The Daily Brief | May 5, 2022

Here’s Why Markets are Slipping…

For the love of…

Just yesterday, the Dow exploded more than 900 points. Today, we’re down 300 points.

All thanks to the Federal Reserve.

On Wednesday, Fed Chair Jerome Powell hiked interest rates by a half point – the biggest since 2000. All to combat inflation, which was never transitory, which was also up 8.5% annually in March – the highest in 40+ years.

“Inflation is much too high, and we understand the hardship it is causing,” Powell said at a press conference. “We’re moving expeditiously to bring it back down.”

Raising rates is just one tool the Fed has to bring inflation down. It’s also reducing the size of its $9 trillion balance sheet starting in June.

And by ruling out more aggressive hikes, markets exploded.

Unfortunately, inflation isn’t going to cool so quickly.

“We are puzzled why the market thinks that Fed hikes are going to stop inflation,” said Nancy Davis, founder of Quadratic Capital Management, as quoted by Zero Hedge. “We see inflation as driven by massive government spending, supply chain disruptions and, more recently, by Russia’s invasion of Ukraine.”

Hopefully, things will start to improve shortly. This roller coaster ride of a market is nuts.

Trading Tips

Keep an eye on lithium stocks.

Most of them moved higher yesterday after Livent (LTHM) posted solid earnings.

“Strong lithium demand growth has continued in 2022,” said Paul Graves, president and chief executive officer of Livent. “Published lithium prices in all forms have increased rapidly amid very tight market conditions and Livent continues to achieve higher realized prices across its entire product portfolio.”

Also, the Biden Administration is investing $3 billion in lithium.

Check out more of this story here.

Insider Buying: Occidental Petroleum (OXY)

With oil prices on the run, Berkshire Hathaway recently bought 5.8 million shares of OXY for $335 million on May 2. On May 3, the group bought another 20,500 shares for $1.18 million.

Analysts also seem to like the stock. Susquehanna just raised its target price to $71 from $58. Barclays raised its from $69 to $74. Truist raised its target price to $86 from $78.

With oil prices up another $2.66 to $110.50 (ouch!), OXY is now up to $63.58 this morning.

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