Things you need to know
- Stocks advanced on better earnings, all while ADP misses BIG
- FB – reports after the bell and gets clobbered – 21% – (the report was not good)
- The negative tone permeating markets this morning…TECH down big
- It is another big day for earnings…some 50 companies reporting…AMZN after the bell…
- Oil – takes a breather after its stunning advance – do not expect it to collapse
- Bitcoin/Ethereum under a bit of pressure…$30k is KEY for Bitcoin and $2k is key for Ethereum
- Try the Pasta Nonna
Stocks extended their recent winning streak yesterday – Earnings during the day continued to provide support for the current narrative that while earnings are slowing from the rapid pace last year, they are not collapsing…..and the estimates that we have been prepared for were not out of line…..With more than 300 companies reported so far – 74% of them have beaten the numbers – now that is down from the +82% of reports last quarter…..but we knew that…this is not a surprise…..
Corporate earnings have been good enough, but will that be good enough to continue to push prices higher as the FED changes monetary policy and the level of interest rates? Most likely not – but that should not be a surprise either. As we make our way through the maze of rising rates, many expect stocks to re-price lower, with bouts of rallies when stocks get short term oversold. Just like we have seen over the past 4 days…. After the January turmoil, February came in like gangbusters, investors suddenly finding value in the same names that they were selling with abandon just days ago- the Nasdaq losing 16% while the Russell gave up 22%. As January ended, we have seen Tech and SMIDS (Russell Small & Mid-Caps) finding so much of the love as investors found big bargains – sending both those indexes up 10% and 7% respectively since January 28th. By the end of the day – the Dow gained 225 pts or 0.6%, the S&P adding 43 pts or 0.9%, the Nasdaq rising 70 pts or 0.5%, the Transports adding 130 pts or 0.8% while the Russell bucked the trend – giving up 22 pts or 1%.
The Eco data yesterday – which was a BIG miss – ADP reported a loss of 300k jobs vs. the expected gain of 150k jobs….and if you go searching for that news – you won’t find any…the WSJ not even featuring a story….nor can you find one on CNBC, or Bloomberg, what you will find is a sentence or two buried deep in other stories. The administration did though, release a story on the first – warning that Friday’s NFP report will be ugly due to omicron – in the story – they lowered the expectations ahead of the report trying to take control of the narrative vs. letting the media spin it. Several officials saying that the week the surveys were taken was the exact height of illnesses post the holidays…. To which I would say, if that is true, then the estimate would reflect that…. how can the estimate be +150k jobs when everyone knows that the survey was taken at the worst possible moment? There is a slight disconnect – but no matter – it is what it is and even if it is weak – do not expect the FED to change their narrative……At this point, they cannot. They can’t suddenly say that this one data point will change narrative – so no matter what the report reveals – the FED is on target to raise rates at the March meeting and that might put some pressure on stocks once again…..Now – they may not raise them 50 bps (the way some have argued) but rates are going higher….period.
Now – all day long, there was all kinds of speculation over what the FB (META) earnings would be – after the surprisingly strong GOOG report the night before….FB traded just around the flat line for most of the day….up a bit, but nothing dramatic and then the bell rang at 4 pm and FB released their earnings…and it was not pretty – at all. They missed on a range of metrics – and before Marky Mark could even attempt to explain it, traders/investors and algo’s smashed it…sending the stock down 22% before you could blink your eye. In the end – there was not a lot to like at all. This morning – the stock is quoted down $60 from last nights close of $323. At 5 am – FB is trading at about $260 – or a 19% decline and this is casting a pall over the tech sector, the other social media names – SNAP – 16%, PINS -7% and Twitter -8% and the broader market this morning.
US futures are lower at 5 am…. the Dow down 120 pts, the S&P off 50, the Nasdaq down 320 pts and the Russell off by 20 pts. There are at least 20 companies reporting prior to the opening bell. PH, LLY, BIIB, CG, HSY, HON, COP, MRK, WRK, BDX, ICE, CI, TW, XYL and then after the markets close, we will hear from another 25……and they include: AMZN, PINS, SWKS, SNAP, BILL, NLOK, ATVI, PRU, F.
Eco data includes Challenger Job Cuts, Initial Jobless Claims of 245k, Cont. Claims of 1.62 mil, Markit US Services PMI of 50.9 (dangerously close to contraction territory – sub-50), ISM Services PMI of 59.5 – a complete disconnect between the two- so it will be interesting to see how this plays out. Factory orders -0.4%, Durable goods of -0.9%. Tomorrow is the all-important NFP report – a report that I think they will dismiss, because of its weakness…they will call it a one off and there is no reason to panic…. the economy is fine, etc.…and the FED is on schedule to raise rates. Keep your eyes on the Unemployment rate – exp to be 3.9% and Avg Hourly Earnings y/y of +5.2% – and if that is true, it is up from 4.7% last month…suggesting further upward pressure on wages… (think Wage/Price spiral inflation – again).
