FRB Chair’s testimony was largely as expected.  Powell stated that the Committee is monitoring the coronavirus, signaling it out among risks threatening the economy.  The Chairman characterized the economy “as strong,” inflation is “trending to goal,” and the labor market as “robust.”  Powell made some generic comments about the repo market stating that liquidity is ample because of Fed intervention.

There was little market reaction to his remarks.

Speaking of the repo market, the FRB of New York started today’s auction was oversubscribed by a factor of two for the third consecutive day.  All are asking why?

Regarding inflation, the NFIB small business optimism topped expectations.  The compensation gauge saw the biggest spike in its history.  Wow!  Is this a harbinger of things to come?  FRB Chairman Powell stated wage gains are greatest at the lowest end of the spectrum.

Wages are the largest cost of production.  Will these gains begin seeping into the general economy or will companies absorb these costs, an absorption that will impact margins?

Equities trimmed gains following the FTC’s request for information from the largest technology companies about acquisitions that may have eliminated new competitors.  In my view today’s mega sized technology companies are only entering into the regulatory abyss, an abyss that will be expensive and transformational.

What will happen today?

Last night the foreign markets were up.   London was up 0.37%,  Paris up 0.40% and Frankfurt up 0.78%.  China was up 0.87%,  Japan up 0.78% and Hang Sang up 0.87%.

The Dow should open nominally higher as China reported the lowest number of new coronavirus cases this month.  The 10-year is off 4/32 to yield 1.62%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.