Things you need to know
- AMZN saves the day…traders and algo’s take it up 13% after a blowout earnings report.
- Oil – trades as high as $93.15/barrel before settling down
- 10 Yr Treasury yields pierce 1.93% sending shivers thru the mkts
- BAC reiterates its call for 7 rate hikes in 2022
- Crypto’s raising their heads (again)
- Try the Grilled Rib-Eye w/Gorgonzola Cream Sauce
Stocks put in a mixed performance on Friday…. acting erratically as investors searched for clarity……sending stocks lower, then higher, then lower, then higher again. 10 Yr. Treasuries contributing to the angst by rising as high as 1.93% – up from Thursday’s close of 1.83%…. before closing at a 1.9% yield. AMZN – which was up 13% – reported blowout numbers on Thursday evening helping to settle the mood in the ‘FAANG’s after the disaster known as META (FB) destroyed billions of dollars of wealth the day before. By the end of the day the Dow lost 20 pts, the S&P gained 23 pts, the Nasdaq advanced by 220 pts (you can thank AMZN), the Russell added 11 pts and the Transports lost 255 pts.
On a side note – there was all kinds of commentary and fascination on Friday about the 13% gain in AMZN as if that was surprising……Look – the FB disaster took the tech names down big on Thursday – in the ‘sympathy’ trade…AMZN losing 8% of its value for NO reason other than it is one of the FAANGS…..and when they reported on Thursday evening – it was clear that they don’t have the same issues as FB does (in fact they have NONE of those issues) – so the ridiculousness of the sellers was met with a strong buy reaction – which took back the lost 8% and added another 5%….and that is what makes sense, because had they not beaten AMZN up on Thursday, it would not have rallied 13% on Friday….Capisce? All investors did was correct the mistake made on Thursday…. And the funniest part of all of it – is that the algo”s that were tripping over each other to sell it on Thursday, were tripping over each other to buy it back on Friday.
OIL also adding to the excitement continues to push up…. rose by 3% or $2.88 – to trade as high as $93.15 before settling up 1.8% or $1.65 at $91.92. And this caused investors to thrash around as they consider the inflationary pressures this continues to create. Just wait until it trades at $100/barrel…. which at this point is only days away?
At 8:30 am – we got the all-important Non-Farm Payroll report – and it stunned investors and the markets……The gov’t reported a 467K INCREASE in new jobs created (recall that same gov’t told us on Monday that we should prepare for a disappointing report due to omicron) Now, I would define it as previous jobs lost (vs. New Jobs Created) due to covid shutdown that are now being reborn – because we are still about 3.5 million jobs below where we were prior to the loss of 9.4 million jobs in 2020 when the gov’t shut us down – as the economy weathers the storm……
Employers hiring at a ‘record pace’ even as omicron cases surged. – And that is a good thing…The unemployment rate rose to 4% and the Labor Participation Rate rose to 62.2 up from 61.9 – which is also a positive as it suggests that more people are actually looking for work… – this rate though, remains below where it was pre-pandemic. Wages rose by 5.7% y/y – significantly above last month’s rate of 4.9%…again suggesting that inflationary pressures continue to push wages higher in what is known as Wage/Price Spiral Inflation – an issue I brought up months ago….and an issue I was told wasn’t happening – that 2022 was not 1979-1982 – when the US last experienced an out of control wage/price spiral inflationary environment….Well, boys and girls – think again…because it is happening and inflationary momentum continues to gain speed and we will get more clarity on that this week.
Wednesday brings up the January CPI (Consumer Price Index) report and it is expected to be up 0.4% m/m, up 0.5% ex food and energy m/m, up 7.3% y/y and up 5.9% ex food and energy y/y – all numbers higher than they were in December. And then on the 15th we will get the PPI report – which is the Producer Price Index – which details the prices that producers have to pay to produce products and THAT report has the potential to register a 10% increase y/y…..a number we haven’t seen in years…..And those price increases usually get passed onto the consumer with a 2 – 3 month lag….so if you think the inflation rate is going down anytime soon, think again…..even if it starts to slow or level off – it is not happening until sometime in the fall…..and I wouldn’t be surprised if it continued into next winter.
