The Roaring Kitty Economy is Standing on its Last Leg

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Brian Evans and Tanaya Macheel of CNBC report the S&P 500 closes flat near record, posts winning week:

The S&P 500 ended flat on Friday, touching a record-high intraday, despite a stronger-than-expected jobs report.

The broad market index slipped 0.11% to close at 5,346.99, after reaching an all-time high earlier in the session. The Dow Jones Industrial Average slipped 87 points to 38,798.99. The Nasdaq Composite edged down 0.23% to finish the session at 17,133.13.

All three of the major averages notched a winning week. The Dow posted a 0.29% gain, while the S&P 500 added nearly 1.32% and the Nasdaq advanced 2.38%.

Stocks are rebounding from pressure earlier in the session following Friday’s jobs report. That news sent the yield on the benchmark 10-year Treasury more than 15 basis points higher.

Nonfarm payrolls increased by 272,000 in May, above the 190,000 estimate from Dow Jones and April’s 175,000 gain. Average hourly wages increased 0.4% last month and ticked up 4.1% from a year ago. However, even with the job gains, the unemployment rate ticked higher to 4%.

Investors had been hoping for weak jobs figures on a hunch it would give the Federal Reserve the greenlight to cut rates later this year. Now, with the labor market showing continued resilience, Wall Street seems focused on the idea that the economy is strong enough to keep growing without the help of lower interest rates.

“We should all be happy that we’ve got a strong economy,” IBM vice chairman and former National Economic Council Director Gary Cohn told CNBC’s “Squawk on the Street” on Friday. “At the end of the day, it’s all about the economy, it’s all about GDP growth, GDP corporate earnings, the health of the consumer, [and] that’s going to win out all of the time in the long run.”

The jobs report comes after the European Central Bank on Thursday cut rates for the first time since 2019, adding pressure to the Fed to potentially lighten up on policy. The Fed will give its decision on rates next week after its June 11-12 policy meeting.

Chipmaker and artificial intelligence darling Nvidia closed down slightly on Friday, but still ended the week up 10%. The stock set a record high on Thursday after pushing pastthe $3 trillion mark for the first time on Wednesday.

arket backs off on hopes for interest rate cuts following strong jobs report:

May’s surprising pace of job growth and wage rise added to the conviction that the Federal Reserve will stay on hold through this summer and possibly beyond.

The Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 272,000 for the month, considerably higher than the Wall Street consensus of 190,000 and well above April’s comparatively muted gain of 165,000. In addition, average hourly earnings rose 4.1% over the past 12 months, more than expected.

Beyond signaling a still-vibrant labor market, the data at the very least adds to the narrative that the Fed doesn’t have to rush to lower interest rates.

As inflation runs above the central bank’s 2% target, there’s scant evidence that higher rates are endangering broad metrics of economic growth.

“I’ve been a little flummoxed at the parlor game of when will the Fed start cutting,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “I’ve been more in the camp that neither of the components of the Fed’s dual mandate are pointing to the need to start cutting, and higher-for-longer means nothing could happen this year.”

The Fed’s “dual mandate” entails maintaining both full employment and stable prices.

Even with the unemployment rate rising to 4% in May, the labor market appears vibrant.

However, on the other side of the mandate, inflation is still running well above the Fed’s target. Most gauges have prices rising annually at about a 3% rate, down significantly from the peaks of mid-2022 but still running hot.

Lowering expectations

Following the jobs numbers, futures traders cut bets on rate cuts.

Pricing in fed funds futures pointed to almost no chance of a reduction at either the Federal Open Market Committee’s meeting next week or on July 30-31. From there, pricing indicates about a 50-50 chance of a September move, and only about a 46% probability that the Fed will follow up with a second cut before the end of the year, according to the CME Group’s FedWatch measure Friday afternoon.

All of those probabilities were down sharply from Thursday levels.

Investors, though, shouldn’t get too pessimistic, according to Rick Rieder, chief investment officer of global fixed income for money management giant BlackRock. He pointed to softness in demand for workers as shown by a report earlier this week indicating that job openings are continuing to decelerate.

Moreover, the household survey, which is used to calculate the unemployment rate, showed a decrease in employment of 408,000 and a continuing trend of part-time employment far outpacing full-time positions.

“And thus, the Federal Reserve’s mandate of price stability and full employment comes very much into balance,” Rieder wrote in a post-report analysis. “With these conditions, the Fed can lower the Fed Funds rate from very restrictive territory to merely restrictive positioning.”

“We believe the Committee can still start cutting the policy rate by 25 basis points at its September meeting, with a desire to get one more cut done this year, but inflation readings from here need to be supportive of this,” he added.

Similarly, Citigroup, long above consensus on Wall Street as the firm continued to expect aggressive rate cuts, said it now sees the Fed not moving until September but then continuing to cut rates from that point.

