Things you need to know
- Earnings continue to help support markets
- Dr’s and Analysts now changing their ‘dire’ tune – It’s all good! Masks come off and Stocks rally.
- Big, Boring and Beautiful multi-nationals are in the spotlight (what have I been telling you?)
- 10 yr. Treasury yields back off to 1.9% after kissing 1.96%
- Try the Bucatini in a Sweet Orange Bell Pepper Sauce.
Here is my appearance on Monday on the TDAmeritarde network with Nicole Pettalides https://tdameritradenetwork.com/video/rB4A-H7ZFweBftmUocQAFg
10 yr. rates cuddle up to 1.96% – sending stocks HIGHER! Yes, that was not a typo…stocks rose strongly yesterday…. the Dow adding 372 pts or 1%, the S&P up 38 pts or 0.8%, the Nasdaq adding 180 pts or 1.3%, the Russell – by far the winner – rose 33 pts or 1.6% and the Transports tacked on 168 pts or 1.1%. Oil fell by 1.7% while gold continued to move up…. closing up 0.3% or $5 to end the day at $1828. And the story of the day??? The Feds seized $3.6 billion of Bitcoin that was stolen 5 yrs. ago (as this husband-and-wife team tried to launder it thru the system) …. setting up the conversation about the blockchain and how the Fed’s followed the money….
The rally being credited to the confidence that investors now have in the economy’s ability to grow in the face of rising rates and talk of balance sheet reduction. That confidence now being fed by the same voices that raised all kinds of concerns about how the FED needed to be aggressive, that they needed to reduce the balance sheet and that they needed to do it sooner vs. later. They jawboned the markets lower (and were buying it all the way down) and now they are jawboning the markets higher (selling those same positions on the way up). Which is exactly why you don’t try to time the market – you stick to the plan…. maybe change your allocations at times but stick to the plan.
Suddenly – the move towards 2% in the 10 yr. is not the big bad boogey man that they made it out to be and 3% yields – Don’t be ridiculous! Not happening. Analysts and economists who have been warning of the danger of rising rates – have now down an about face – suggesting that all of the recent chatter about 5 – 7 hikes and bigger percentage points moves is nothing but chatter…..Inflation – while uncomfortable is NOT going to continue to move higher and that the FED has it under control…So there it is – Nothing to worry about – and that coincides with the latest Dr. Fauci narrative…..that the ‘Pandemic is nearing an end’, CNN tells us that it’s time to drop the masks, and states like NY, NJ, IL, CA are all getting ready to drop the mask requirement as well….….suddenly – it’s all good. ‘We protected you and your kids, oh and by the way – the mid-term elections are coming, and we’d appreciate your support’.
Financials – XLF, Consumer Discretionary – XLY, Tech – XLK, Basic Materials – XLB all leading the way higher…. all up about 1.3% – 1.5%. Energy – XLE – which has been on a tear was the biggest loser – shedding 2%. And as I have been saying (and doing) Big, Boring yet beautiful stocks are being eaten up (not beaten up) …. The S&P High Yield Dividend Index – (SPXHDUP) is up 3% ytd vs. the S&P which is down 5% ytd. Names like IBM, MRK, XOM, T, 3M, C, PPL, IP, CVX, JPM, BMY, GIS, NWL, GILD all included in that index. What you’ll notice is that they are ‘Big America’, multinational, NOT sexy, NOT dramatic – just boring big America and that is fine with me and should be fine with you if you are expecting turbulence in the weeks ahead….and it appears that many are.
The Value trade – SPYV rose 0.7% leaving it down 0.7% ytd, while the Growth trade – SPYG was up 1% leaving it down 9% ytd………and that does make some sense considering the beating that growth has taken this year…..so when the market rallies, expect the fast money to go to names that might burst higher in the short-term. Now while the 4 major indexes are still in negative territory – the Dow (which is the epitome of value names) is only down 2% ytd, while the Nasdaq and Russell (think Growth) each remain lower by 9%.
