Markets finished the day in mixed fashion with the Dow higher led by financial and energy stocks while the NASDAQ fell thanks to a pullback in tech stocks. The issues in play are concerns over political actions in China and energy issues in China and Europe possibly affecting global supply chains. Oil prices hit a 5 year high and in the US, interest rates rose with the 10 year treasury hitting 1.48% up from 1.3% last week. At today’s close the Dow was up 71 at 34,869 on heavy volume. IBD lists markets as being in rally mode. Over the course of last week the Dow had a net positive gain of 215 points after a wild ride with a 600 point drop at one point.
The Economy and Earnings
FedEx reported earnings last week which came in lower than expected largely due to labor shortages and rising labor costs. At its delivery hubs, FedEx is short staffed thus package sorting and getting couriers out the door on time is not happening. The labor issues cost FedEx an estimated $800 million last quarter and management said the problem will persist for at least this quarter and perhaps future quarters considering the expected surge in holiday deliveries. FedEx posted a 14% revenue increase and a 10% decline of net income sending shares down 10%.
Cathy “El” Woods at ARK Investment Management recently stated that tech is not in a bubble because what she considers the five most disruptive technologies today are “converging” or coming together to accelerate change. These five areas include DNA sequencing, energy storage, AI, robotics and blockchain technology. She noted that Tesla incorporates three of these five which makes it a viable long term holding. While not everyone agrees with Ms. Woods they do agree that advances in these areas mean that disruption will continue and that investors need to ask themselves which is better: the disruptors, which many feel are overvalued or the underpriced disruptees?
Never mind the chip shortage, let’s talk about the labor shortage. The Puget Sound Business Journal reported that jobs in Seattle are up over 14% while the number of employees is up only 1% over the past year leading to a massive gap in unfilled job openings. Now that rich unemployment benefits are off the table, the reasons behind the lack of labor according to recruiting firms include baby boomers retiring, employees holding out for more pay and a better job, people fearful about getting infected and lack of child care access. How long this problem persists is anyone’s guess but for sure its an “employees” market.
Items of Interest
The Scouts are holding meetings again at an undisclosed outdoor location in an “untented” Ballard park. The meeting had about 40 attendees and began with a flag ceremony and pledge of allegiance followed by uniform inspection then skills. By closing time it was dark and the scout oath, law and outdoor code were recited by the scouts. It was cool as the scouts all shouted the 12 points of the law and words like “trustworthy, loyal, helpful”….echoed through the neighborhood. Our troop’s first female Eagle scout used the closing ceremony as an opportunity to award her mentor pin to an adult which turned out to me! What an honor!