In his podcast addressing the markets today, Louis Navellier offered the following commentary.
If you wish to listen to this commentary, please click here.
No More Hikes
The Fed is probably not going to raise rates. If the positive CPI news is not convincing enough for the FOMC, the Labor Department announced on Thursday that the Producer Price Index (PPI) rose 0.1% in June and in the past 12 months. This is the slowest annual pace in almost three years (since August 2020).
Importantly, wholesale service prices rose only 0.1% in June, which should please the Fed, since service costs had been an inflationary concern a few months ago. Also notable is that wholesale goods costs declined 4.4% in the past year, so deflationary forces now exist on the wholesale level. Overall, there is no longer any inflation on the wholesale level.
Treasury bond yields declined in the wake of the CPI and PPI reports, which is a very good sign and raised the probability that the Fed might pause at its June Federal Open Market Committee (FOMC) meeting.
Energy Stocks Surprise
We have seen strength in energy prices in recent days due to seasonality, but a lot of it is also the anticipation of the second-quarter earnings announcements. The energy stocks are anticipated to have some of the biggest surprises and have the most dramatic profit margin expansion. I’m very excited about refinery stocks and integrated energy such as Exxon (NYSE:XOM), Conoco (NYSE:COP), and EOG Resources (NYSE:EOG) as well as some of the oil service companies.
North America and Latin America are producing more oil despite the tragic fires in Canada that are disrupting Canadian oil output. OPEC is very tight now as Saudi Arabia pulled off two million barrels a day of crude oil, while Russia is in chaos. The energy patch is still looking pretty good and we’re going to have very strong seasonal demand through Labor Day.
Meanwhile, the heat wave that much of the United States is experiencing is great for natural gas stocks because there are natural gas peaker power plants all over America that come on during peak load demand to help provide extra electricity.
Watch Loan Loss Reserves
Tomorrow, we’re going to have the bank earnings and we want to see if they’re increasing their loan loss reserves.
Coffee Beans: Hawkish Policy
Mail delivery has been temporarily suspended to a Texas neighborhood due to a dive-bombing hawk that has been targeting postal workers — and anyone else who goes outside. An expert said the hawk is likely protecting its young. Source: UPI. See the full story here.
