Yellen/Tepper Temper mats; 10 yr drops; Stocks Surge – Try the Pan Seared Sea Bass

Kenny Polcari Uncategorized

Things you need to know.

  • It was a Yellen/Tepper rally – who will speak today?
  • 10 yr yields drop to 1.52% – futures are higher
  • Nasdaq under pressure for a couple of days is seeing big bargain hunting
  • The dollar is up about to kiss trendline…Rates will decide the next move
  • The House sends Covid-19 Relief bill to Biden while 50% of 25 – 35 yr olds intend to use the money to buy stocks….so much for the relief
  • Try the Pan Seared Sea Bass

It was a Janet Yellen / Mark Tepper market rally for the Dow and Russell as Value names exploded higher while the growth names got hammered and the Nasdaq which has been dancing between correction territory and normal territory ended the day solidly back in correction territory after the growth sector got smashed….the Nasdaq falling 310 pts or 2.4% leaving it down 11% from its most recent highs – and the S&P’s which also has a large tech population took it on the chin as well,  closing down 20 pts or 0.54%.  Overnight Sunday – Tech names in China continued to get shellacked falling again bringing the total losses to more than 14% in that market over 14 trading days….and that negative tech tone washed over markets around the world leaving Nasdaq futures solidly in negative territory as the markets prepared to open in America.

Then yesterday morning as the futures were trying to sort themselves out – CNBC brought a Mark Tepper interview to the show…. (Tepper of Appaloosa Management) was bullish on America – saying that ‘the recent sharp rise in rates is LIKELY over and it’s hard to be bearish on stocks’ – and futures turned…from negative to positive…. (Remember – Tepper’s Appaloosa Fund is about $13 billion or so) so his comments do carry some weight for investors….

and then Janet Yellen – Former Fed Chair and now Treasury Secretary – chimed in saying that ‘fears that the administrations $1.9 trillion relief bill could trigger a rapid rise in inflation is MISPLACED’ and that is all the value players needed to hear – because while she is saying that – many don’t necessarily believe that…..(think jawboning) ,.,……Next thing you know – growth names came under pressure again, taking their cue from China  –  so asset managers sold the high growth names and moved into the cyclical, value and recovery trade names…… and that sent the Dow, Russell and Transports higher ending the day up 306 pts, 10 pts and 92 pts respectively.

More good economic news, (surging jobs, steady wages, falling unemployment, rising gas & oil prices – helping to fuel inflation), improving virus news and fantastic vaccination news while all happening are being overshadowed by the interest and inflation rate news…so they need to ‘cancel’  out the inflation/interest rate news and focus on what they can control…..There are now more Americans vaccinated than there were infections and the CDC came out and told us that grandparents who are vaccinated can go and visit grandchildren (who are not vaccinated) as long as they live in the same town and no one has to travel… If you must get on a plane – then that is a deal breaker!

Again the whole interest rate and inflation rate conversation will be the theme in the days, weeks ahead…..because the FED – now in ‘silent mode’ ahead of the March FOMC (Federal Open Mkt Committee) meeting needs to have a voice to ‘jawbone’ the markets into stability and the to do that they need to convince the markets that they ‘have it under control’…..so No Worries, we’re good.  And so, they paraded Davey and Janet yesterday making sure that what they had to say was heard…. So now the question is:  Who is on tap for today and tomorrow? Who will become the next face to soothe the markets?

Surely we will hear from Cathie Wood again – (Cathie as you know is the CEO & CIO of Ark Investment Management with $20 bil under management) and holds significant investments in TSLA 10%, Square 6%, Roku 6%, Teladoc 5%, Baidu 3.4%, Zillow 3.3%, Spotify and Shopify at 3.3%, Zoom 3%…..) – her ETF (ARKK) which was up 221% since January 2020 thru February 2021- is now off a bit…as of yesterday it is down 40% as many of her names are taking it on the chin – TSLA is off 35%, Zoom is off 47%, ZILLOW down 42%,  SQ, SHOP, SPOT  down 30+%, …..but she is a trooper and yesterday and again today (most likely) CNBC will surely parade her around on a range of shows to tell her story and remind investors that she is sticking the plan….and that this recent rout – has only strengthened her resolve – HELLO???  Did you expect that she is going to bail on her very public strategy?  Would she suddenly say that she had it wrong?  I mean it is 6 am and already Joe Kernan is talking ‘Cathie Wood’….and what is she saying?

‘We think that rising rates are scaring investors and that is overblown…. the mkt is broadening out and we are all in…. (essentially)….’

And while I believe that the current surge in rates from 1.3% to 1.6% may have been a bit overblown – I do not think that another surge up in a short time frame would be overblown…because that would suggest that the FED has lost control of interest and inflation rates and THAT will be the undoing…..So – caution is still the name of the game….Now coincidentally – 10 yr. yields are backing off this morning at 1.52% down from last nights 1.59%…..and that is causing US futures to surge….Dow futures are up 200 pts, S&P’s are up 44 pts, the Nasdaq is spiking – up 280 pts while the Russell is ahead by 36 pts….

