What to know today

  • It’s almost the Fourth of July.
  • Elon has some mojo again.
  • AI requires a lot of digging.
markets

Jerome Is Thinking About Jobs

“Progress” is his word on inflation.

If the job is to get inflation back toward its 2 percent target without breaking the economy, the Federal Reserve appears to be doing it, according to a steady stream of incoming data.

Even Fed Chair Jerome Powell said he was pleased with the central bank’s progress – “significant progress,” “real progress,” and “quite a bit of progress” is how he framed it from the stage at the ECB Forum in Portugal on Tuesday.

But Powell is not yet confident enough that inflation is moving sustainably down. “We want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” he said.

We’ll get a read on what Federal Open Market Committee members were thinking about the economy, inflation, and employment in June upon release of the minutes from their most recent meeting today at 2:00 p.m. ET.

The New York Stock Exchange and the Nasdaq will be closed by then – they’ll shut it down at 1:00 p.m. And the bond market will close at 2:00 p.m. Those minutes won’t reflect the most recent incoming data anyway.

We’ll have to wait until Friday for any overreaction, as markets will be closed in the US on Thursday in observance of Independence Day.

Powell shared his current thinking yesterday in Portugal: “You can see the labor market is cooling off, appropriately so, and we’re watching it very carefully.”

He didn’t set a timeline for a change in policy – “I’m not going to be landing on any specific dates here today” – but reiterated that a sudden deterioration in employment growth could be a catalyst for the central bank to cut the federal funds target rate.

The Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics showed that job openings rose to 8.1 million in May from 7.9 million in April.

On that score, the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics provided more evidence the Fed can hold at a higher level for longer without doing significant damage to the economy.

BLS data show job openings bounced up to 8.1 million in May from 7.9 million in April. Openings have fallen from a record high of 12 million in March 2022 but remain above a long-term pre-pandemic average just below 7 million. 

The ratio of job openings per unemployed worker was flat at 1.2, down from the 2022 peak of 2.0 percent and back in line with the pre-pandemic trend. The quits rate was steady at 2.2 percent. The layoff rate was steady at 1.0 percent.

The good news here is nothing is moving too fast in either direction.

We will see what’s happening with the ever-noisy weekly jobless claims set at 8:30 a.m., but it’s been slow-stepping up and down lately and is unlikely to provide definitive answers this morning.

So it looks like the Fed has something like optionality when it comes to holding for longer or cutting.

That’s subject to the pressures of the political calendar, but surely we can enjoy our ideas about independence on this day, of any day…

deep dive

TSLA Gets a Boost

This expectations game is getting interesting.

It was a good day for Tesla $TSLA and a very good day for Elon Musk.

The company shared news about its second-quarter EV production and delivery efforts, and the stock price soared 10.20 percent.

We can probably look forward to another double-digit move when Tesla announces full second-quarter financial and operating results after the market closes on July 23.

TSLA has posted an average move of 11 percent following management’s last four quarterly earnings announcements.

That average includes up moves as well as down moves.

Tesla’s hard core of retail shareholders and a cadre of Wall Street analysts were certainly impressed by those production and delivery figures.

It produced 410,831 electric vehicles during the three months ended June 30, and it delivered 443,956. Analysts were pleased with the production-delivery dynamic: Production below deliveries means inventories are shrinking.

Tesla $TSLA was up 10.20 percent on July 2, 2024, after announcing expectations-beating second-quarter production and delivery numbers.

The raw delivery number was particularly pleasing, as the consensus expected 438,000. And recent Wall Street estimates were in the 420,000 to 425,000 neighborhood.

It’s not getting as much attention, but Tesla also reported record deployment of battery storage during the second quarter, 9.4 gigawatt hours.

CFRA analyst Garrett Nelson boosted his price target for TSLA by $20, from $230 to $250. Dan Ives of Wedbush Securities reiterated his $275 target.

Not too many investors, traders, or speculators seem concerned about the fact that deliveries were actually down nearly 5 percent compared to the second quarter of 2023, extending a worrying trend.

Quarter-over-quarter deliveries were up 14.8 percent. But this is the first time ever Tesla has reported year-over-year sales declines for two consecutive quarters.

It wasn’t as bad as feared, is the thing. That fear is about Tesla’s aging EV offerings as well as the eroding effects of the CEO’s behavior on the company’s brand. 

Now let’s see about TSLA’s price action up to and through July 23.

deep dive |
July 3, 2024

TSLA Gets a Boost

WEEKLY MARKET OUTLOOK

AI Is a Commodities Story

We’re going to need a lot more metal.

“The more time that goes by,” Mish Schneider reflects early in her Weekly Market Outlook, “the more I am convinced, not all commodities, but that many commodities haven't even begun to see the move higher that they're going to see.”

It’s a function of deteriorating geopolitics and accumulating government debt, according to Mish.

There’s a lot of unrest in many of the jurisdictions where the raw materials necessary to support the proliferation of AI data centers are located, like Nigeria and Bolivia.

And there’s general unrest even in developed markets such as France.

Silver has outperformed both copper and gold year to date.

So, yeah, artificial intelligence is a big tech story. But it’s also a utility story, because those data centers require an enormous amount of electricity.

And generating electricity requires a lot of raw materials.

Mish starts this week’s review with copper, “a really interesting commodity because, yes, it's going to be in high demand for electricity. It's what all the wiring is made of.”

It really is as simple as that.

Copper has put in a major correction lately but looks to have found support. And there’s nice upside from here, barring a major recession, Mish says, “but certainly nothing is reflecting that right now.”

Silver is actually Mish’s top commodity pick, “especially in the terms of the metals.” And it’s looking particularly attractive right now from a technical perspective.

Like copper, silver is an “electrical metal.” In fact silver has the highest electrical and thermal conductivity among metals, and it’s used in solar panels as well as in battery EVs.

We could see much higher prices in silver from here, according to Mish.

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