DoubleLine Minutes

DoubleLine’s Eric Dhall and Ryan Kimmel run down the June 8-12 market week, which marked the arrival of the historic SpaceX IPO – an impressive debut for a company with no profits, as Mr. Dhall notes. Aside from the SpaceX splash, the broader equities market was up a little with quite a bit of dispersion in performance. Fixed income (3:37) was positive across the board, with a rally in rates catalyzed by talk of a potential ceasefire. Commodities (5:22) were down for the week, led by energy, but the spike for Dr. Copper could be a positive sign.

On the macro front (9:45), the big story was some hot CPI and PPI inflation prints. While the headline numbers were pretty stark, Mr. Kimmel takes a look underneath the hood to provide a more detailed prognosis. He notes that the CPI and PPI numbers are pointing to a hot PCE print later in the month. Next week (18:57) will be all about the inaugural FOMC meeting for new Fed Chair Kevin Warsh. Messrs. Dhall and Kimmel look forward to his debut, cautioning that the arrival of a new chair often leads to some market volatility. Be sure to check out DoubleLine’s Fed Day coverage, including CEO Jeffrey Gundlach joining CNBC’s “Closing Bell” to share his thoughts on the new chair and his first post-FOMC meeting press conference.

Minutes will be off next Friday for the Juneteenth holiday but will return June 26. Happy holiday!

DoubleLine’s Jeff Mayberry and Mark Kimbrough survey a June 1-5 market week ending with a selloff in stocks (1:28) led lower by the high-flying tech, consumer discretionary and communications services sectors; higher, flattening bond yields (4:14); and weaker commodities (6:18) with the exception of energy. The risk retreat came on Friday’s strong payrolls report for May, which topped the week’s macro news (7:52) that also included a resilient ISM manufacturing report and an April JOLTS report showing a persistently low-hire, low-fire labor market.

Payrolls strength disappointed the doves. Fed funds futures (15:30) now price a hike in the rate by the end of the year. Jeff Mayberry, however, opines that the overall macro picture so far is unlikely to show to new Fed Chairman Kevin Warsh a case for tighter official short-term interest rates. The most-anticipated macro prints (18:40) for the week of June 8-12 will be the May CPI and PPI reports on Wednesday and Thursday, respectively.

On the last trading day of May, DoubleLine Portfolio Manager Eric Dhall and Macro Asset Allocation Strategist Ryan Kimmel review a month that saw a few tech giants (0:41) drive the S&P 500 to new highs while bond yields eased (5:56) albeit to still elevated levels versus the start of the month. Commodities (10:53) declined, led by energy. These moves came amid a ping pong of headlines fueling both hopes for a détente in the Persian Gulf and fears over the precarity of the ceasefire between the U.S. and Iran. “The U.S. is negotiating with some more moderate people in Iran, but the guys with the guns don’t necessarily agree with those moderates,” Eric Dhall notes. “It’s tough to believe that this situation is going to blow over until we start seeing ships transiting through Strait of Hormuz.”

On the macro front for the week (13:27), Ryan Kimmel notes that despite softer-than-expected readings on the PCE Deflator for April, inflation still “is not moving in the right direction and remains well above the Fed’s targets.” Looking inside the personal income report for April, he notes real wages and salary growth turned negative. For the week ahead, the biggest item will be the Bureau of Labor Statistics’ payroll and unemployment reports for May.

“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”

– Democratic Election Strategist James Carville, 1993

 

DoubleLine Portfolio Manager Eric Dhall and Analyst Mark Kimbrough survey a “neck-snapping” week ended May 15 that saw stocks (0:32) sell off Friday after the S&P 500 marked an all-time high on Thursday. The party crasher came from the fixed income market (3:27). Inflation-focused bond vigilantes sent Treasury yields higher by 20 basis points or more from two-year to 30-year tenors across the curve. The Bloomberg Commodity Index (9:21) edged higher, amid wide dispersion, as energy rallied, copper was flat and precious metals were sold.

Macro news (11:21) began with a consensus-matching April CPI on Tuesday but was dominated by an April PPI on Wednesday showing broad signs of inflation. Eric Dhall suggests Friday’s fixed income vigilantism amounted to a “delayed reaction” to the week’s earlier inflation news. Eric and Mark note fed funds futures are pricing in a Fed standing pat until July 2027. The May 18-22 week will be a light one for the statistical mills, with the most notable items being an FOMC minutes release, jobs claims and S&P Global manufacturing and services reports.

DoubleLine Portfolio Manager Jeff Mayberry and Macro Asset Allocation Strategist Ryan Kimmel on May 8 review a stock market (0:39) dominated over the month by a handful of tech giants, a fixed income market (3:32) earning its carry while Treasuries danced to oil’s war tune. Commodities ended the month mixed with energy lower amid gains for industrial and precious metals.

The week’s macro news (7:41) was led by stronger-than-expected nonfarm payrolls in April, with Ryan noting improving breadth in terms of sectors adding vs. detracting jobs as well as more jobs in the cyclically sensitive sectors. On the inflation front, he points out a trend of higher prices paid within the ISM services report for April. Consumer prices, Ryan adds, appear to be outpacing income, as registered in May by the lowest reading on the University of Michigan Consumer Sentiment Index since its inception in January 1978.

For the May 11-15 week, the April CPI report (due Tuesday) and PPI report (due Wednesday) will land on the top of Jeff and Ryan’s desks. They also will be on the lookout for Thursday’s jobless claims report and for retail sales, in particular, the inputs into the consumer spending component of gross domestic product.