Ok – let us not get crazy…. there is this thing called a ‘dead cat bounce’ as well….and that happens when stocks or indexes get short term oversold…. they ‘bounce’ and then once that happens – the selling resumes… Now that doesn’t necessarily happen in a day….it might take a couple of days…but once everyone is settled again – and reality sets in and rates spike up from current 1.52% to 1.75% quickly – then watch what happens again…..and I say that because we are about to see about $120 billion worth of debt auctions in the coming days….and these sales will test just how hungry investors are for ‘the safest debt’ available in the world….after last months auctions sent shockwaves throughout the markets….Remember – if it is poorly received – prices will go down forcing yields up and that will raise the alarm bells once again…..

Now remember what I said in my Sunday IGTV commentary from the beach –
(https://www.instagram.com/p/CMIEWzrA2gR/)

“Rates are going up!  We expect them to be 2% by year end and that is ok – markets will adjust without panic because it’s 9 months out, but if we get to 2% in a month – then all bets are off and markets will re-price violently and swiftly…”

And you can bet that the FED and the administration will do everything they can to prevent a spike in rates to avoid what could be an ugly move lower…and to that point expect the talking heads to ‘talk their books’ – suggesting to all of us that we are mis-informed and that the fears of spiking rates – both inflation and interest – are a myth…….So those increased prices in  food, oil, gas, lumber, wheat, soybeans, corn, pork, copper, plastic, concrete, roofing, auto’s, airplane tickets, (pricing predicted to rise by 6% every month thru the summer….so that’s about a 45% increase – because each month is 6% on top of a higher number so it’s not a simple 6×6 calculation)…..whatever!

Eco data – the biggie is tomorrow – the CPI report and the expectation are for +0.4% and ex food and energy of +0.2% m/m and 1.7% and 1.4% y/y….  Recall that two weeks ago we got the PPI number (Producer Price Index) and showed that prices at the producer level rose much faster and stronger than the mkt expected – so expect those higher prices to get passed onto you and me and so tomorrows CPI report will be closely watched.
Look for MSFT to be in the news today after the massive China breach and for cybersecurity names to be in demand – HACK will be a good way to play this…. especially as it has re-priced by 16% from its highs bringing it right to intermediate support… And NVTA (Invitae) Oh – yeah…Cathie likes this name too and she does own 16 million shares of it – and likely buying more today…. Just sayin’

European markets are up… Eurozone GDP fell by 0.7% in the 4th qtr., – worse than expected….and investors there buying into the fact that the 10 yr. yield has dropped to 1.52% this morning. sending US futures higher….and allowing European investors to jump on….and expect to see the Covid Relief bill to pass the house and go onto the Oval Office for Joey’s signature.  At 7 am – the FTSE +0.86%, CAC 40 +0.47%, DAX +0.50%, EUROSTOXX +0.64%, SPAIN +0.75% and ITALY +0.51%.

And oil which backed off a bit yesterday is resuming its momentum and is up 80 cts at $65.84/barrel……as the recovery story continues, and demand remains alive and well….
DXY as predicted – continues to rise trading at 91.998 and is about to kiss the trendline at 92.94…. where I think it will stall…. unless of course we get another spike in rates….and this week’s bond auction may give us some insight….

Bitcoin – is up $2200 at $54,000.

The S&P closed at 3821 after trading in a 70-pt. range yesterday…. Tech weakness causing it to turn lower off the highs and end lower on the day – but it remains in the trading band and has not retreated more than 5% off the highs….as it fights to hold on….  This morning futures are pointing higher and Nasdaq futures are finding lots of buy interest – so expect both of those indexes to surge…. especially now that the 10 yr. has backed off to 1.5%.   Stick close…and watch the stars align….

As always, I would advise you to 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 Sea Bass on a Bed of Sweet Potato Mash

For this you need:   Two sea bass fillets, chorizo, olive oil, S&P, spinach, 2 sweet potatoes, milk (I always use half & half), butter, mustard, and red pepper flakes (optional)
Bring a pot of salted water to a boil.  Peel and cube the sweet potatoes and put them to boil.  Once they are done – strain, add the milk (or cream) half stick of butter, s&p, and a teaspoon of mustard and mash.  (Here is where you would add the red pepper flakes if you were using).   Keep warm in the oven.

Bring fillets to room temperature and rub in a little olive oil and season with S&P.  Set aside.

Heat the frying pan on a med high heat – add a dollop of butter and add diced chorizo, sauté for 2-3 minutes and then remove the chorizo but leave the oil.  Now add the fillets – skin side down and sauté until the skin is crisp – 4-5 mins -,   flip and sauté the fish – flesh side down for another min or so – add back the chorizo to re-heat.

While the fish is sautéing – in a separate frying pan – add a dollop of butter and wilt the spinach.  Season with s&p as desired.

Present as follows:  Spoon the mashed sweet potato onto the plate, top with some spinach and then place the filet on top of that – skin side up.  Spoon the chorizo around the plate and serve.

Pour yourself a nice glass of your favorite chilled white wine….

Buon Appetito.