Market Pullback, Orderly

First, I must say, it’s hard to believe it’s been 22 years since 9-11!  My emotions snap back immediately!

The recent market pull-back has been quite orderly. 

The S&P 500 is off (3.26%) from its recent 52-week high and now sits (7.5%) below its all-time high.

The Nasdaq composite is off (4.75%) from its recent 52-week high and now sits (15.12%) below its all-time high.

The Dow is off (3.09%) from its recent 52-week high and now sits (6.43%) below its all-time high.

The positive, assuming inflation continues to moderate, the Fed is either in the 9th inning or hopefully finished raising rates. 

Corporate profits are expected to be bottoming with many calling for profits to begin rising in 2024 which is necessary for stock prices to continue higher.

The markets have come a long way back in a short period of time.  An orderly pullback was expected.  Let’s hope going forward, the Fed and Corporate Profits lead us higher going into year-end and 2024.

CPI, Apple & UAW

Inflation will continue to be front and center as Wednesday brings the latest Consumer Price Index (CPI) reading.  Expectations are for a month-to-month increase of .2% with and without food/energy.  My concern is the price of oil has risen significantly from a couple months ago. 

Apple stock fell 6% last week as the rumor circulated China will ban iPhones from being used by workers of government agencies.  We’ll be watching this closely as Apple is obviously a bellwether company of significant global importance.  Keep in mind, Apple has a boat load of cash and a very loyal customer-base.

146,000 United Auto Workers (UAW) may go on strike Thursday at 12 midnight.  General Motors, Ford and Stellantis face an immediate production halt.

The union is asking for significant increases in compensation, benefits and a shortened work-week. 

According to the Wall Street Journal, auto makers may have inventory for approximately 70 days.  The union has a monetary war-chest that can support its workers for 2 to 3 months.  The striking workers will be receiving less than if they were working.

Should we be concerned?  Yes!  A supply disruption may place pressure on prices for the 3 auto-makers current supply, as well as potentially raising prices for used and new cars at other car-makers.  Less supply typically leads to increased pricing, as we’ve all witnessed over the last couple of years.

The Wall-Street Journal also wrote that Tesla’s cost per employee is approximately $45/hour.  The UAW’s cost is now $66 and will shoot up to $136/hour if all demands are met.  Highly unlikely all demands will be met however that message is thought provoking.  Asian hourly automakers cost is reported to be approximately $55/hour.

There are several positions on both sides of the auto debate.  For the economy and markets, a sooner than later resolution will be welcomed.

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