Macro Data is Benign; Stocks Surge – Try the Pan Seared Flank Steaks

Kenny Polcari Uncategorized

Things you need to know.

  • Macro data suggests benign pressures – stocks surge
  • PPI comes tomorrow…will it reflect the same pressure as last month?
  • Debt auctions showed plenty of demand – yields fall – stocks surge.
  • The House passes ‘the most progressive agenda’ to date – Joey about to sign.
  • Dollar weakens, Oil strengthens.
  • Bitcoin trades at $55,500 and Ethereum trades at $1770
  • Try the Pan Seared Flank Steak

Oh boy – I have a headache…..…..it was all the CPI yesterday and as expected the gov’t reported that there ISN’T any inflation….nothing, not here, not there, nowhere….in fact not only is there no inflation – the report showed that the ‘CPI ex food and energy’ was even less than no inflation….which is really comical…….The consensus estimates were for +0.4% composite and +0.2% ex food and energy m/m and 1.7% and 1.4% y/y….Which is essentially no inflation – per the FED…because the target has to have at least a 2 handle on it for the y/y rate to suggest any inflationary pressure and we are nowhere near that…Keep that thought….

Yesterday the actual report showed the m/m composite number was on target at +0.4% but the Ex-food and energy measure came in at +0.1%.  Essentially zero.  So, what this report suggests is that if you take out the most volatile sectors -then guess what?  There is not any inflation…so what is all the fuss about?  Why would anybody even suggest that prices are going up?  Why would anyone be concerned at all?  Apparently – nobody is….

So like I said yesterday – I still think that they are playing ‘I’ve got a secret’! and tomorrow will be another opportunity to prove this point….Tomorrow we will get another read on PPI – Producer Price Index – and if you recall – this was the report that started it all last month… Recall that when the report came out it suggested building inflationary pressures – because producer prices rose much faster than the expectations – in fact – just to be clear the report showed a ‘huge’ increase of 1.3% and 1.2% ex food and energy – that’s right a FULL percentage increase above the expectation….and usually when they say – ‘Oh great – they beat the expectation’! – it’s a good thing…but in this case this was NOT a beat at all – it was a disaster……think about when a company during earnings season expects to report $1.00/sh and then reports earnings of say 20 cts/sh – what would happen?  What would be the result?  How would investors react?  Think hard…you know the answer…….And that is what started all the drama around surging inflation and rising rates….and sent growth stocks into a tailspin.

In any event – it is what it is and yesterday’s CPI report was ‘better than expected’ and investors/traders and algos went ALL in continuing to push prices higher and by the end of the day – the Dow (and all of the value/cyclical names) were the beneficiaries….adding 464 pts or 1.46%, (leaving the Dow closing above 32k for the first time in history),  the S&P up 23 pts or 0.6%, the Russell up 40 pts or 1.8%, the Transports up 83 pts or 0.6% – while the Nasdaq ended the day flat – actually down 5 pts or -0.04% – which should be no surprise considering its outsized move on Tuesday…..

Every sector in the green…Value continues to outperform Growth– on the year value is up 13% while growth is up 3%…. …. Energy again at the top of the hit list – the XLE up 2.5% with Basic Materials ahead by 2.4%, Retail up 1.9%, Industrials up 1.5% – with Utilities up 0.7% and Tech essentially flat.

And then to add to the story – we had the 3’s and 10’s debt auction yesterday and that too surprised the masses – demand was strong for those assets resulting in lower yields…..in fact the 10’s came in at 1.5% – well below what the current 10’s were yielding and that suggested that the recent concerns over rising rates is just another empty concern….and that gave a second shot in the arm to investors causing stocks to continue to trade higher…..and so it goes….there is nothing to worry about – period the end…..

Ok – great…you go with that thought…..I’m still in the cautious camp – which doesn’t I’m out or that I’ve sold everything…not at all…..I’m invested and my portfolio is benefitting….I’m just not chasing now….I’m being patient once again – like I was before the sell off last week – when I took some of the cash on hand and put it to work at prices that are now a distant memory…..I mean why pay $155 for JPM today – when I bought it at $147 last week when it was under pressure?  Or the IWM – Russell 2000…. why would I pay $227 today when I scooped some up at $212 last week?   I will not…. I will sit back and wait again…. Capisce? Patience is a virtue.

Ok – onto today…US futures are up…..the House – as expected – passed the 3rd Covid Relief bill – along party lines….all Dems supported it while Republicans voted against it (no surprise at all) …..we just spent another $1.9 trillion on top of the $900 bill in December and the $2 trillion last year….and Chucky (Schumer) tells us to hold on – we’re on a roll and expect to spend even more by the summer…..estimates suggest a possible $3 trillion fiscal stimulus package….- so add it up – nearly $10 trillion in stimulus since this pandemic hit ….….So I ask – where will the current leadership –  Chucky, or Nancy, or Patty (Leahy), Dicky (Durbin), or Lizzie and Bernie be when the bill comes due?  The average age of this group is 76 yrs. old…. – My bet – none of them will be around when the bill comes due…. not one…. Just sayin’.

