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Markets Stay Buoyant Amid Bitcoin, Powell

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Today’s market appeared to grapple with sinking Bitcoin prices before tossing the issue aside in favor of the growth trajectory we’d been on during today’s pre-market. This was a muted version of the bullish sentiment we saw in yesterday’s trading, where market participants took the initiative to mostly wipe out the losses suffered Friday of last week.

Melting a bit into the close, the Dow was +0.20% on the day, the S&P 500 +0.51%, the Nasdaq +0.79% and the Russell 2000  +0.43%. Nevertheless, it’s a new record high close for the Nasdaq. Microsoft (MSFT - Free Report) also became the second $2 trillion company by market cap.

Bitcoin had been mounting an heroic comeback this afternoon, bouncing back more than 1000 points higher than yesterday’s close after briefly dipping a toe sub-29K early this afternoon. This was the lowest point seen for Bitcoin since January 1st. Investors seemed to be shrugging off the draconian approach to crypto mining demonstrated in China over the past weekend… but then the crypto skidded as the stock market’s closing bell rang, -0.14% on the day.

Fed Chair Jay Powell’s testimony before a House select sub-committee today gave him the opportunity to solidify the notions brought up in last week’s outlook on monetary policy. Unfortunately, it also gave opportunities to partisan representatives to lambaste their political rivals based on whatever Powell was answering questions about at a given time. Powell’s calm demeanor serves him well in public events like these; however, those looking for a deeper reveal on tapering or interest rates were surely disappointed.

For the most part, the recovery according to Powell rests largely on the labor market, on which he says, “We have a long way to go.” While reps from the GOP were keen to blame Democrats for unemployment benefits to keep from filling still-9 million job openings, Powell instead cited the wide adoption of Covid vaccines being essential to maximum employment. Democrats looking for Powell to sign off on broadband initiatives in its infrastructure bill were met with lukewarm enthusiasm, at best.

In terms of inflation, which the Chair still considers transitory, Powell cited big price increases in things like used automobiles, airline tickets and hotel rooms. “These are not the kinds of things that lead to high inflation over time,” he said. Powell mentioned the supply side of the economy was caught “flat-footed” coming out of the pandemic, and the sharp increase in prices mostly came in those segments of the economy most directly affected by it. By definition, these forms of inflation would be transitory.

If anything, Powell represented himself as clear and focused on the issues, with a methodical approach toward addressing solutions. This stood in vast contrast with elected officials on Capitol Hill, who looked for chances to play politics about the issues rather than press for further clarity from the Fed Chair about his biases for decision-making going forward.

Seasonally adjusted Existing Home Sales for May fell month over month, as expected, but not by as much as anticipated. A total of 5.80 million “used” homes being sold last month marks the fourth-straight month lower, -0.9%.

While demand remains high, the median price for an existing home on the market rose 23.6% year over year to $350,000 — the first time in history prices have breached $350K on average. This has had a pronounced effect on buyers, especially those getting into the market for the first time.

Only the Midwest posted existing home sales gains in May, which points clearly to rising expenses in housing in places like the West and South. Homes for sale fell 20.6% from a year ago to 1.23 million. And with difficulties in the New Homes space, as homebuilders beg off new construction until input costs cool down, existing homeowners don’t seem too excited about putting themselves back into the housing market these days, either.

Hmmm… perhaps Congress should have asked Jay Powell whether he thinks record-high existing home prices were still in the “transitory inflation” column?

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