“The jobs report does not change our view that hiring demand, and the broader economy, is slowing and that this will ultimately provoke the Fed to react with a series of cuts beginning in the next few months,” Citigroup economist Andrew Hollenhorst wrote.

I tend to agree, despite another solid jobs report, the US economy is slowing, increasing the odds the Fed cuts rates in September and continues after the elections.

Still, the jobs report is strong enough for the Fed to hold off cutting rates next week, thus not following the Bank of Canada and ECB which both cut 25 basis points earlier this week.

This was confirmed by the bond market's reaction after the release of the payroll numbers:

The yield on the 10-year Treasury surged Friday as investors assessed a strong nonfarm payrolls number for May that fueled concerns that the Federal Reserve may not cut rates as soon as expected.

The yield on the 10-year Treasury jumped nearly 15 basis points to 4.43%. The 2-year Treasury yield rose about 17 basis points to 4.885. Yields and prices have an inverted relationship. One basis point equals 0.01%.


Nonfarm payrolls rose by 272,000 in May, up from 175,000 in April. That also surpassed a Dow Jones consensus estimate for 190,000. The unemployment rate, however, ticked up to 4% for the first time since January 2022.

The data comes after ADP’s private payrolls report showed that companies added 152,000 jobs in May, below the 175,000 estimate.

Many investors had hoped that Friday’s data would indicate that the labor market and economy are slowing, convincing the Fed to consider easing monetary policy and cutting interest rates.

The Fed is due to meet next week, but is widely expected to keep rates unchanged then as well as at their July meeting. CME Group’s FedWatch Tool showed that traders are pricing in a 68% chance for a rate cut for September.

The European Central Bank on Thursday moved to cut interest rates for the first time since 2019, even as inflationary pressures linger. Questions remain about whether there will be additional cuts this year, and if so, how many.

Higher bond yields are not good for risk assets but stocks scaled back their earlier losses to close down but still eked out a gain for the week.

It's important to note that when the Fed actually starts cutting rates, that will spell even bigger trouble for stocks as the US economy will be in a recession by then.

Alright, what else happened today?

GameStop (GME) stock sank nearly 40% Friday in highly volatile trading as GameStop filed to sell millions of shares — and more than half a million viewers tuned in for a much anticipated YouTube livestream from "Roaring Kitty," an alias used by bullish retail investor Keith Gill:

The event marked Gill's first live appearance on the channel since the investor helped ignite a meme stock rally in 2021 via his bullish videos and posts about the video game retailer.

The stream kicked off with a video clip of kittens playing interspersed with shots of Gill. He then appeared in front of a screenshot of a Yahoo Finance stock page for GameStop.

 


"It becomes a bet on the management. In particular, of course, Ryan, f***ng Cohen. Ryan Cohen and his crew. That's what folks should be focused on," Gill said.

He added, "I see enough where I believe this guy may be able to do it." He noted that "nothing on this stream is advice."

Gill also said that the screenshots of GameStop holdings posted earlier this week on social media are his.

"The accounts showing my positions are mine. These are my positions. I'm not working with anybody else. I'm not working with hedge funds," he said.

I had to laugh at that last part because I've always said it going back to 2021, this meme stock mania has nothing to do with Roaring Kitty and an "army of retail traders," it's all part of large quant hedge funds pumping and dumping trash meme stocks and using this doofus as a front person.

Just remember, no matter what he states publicly, behind Roaring Kitty there are Roaring Lions calling the shots.

The fact that the SEC and other US regulators have not probed the activity in GameStop shares to see which funds are actually pumping and dumping this and other meme stocks is astounding.

Then again, it took Harry Markopolos 20 years to convince the SEC that Madoff was a giant Ponzi scheme.

It's all a farce, just remember this, there is no way that Roaring Kitty and retail traders are behind this meme stock frenzy which still persists three years later.

I would highly advise you ignore Roaring Kitty and even the hoopla of a roaring US economy.

Buckle up this summer and especially this fall.

Below, CNBC's Rick Santelli joins 'Squawk Box' to break down the May jobs report.

Also, Former Federal Reserve Vice Chairman Roger Ferguson joins 'Squawk Box' to react to the May jobs report, impact on the Fed's rate decision, state of the economy, and more.

Third, CNBC reports on Keith Gill, known online as Roaring Kitty, streams live on YouTube for the first time in nearly four years, discussing his massive bet on the brick-and-mortar video game retailer GameStop.

Lastly, take the time to watch Roaring Kitty's live webcast from earlier today. 

I watched 5 to 10 minutes towards the end and it only confirmed my belief that he's not particularly bright and there is no way in hell he and his retail army are behind any of the meme stock pumping and dumping.

And the fact that he officially stated he's working alone and not with hedge funds should raise even more suspicion. Official deniability typically means culpability and suggests something is up.

Enjoy your weekend my little kitties! :))

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