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An Alternative To Money Market Funds

April 2023

MARKET OVERVIEW
March  is behind us and what a surprisingly strong first quarter it was for the stock market!! The unexpected strong start to the year took place even with the second and third largest bank failures in US history occurring within days of each other last month (Silicon Valley Bank and Signature Bank). As of March 31, The Dow Jones Industrial Average was up 0.38%, The S&P 500 finished the quarter up 7.03% and the Nasdaq finished the first quarter up 16.77%.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 236,000 jobs were added, a touch below the estimate of 240,000 jobs. Note that employment for the prior two months was revised down by 17,000 jobs. The U-3 unemployment rate fell to 3.5%. Meanwhile, the U-6 rate fell slightly to 6.7% last month. The Labor Participation Rate increased slightly to 62.6% while Average Hourly Earnings rose slightly to 4.2% in this month’s report, year over year. The next NFP report arrives on May 5.

FEDERAL RESERVE
The Fed met on March 21-22 and raised the overnight lending rate by a quarter point. Some economists felt the Fed would pause at this meeting due to the collapse of Silicon Valley Bank and Signature Bank earlier in the month. Nevertheless, the Fed continued with another rate increase. The overnight rate moved to a range of 4.75% to 5%. Last Friday's strong jobs report will probably see the Fed raise rates by another quarter point at the next Fed meeting on May 2-3.

STOCKS TO WATCH
Late Friday, there was a report from Dow Jones that Exxon Mobil (XOM) was in talks to acquire Pioneer Natural Resources (PXD). Shares of XOM ended trading last week with a closing price of $115.05 and a market cap of $468.4 billion according to Fidelity’s website. Shares of PXD ended trading last week with a share price of $208.16 and a market cap of $48.9 billion according to Fidelity’s website. Clearly, this would be a big deal for XOM even though no terms have been made public so far. If completed, XOM would become the dominant shale oil & gas producer in the Permian Basin.

Having spent years working in Mergers & Acquisitions in my career on Wall Street and London, I seriously doubt this deal will be completed with the Biden administration in office. There are two reasons for my belief here. First is Lina Khan, Chair of the US Federal Trade Commission.The second is Jonathan Kanter, Assistant Attorney General and Head of the US Antitrust division. Both of these officials are fiercely opposed to large corporate combinations. Couple that with this administration’s push for green energy and one can see why there is little chance this deal would be completed while the Biden administration is in office.

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available here.

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