There wasn’t any eco data yesterday to drive the move and there isn’t really much today that is going to make a difference either….But it is tomorrow’s report that everyone is focusing on….and the one that the big boys are trying to defuse…..Calls for the CPI report to show a 7.3% y/y move is the expectation….some expect the report to be more than that – while others are trying to talk investors off the edge….saying that it’s nothing to worry about….the strength of the underlying economy will carry us thru the day….ok…and we are about to find out. The other part to that report is the Real Avg Hourly Earnings y/y…. what will that show? More upward pressure as well? And the after this report is Tuesday’s PPI report – the Producer Price index and that is expected to have a 10 handle on it….so can’t wait to see how they position that report in the context of the inflation argument.
This morning – Dow futures are up another 200 pts, S&P’s up 33, Nasdaq is ahead by 140 pts and the Russell is up 15. Pointing to big gains again…. Earnings continue to top the headlines – but expect this to end soon…as the majority of earnings are out, and we found that 76% of those reports have beaten on the top and bottom lines. Returning to what is considered more ‘normal’. The 10 yr. is down 4 bps yielding 1.91% – adding fuel to this rally – central bankers now telling us that the market ‘may be getting ahead of themselves in pricing out rate hikes for this year’….as the selling in the bond market ‘eases. And as these eases – keep your eyes on the tech sector…. (Hint: that’s where the biggest opportunity is in the short-term for quick gains). Cleveland’s Loretta Mester is due to speak at a conference today – so expect to hear more about her comments and what they may point to in terms of FED Think.
European markets are all higher – for much of the same reasons…. better earnings, and calming concerns over global central bank policies. European bonds are also finding bids and that is sending yields lower on some of the sovereign debt that has also surged higher in the past month. Investors across Europe are also awaiting the US inflation report due out tomorrow. At 6:30 European markets are all up about 1.5%.
This morning – crude oil is trading down 0.5% at $88.90/barrel as it takes a breather.
Russian/Ukraine continues to simmer – news over that has been moved to the back page (for now). Talk of higher energy prices in Europe have also been moved to the end of the line as global leaders work to find a diplomatic solution. My guess is that Vlad is not gonna play nice in the sand box and then that leaves Xi Xi to decide what he is going to do with Taiwan. So, this story continues…. sit tight.
Bitcoin and Ethereum continue to tread water…. trading at 43,500 and $3,100 respectively.
The S&P closed at 4521 – up 38 pts… Now it tested both 4465 on the downside and 4531 on the upside. This morning we are about to test the upper range of the trading band I have been talking about. 4550. My sense is that we will test the intermediate term trendline at 4570 before stalling. Remember – tomorrow’s CPI report is the focus…. will these past couple of days – be the ‘buy the rumor/sell the news’ type of days? We’ll find out in about 28 hrs.
Remember – stick to the plan. Call me to discuss.
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Bucatini in a Sweet Orange Bell Pepper Sauce
For this you need: 1 lb. of Bucatini, Vibrant Orange bell peppers – washed and sliced thin, diced onion, garlic, olive oil, s&p, fresh basil, hot red pepper (optional) and plenty of Pecorino Romano Cheese.
This is simple
Bring a pot of salted water to a rolling boil.
In a large sauté pan – heat up the olive oil, sauté the sliced garlic, now add in the diced onions and sauté until translucent. Now add in the thinly sliced orange peppers and sauté until soft. Season with s&p. When done – run 3/4 of it thru the food processor to blend. Return to sauté pan and set aside.
Cook the pasta al dente – maybe 8 mins… strain and reserve a mugful of water. Toss the pasta into the sauté pan and turn heat to med – mix well – add in some of the pasta water to keep it moist.
Now add the fresh basil – some hot red pepper (opt) and plenty of cheese. Toss and serve.
Buon Appetito