Oil took a break yesterday – falling 0.4% – many pointing to the weak ADP report – ok, go with that – since the commodity has done nothing but advance all year…. up 22% since January 1st. If that is how you want to explain it, then go ahead…Another issue is hat Iran did come out and say that they were ready to come back to the oil market and if that is true, it will bring new supply, which could put some pressure on prices but there was no indication that Iran is anywhere near the goal post. In the end – oil is not retreating at all…. demand is strong and the Russia/Ukraine crisis is still on the back burner.
European markets are all weaker…. Monetary policy decisions are due out from the BoE and the ECB today and that will help shape investor reactions today. Eurozone inflation rose to 5.1% vs. the expected 4.4% decline…and that will put new pressure on Christine Lagarde – Pres of the ECB to do something…. The BoE is also expected to announce a second-rate increase – to combat rising inflation in the UK. Earnings will continue to drive the individual action while the Russia/Ukraine situation will continue to drive the geo-political conversation.
Bitcoin is lower – trading at $36,500 while Ethereum is at $2,600.
The S&P closed at 4589 – piercing its intermediate term resistance trendline….and appearing to want to push higher…. but that is not happening – at least not right now. The FB news will prove to be a bit unsettling for FB, but also for the sexy high growth names….and that will overflow into the broader market today. Investors will be watching the bevy of earnings reports trying to discern the next move. I do not own FB (never have) and am not a seller in my long-term portfolio. I am putting new money to work in Consumer Staples, Financials, and Industrials. I think tech will take a leg lower and that will provide for an opportunity to scoop some up again. I am still in the camp that the S&P must test the lows put in on January 24th….4,222 before this is over, where are you?
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Pasta Nonna
Pasta Nonna – this is a great dish that many restaurants define as your “Sicilian Grandmothers favorite”. It is a typical Sicilian dish and yes – my grandmother used to make it too – although we never called in Pasta Nonna – we just called it Rigatoni with Eggplant. it is comfort food – Simple to make – serve it with your favorite Chianti…
For this you need Garlic, olive oil, Eggplant, Cherry Tomatoes in their juice, s&p, Vidalia onions, and Ricotta Salata. (Ricotta Salata is an unusual cheese. Made from Sheep’s milk – the curds and whey are pressed together and dried before aging – giving this cheese a dense texture with a salty, milky flavor – like feta – but drier – It is not a creamy Ricotta cheese at all).
Bring a large pot of salted water to a boil.
In a large frying pan – heat up some olive oil – add in a couple of sliced cloves of garlic and sauté…now add in two med/lg diced Vidalia onions – continue to sauté until soft and translucent – 10 mins…. Next add in 4 12 oz cans – of cherry tomatoes in juice. Turn heat to med low and let it simmer – next – with the back of a slotted spoon (or with a fork) crush some of the cherry tomatoes so that you get a chunky sauce while keeping some of the tomato’s whole. Season with s&p.
Make a garlic paste – so – in the food processor add 6/8 garlic cloves and some oil – blend well. Add enough oil – you do not want a dry paste – you need to toss the cubed eggplant in it – so it cannot be dry.
Dice the eggplant – leaving the skin on…cut it in half and then cut each half into one” strips and then cut across to make cubes…. add to a large bowl and toss with the garlic paste – let sit for 10 mins.
Now in a separate sauté pan – add a bit more oil and heat up. Now add the eggplant and sauté on med hi heat. Season with s&p. Keep tossing the eggplant until it is cooked. Should take 15 mins or so. Make sure to keep stirring – do not burn. When complete – add to the larger fry pan with the tomatoes. If you need to add a bit water – do so now. Taste for seasoning and adjust if necessary.
Now the pasta – use Rigatoni – this is in the family of Penne Pasta. It is slightly larger and “beefier” – but it screams for a hearty sauce with chunks of meat or veggies etc. In this case we are using “chunks” of sautéed eggplant with Cherry tomatoes. Cook until al dente – 8/10 mins max. Strain the pasta always reserving a mugful of the water – return to the pot – add back ½ the mug of water – stir to re-moisten. Now add directly to the tomatoes and eggplant and allow it to blend for 5 mins or so – keeping the heat on simmer. Serve in warmed bowls with shaved ricotta salata on top
Buon Appetito.
