Stocks Gain From Oversold Condition; 1Q GDP 2.0%

Nothing really to see here on the second-to-last trading day of the quarter, as stocks were due for a bit of a relief rally, which is exactly what this was, despite the bad news that first quarter GDP was revised lower, to 2.0% annualized.

The final estimate of GDP came as a bit of a shock to the know-it-alls on Wall Street, who collectively were looking for somewhere between 2.2% and 2.3% for the final figure. The fact that GDP underperformed (despite metrics that include everything other than drug dealing and prostitution) speaks volumes about the true state of the US economy, and, to a larger extent, that of the world.

Fading the Fed's favored position that the economy is solid, one would be better advised to consult one's stock broker or neighbor for a more accurate read on economic conditions. Savvy investors realize that GDP, as much as its inflated figures and inclusion of government expenditures belie a weakened state, isn't a very good measure of the health of an economy. The figures can be massaged and pushed around to fit any narrative, and usually are. What's happening in reality is that any growth is easily being eaten away by inflation, and any profits are funneled to the top 10% of the income gatherers, leaving the bottom 90% craving more and spending on credit while saving little to nothing.

A panoply of exaggerated expectations and flimsy figures is what the government number crunchers present, and it is so putrid that even their best efforts to make it appear palatable fall short. The United States has a hollowed out economy, devoid of a thriving middle class, replaced, over the past 20 years, with debt-ridden wannabes whose status is ultimately dependent on enormous wads of credit, from mortgages to school loans, to credit cards, to auto loans and leases, it is all a huge fallacy.

That stocks are able to even maintain some semblance of vigor is owed only to stock buybacks and the largesse of the central bank, which has fueled the massive facade with enough hot money and hot air to lift what is a limp and lifeless corpse off the deathbed... for now.

Numbers don't lie, and the best come from the bond pits, which was relatively calm, but still flatter in the middle, with the spread on 5s-10s falling to a mere 11 basis points. The 30-year bond remained steady at 2.97%, while the ten year ticked up one bip, making the 10s-30s spread just 13 basis points, which is not much interest for 20 years of waiting. Bonds continue to tell the real story, and it's not a happy one. Credit is tightening, slowly but certainly, and the Fed is creating a chokepoint for the economy which will lead only in one direction, to recession.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86
6/22/18	24,580.89	+119.19	+165.05
6/25/18	24,252.80	-328.09	-163.04
6/26/18	24,283.11	+30.31	-132.73
6/27/18	24,117.59	-165.52	-298.25
6/28/18	24,216.05	+98.46	-199.79

At the Close, Thursday, June 28, 2018:
Dow Jones Industrial Average: 24,216.05, +98.46 (+0.41%)
NASDAQ: 7,503.68, +58.60 (+0.79%)
S&P 500: 2,716.31, +16.68 (+0.62%)
NYSE Composite: 12,475.98, +63.91 (+0.51%)

Weekend Wrap: Dow Ends Losing Streak at 8, Week Was Rough For Stocks

In what could easily bee seen as a week of transition - either from fantasy to reality or speculation to fundamental investing - all of the major averages lost value, led by the Dow Industrials, which suffered its worst weekly loss (-2.03%) since mid-March.

Since the day before the Fed raised rates on June 13, the Dow had been in a free-fall, losing 860 points over a span of eight trading sessions, before receiving on Friday to post a somewhat insignificant, symbolic gain. It was almost as though the Dow Industrials were collectively saying, "we're OK, we're still here, don't worry," while all along the smart money was leaving in droves for either safety in bonds, higher yields in the risky NASDAQ, or the venerable hideout in the Hamptons for the summer. In some cases, all three avenues of escape were likely employed.

Not that any of them did anybody any good, as the NASDAQ took its first weekly spill in the past five and bonds vacillated around the unchanged mark for the week. The 10-year-note closed out the week at 2.90%, well below any expectations from the runaway inflation and "solid" economy promoted by the Federal Reserve. If inflation and the economy were truly getting away, bonds would surely reflect the condition, but they are instead contracting, with the yield curve continuing to point toward inversion, and, if not a complete recession within the next 6 months to two years, at least a slowdown or moderation.