And THAT is the issue behind what the FED must do at the March meeting and possibly even before (which no one is also NOT talking about). Just to be clear, the FED can move (either way) even in a month when there is no meeting…if they deem it necessary to control whatever it is they are trying to control. So, while everyone expects a March announcement of a 25-bps increase – we could get a February announcement of 25 bps plus a March announcement of 25 bps OR we could get no February announcement and a March announcement of 50 bps…. which is becoming more and more likely…. which is why this week’s CPI and next week’s PPI reports become even more significant.
We are now in the final throes of earnings season. And this week brings us some very popular names…. TYSON, TAKE 2 INTERACTIVE, PFIZER, DUPONT, CHIPOTLE, CVS, PEPSI, DISNEY, MATTEL, COCA-COLA, TWITTER, CLOUDFARE, UNDER ARMOUR, CLEVELAND CLIFFS and GOODYEAR.
Over the weekend – BAC comes out – doubling down on their very aggressive call for the FED…. calling for 7 rate hikes this year…saying that the FED is so far behind the 8 ball that they can’t catch up with 4 or 5 – 25 bps rate hikes. And while anything is possible – what they are saying is that the FED needs to move by 1.75%….so the question is how do we get there? 7 – 25 bps moves, or some combination of 2- 50 bps moves and 3 – 25 bps moves…. etc.…FED Fund futs are now pricing in 6 rate hikes. You get the picture, right? And that is what will keep markets and investors on edge. The other thing is how – as I keep saying – the FED has lost control of the conversation…they are letting the big banks drive it, they are letting the big banks set the tone…and that is the mistake. Jay Powell needs to take back control and tell the markets what to expect rather than letting the big banks drive the conversation – OR is he encouraging the banks to jawbone the markets and do the dirty work for him? It is a tangled web we weave…..
This morning Dow futures are down 75 pts, S&Ps off 8, Nasdaq is down 20 pts, and the Russell is down 14 pts. European markets have been all over the place….and at 5:30 are mostly lower. There is no economic data out today to drive the action- so the focus is on speculation over the coming CPI and PPI report and what they say about the next move.
The 10 Yr. treasury is holding tight at 1.9%, Oil is trading $91/barrel and the dollar index is bouncing off support at $95.21. Gold continues to churn here at $1811/oz.
Bitcoin has lifted its head and is now trading at $42,500 while Ethereum is trading at $3,100.
The S&P closed at 4500 up 23 pts and remains within the 4440/4550 trading band. The long term trendline – is now at 4445 and remains a KEY level to watch. I still believe that we have a good shot of testing the January 24th lows…. before this is over and Wednesday’s report could be the fuse that lights that fire.
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Grilled Rib-Eye w/Gorgonzola Cream Sauce
For this you need the Bone in Rib-Eyes, s&p,
For the Gorgonzola cream you need – Dry Vermouth, cream cheese, Gorgonzola Cheese, a “bouquet of thyme & rosemary” and black pepper corns (crushed).
Begin by putting 2 cups of vermouth in a small pot and bring to a boil – add in the bouquet of thyme and rosemary, crushed pepper corns and allow it to reduce by half.
Now turn heat down to med – remove the bouquet and add in 2 tbsp of cream cheese and whisk until smooth. When ready – add in an equal amount of crumbled gorgonzola and mix well – remove from heat and allow the gorgonzola to melt slowly.
Throw the steaks on the grill and cook to perfection (or as you like). When ready – remove the steaks, Slice generously and place on a warmed plate. Drizzle some of the Gorgonzola sauce on top and have plenty more in a bowl on the table. Serve with a large mixed green salad with a balsamic dressing.
**This is also great on a sliced steak sandwich with caramelized onions, on a fresh baguette. Mmmmmm.
Buon Appetito.
