's demonstrated by the gold and silver prices for immediate delivery is that extraordinarily-high premiums still command the market, though silver slipped somewhat over the course of the week, with the Single Ounce Silver Market Price Benchmark (SOSMPB) falling to $41.85. The auction and individual ounce market remains red-hot, however, with silver premiums upwards of 60% over spot. Gold, due to its higher average and median values, still carries premiums over 13% for common coins, and about 10% over spot for bars and rounds.
While the precious metals wholesale market remains moribund and the retail market in tight supply, there's no mistaking the real rally in base commodities. Zinc, Tin, Nickel, Copper, Lumber, and Aluminum have all risen steadily - if not spectacularly - over the pst year, yet another indication that inflation is well entrenched, despite what government and Federal Reserve mouthpieces have to say.
When Money Daily recommended canned goods on Friday, not only will the contents of such purchasing now act as a future inflation hedge, the packaging may turn out to be one of the best investments of the decade.
That's a WRAP for this 3000th posting of Money Daily.
At the Close, Friday, March 19, 2021:
Dow: 32,627.97, -234.33 (-0.71%)
NASDAQ: 13,215.24, +99.07 (+0.76%)
S&P 500: 3,913.10, -2.36 (-0.06%)
NYSE: 15,562.26, -26.81 (-0.17%)
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