Next up – Joey announces that he is buying 100 million more vaccine doses from JNJ and will share any of the surplus with the rest of the world after saying that.

“we’re gonna start off making sure Americans are taken care of first, but then we’re going to try to help the rest of the world”.

And Deutsche bank came out today and confirmed what we have been hearing…. many of the recipients of the ‘relief checks’ are planning on plowing it into the stock market…. So, the questions are – Why are we sending those people checks since they clearly do not need it and then Which stocks will be the beneficiaries?   You have got a bunch of analysts now trying to ring fence the names and then trying to figure out what to call it…. How about the RCBTS – ‘Relief Check Beneficial Trust Stocks’.  I mean – you cannot make this up!

And because yesterday’s data showed no pressure on prices – we have the 10 yr at 1.49% this morning and that is causing US futures to trade up again….at 6 am – Dow futures are up 100 pts, S&P’s up 28 pts, the Nasdaq up 225 pts and the Russell ahead by 15 pts….

Eco data today includes the usual Thursday suspects….Initial jobless claims – exp of 725k, Continuing Claims of 4.2 mil, JOLTS Job Openings of 6.7 mil which would be better than last month’s 6.6 million – this as the Spring Awakening is on the verge of being a Spring Deluge of activity…..and that is good…..With some states now fully open and others beginning to dip their toe in the water, the economy is ripe for an explosion of activity – so hold on because it’s coming….

The VIX (Fear Index) continues to decline…. No surprise.

European markets are mixed…as investors await a press conference by ECB President – Christine Lagarde – where she will lay out the latest interest rate policy and discuss the broader macroeconomic projections.  Recall that she said that the recent rise in bond yields was ‘unwarranted’ and needed to be closely monitored…. There is no eco data to drive the action…. but there are some earnings that will drive specific stock action – At 6:30 am – the FTSE -0.21%, CAC 40 +0.22%, DAX +0.06%, EUROSTOXX +0.38%, SPAIN +0.48% and ITALY +0.82%.

Oil – up 70 cts at $65.15. – Same story…. No change there.

DXY as predicted – rose to resistance and failed….and is heading lower this morning as yields fall currently trading at $91.53…. look for support at the 91.20 level.

Bitcoin – is down $1300 at $55,600 and Ethereum is off $50 at $1765.

The S&P closed at 3898 – after trading in a 32-pt. range….and edging higher….US futures this morning suggest that we will test and pierce yesterday’s high of 3917 – leaving the old high of 3960 ish…well within sight… We remain in the 3770/4040 channel – and if the macro data continues to be benign – then expect the algo’s to continue to push higher in what is once again a ‘momo’ (momentum) environment.

Stick to the plan, trim where necessary and put money to work in some of the underperformers.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you.  You can now get a video version of this note on my IG (Instagram) feed – my handle is Kennyp1961 (https://www.instagram.com/kennyp1961/)
Take Good Care,

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Pan Seared Flank Steak w/Red Wine Shallot Sauce

This is easy to make and will present like you spent hours in preparation.  For this you need:
A Flank Steak, butter, garlic, s&p, Red Wine, Shallots, Balsamic Vinegar (a good thick one) and olive oil.

Begin by melting a stick of butter – now season the steak with s&p, add chopped garlic and massage.  Now pour the melted butter and massage that into the meat as well.  Cover and set aside. (now you can use olive oil – but trust me – the butter is so much better!)

In a small pan – melt more butter (1/2 stick) with some olive oil – so that the butter does not burn.  Now toss in sliced shallots – maybe like 4 shallots in total – sauté for 5 mins or so.  Now add in ¾ cup of red wine (your choice) and 2 tblsp of the nice thick balsamic vinegar.  Bring to a boil and then turn to simmer.  Reduce by half – will only take a couple of min.  Turn off the heat and whisk in one more tblsp of butter.  (Can never have enough butter)

Preheat the oven to 400 degrees.

In a large skillet – add a touch of olive oil and heat up.  When ready – add the flank steak to the pan and sear on both sides – 3 – 4 mins per side.  Now remove and place in a pyrex dish and put it in the oven for 5 – 8 mins (depending on thickness).  Remove and cover – let rest for another 5 mins.  (*now you can use this sauce on any type of steak you like…. grilled rib-eyes, filet etc.)

Prepare you to serve platter with fresh kale – When ready – slice the flank steak across the grain and arrange on the platter with the kale.  Looks good, no?  Now you can spoon the Red wine shallot sauce over it all or you can keep it on the side and let your guests serve themselves. Serve this dish with smashed roasted potatoes and a lg mixed salad.

Buon Appetito.