In his podcast addressing the markets today, Louis Navellier offered the following commentary.
This week we will learn if the Federal government lied to us. I am not referring to Federal Reserve Chairman Jerome Powell’s testimony before the Senate on Tuesday or House on Wednesday. Instead, I am referring to Friday’s February payroll report.
Specifically, I want to see if the January payroll report is revised substantially lower after being artificially boosted by massive seasonal adjustments and gets closed to the ADP report.
I have not been the only one questioning the shocking January payroll reports, since Bain Capital also questioned the seasonal adjustments in a recent economic report.
The Wall Street Journal on Tuesday had an excellent article discussing the mystery of “seasonal adjustments.” Specifically, this article explains why widespread layoffs by technology companies and other firms were masked by January seasonal adjustments.
The WSJ pointed out that since “companies let go of holiday workers,” January has substantial seasonal adjustments. This WSJ article is effectively setting the stage for a potentially massive payroll revision on Friday.
The other big economic report that may have also been exaggerated by January seasonal adjustments is the retail sales report next week on March 15th. The bottom line is that the stronger-than-anticipated January payroll and retail sales reports caused interest rates to soar, which is now causing more investor anxiety.
The fact that these two blowout economic reports may have been grossly distorted by January seasonal adjustments implies that interest rates might have surged for bogus economic reasons.
Going Off Script
So far, the Fed has been remarkably quiet about surging Treasury yields. However, after two days of Congressional testimony, we should learn more from Fed Chairman Powell this week, since he may go “off script” after being repeatedly insulted about inflation and higher interest rates by Senators and members of the House.
Right now, it appears that the Fed wants to continue raising key interest rates by at least 0.25% at its upcoming Federal Open Market Committee (FOMC) meeting on March 21st and 22nd. The big Fed news is that the “dot plot” will be updated, which is a survey of FOMC members' federal funds rate forecast.
A Seasonally Strong Month
I should add that March is a seasonally strong month, due somewhat to continued strong pension funding as well as improving spring weather. Although it is still snowing in the Mountain West where I have a home, the snowstorms are expected to be warmer this week, so it is time for “Sierra Cement” to start falling, which is wet heavy snow.
I should add that the power has been out for many mountain communities, including Mammoth Mountain, which had to delay opening last weekend, since its ski lifts had no power. It will be interesting about the blowback for the electricity outages throughout California’s mountain communities from the record snowpack.
The good news is warm weather is coming for most of the U.S. in the upcoming weeks and that typically helps boost consumer confidence and spending.
China's customs bureau on Tuesday announced that its exports have fallen 6.8% in the first two months this year. Higher interest rates in Western countries are being blamed for falling Chinese exports. As central bankers continue to raise key interest rates higher, it is definitely impacting consumer behavior.
Tesla's Price Cuts
Interestingly, Tesla Inc (NASDAQ:TSLA) this week cut the prices of its expensive Model S & X vehicles 5% and 9%, respectively, to stimulate demand. As more auto manufacturers make electric vehicles (EVs), Tesla is facing more competition, but at least Tesla is striving to boost its market share with price cuts.
I should add that the Model S and X do not receive the $7,500 federal tax credit, so they appeal to luxury EV buyers. It will be interesting if the inventory of luxury EVs continues to expand since it appears that higher interest rates are curtailing the sales of luxury EVs.
The estimated economic cost of restricting the internet in Russia is estimated to be $21.6 billion between the invasion of Ukraine in February 2022 and the end of the year. Since the blockages are country-wide, the large number of people affected causes the high price tag. Source: Statista. See the full story here.