Neither result would be particularly beneficial to the interests of the Fed, which has to try to keep a straight face while propagandizing the condition of the economy. Spreads on the 2s-30s contracted one basis point on the week, to 48; the 2s-10s dropped two basis points to 34, while the 5s-30s expanded from 25 to 27 basis points.

After last Friday's smackdown, precious metals saw little change over the course of the week, though silver (16.45) fared better than gold (1271.10). Persistent calls for a breakout among the prominent "bug" pundits have produced nothing but a series of short-term run-ups followed by timely price busts.

Oil was the place to be on Friday, when OPEC failed to announce expected production increases. On Saturday, however, with markets closed, OPEC and a number of oil-producing countries such as Russia, Mexico and Kazakhstan, agreed to share an increase of a million barrels per day.

How the increases would be shared was not immediately disclosed, but, the Saturday announcement is sure to snap back against the 3.74 (+5.71%) gain on Friday that pushed the price of WTI crude oil to $69.28 per barrel.

With summer officially arriving on Thursday (June 21), the pessimistic view of stocks could begin to prevail, as the adage of "sell in May" might more aptly be applied as "swoon in June."

The Dow slipped back to a point where it is more than 2000 points below the January high (26,616.71, January 26), and prospects going forward - as a drop-off in earnings is expected over the next three quarters - are not yet dire, though they may be characterized as "challenging."

A powerful (and very long) article on fiat money, gold, silver, and cryptocurrencies by former member of the US House of Representatives and candidate for president, Ron Paul, is on the Mises Institute website, here.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86
6/22/18	24,580.89	+119.19	+165.05

At the Close, Friday, June 22, 2018:
Dow Jones Industrial Average: 24,580.89, +119.19 (+0.49%)
NASDAQ: 7,692.82, -20.14 (-0.26%)
S&P 500: 2,754.88, +5.12 (+0.19%)
NYSE Composite: 12,639.57, +79.34 (+0.63%)

For the Week:
Dow: -509.59 (-2.03%)
NASDAQ: -53.56 (-0.69%)
S&P 500: -24.78 (-0.89%)
NYSE Composite: -95.07 (-0.75%)

Stocks Lose Luster In Late Trading

Getting the usual Monday morning boost, stocks experienced widespread gains throughout the day but faded badly into the close, with the Dow suffering the worst, dropping 80 points off its early afternoon high at 25,402.83.

The blue chips ended the day with a gain of just less than six points, the smallest percentage higher (0.02%) of the major indices.

Monday's subdued trading preceded the signing of an historic agreement to denuclearize North Korea, signed Tuesday morning, Singapore time, by President Trump and North Korean leader, Kim Jong-un. The late-day selloff might have been a precursor to more meaningful action to come Tuesday and Wednesday as the Federal Reserve plans a widely-anticipated increase to the federal funds rate, also known as the overnight or interbank rate, the price banks pay to loan funds to each other or to and from the Federal Reserve.

With the FOMC set to open the rate policy meeting on Tuesday and conclude Wednesday afternoon, treasury bonds displayed relative quiet, though yields rose moderately across the treasury spectrum.

Most worrying to bond traders and economists is the continuing flattening of the yield curve, as it approaches possible inversion, a condition that has presaged every recession since 1955.

The 2-10-year spread reached its lowest point in the current cycle, dropping to 43 basis points. The 5-30 spread stood at a mere 30 basis points (0.30%) at the close of trading Monday.

Further rate hikes by the Fed treated to choke off investment and send shorter maturities higher while longer ones stand firm. Both the 5-year note and 30-year bond have risen in yield by six basis points since June 1, though the stability is not expected to last long past this week's FOMC meeting.

As far as trading is concerned, there is likely to be a period of quietude Tuesday and Wednesday morning, leading up to the policy announcement at 2:00 pm EDT.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47

At the Close, Monday, June 11, 2018:
Dow Jones Industrial Average: 25,322.31, +5.78 (+0.02%)
NASDAQ: 7,659.93, +14.41 (+0.19%)
S&P 500: 2,782.00, +2.97 (+0.11%)
NYSE Composite: 12,856.96, +24.89 (+0.19%)