Things you need to know
- Earnings steal the spotlight – GOOG announces a 20/1 split
- PYPL misses and forecast is weak – stock down 16%
- Every report this morning (so far) has beaten the estimates
- FED’s Bullard telling us that 5 hikes ‘is a good bet’
- OPEC meeting today and oil is higher again…
- Try the Pan Roasted Salmon w/Lemon Herb Butter
Stocks finished the day higher after chopping around most of the day. Investors focused completely on the slew of earnings that crushed estimates and were delivered prior to the opening sending these names higher…. UPS +14%, XOM +6.5%, SWK 0.8%, SIRI +6.3%, PHM +1%, and BEN +0.5%. – setting the tone for the morning – yet the broader market continued to chop for much of the day….in fact – the broader market traded around the flat line until 3 pm….and then suddenly the focus turned to the earnings due out post the close…. Investors preparing for reports from AMD, GOOG, GM, PYPL, and GILD…and this caused the algo’s and investors to go all in – sending stocks higher in the final hour of trade. By the end of the day – the Dow added 275 pts or 0.8%, the S&P’s up 31 pts or 0.7%, Nasdaq up 106 pts or 0.8%, the Russell adding 23 pts or 1.1% and the Transports gaining 240 pts or 2.1%. The 10 yr. treasury which ended the day yielding 1.78% – which was down from 1.8% also helped the feel-good mood.
In the last 4 days- both the Nasdaq and Russell have taken back nearly 8% of the losses suffered in January while the Transports have regained 6% of their January losses as the tone has changed, if even temporarily. Both the Value trade SPYV – and the Growth trade – SPYG gained 0.8%.
The Direxion 3X bull ETF – SPXL gaining 20% in the last 4 days (after getting clobbered in January – falling 33%), while the 3X bear ETF – SPXS has fallen 18% in the last 4 days after rising 33% in January – during all of the turmoil. (Note – these are not long-term investment vehicles at all – they are meant to be strategic and retail investors need to understand the risks associated with such leveraged vehicles – the 3X should be the clue – while it is exciting, the knife cuts both ways)
As expected GOOG completely blew the roof off the house……. I mean – why is anyone surprised? 4th qtr. revenues of $75.3 billion, up 32% y/y, profits up 33% and a surprise announcement…..GOOG which trades at $2750/sh – making it out of reach for many retail investors announced that they are splitting the stock 20 for 1 in July which will bring its stock price down to about $140/sh give or take…because a lot can happen between now and then. In any event – it was well received, and the stock traded up 10% in the mins after the announcement…. after ending the day essentially flat taking that stock right back to where it was on January 1st – before all of the angst that sent the stock down 14% during the month.
Expect this to be the talk of the day as the business channels focus on the massive stock split and what that means for investors. Speculation running rampant this morning that they did this to ‘win’ a spot in the legendary Dow Industrial Index – which only means that someone would have to be replaced? Just from an optical perspective – it is very exciting – with many now wondering if AMZN – also a $3k stock is set to make a similar announcement tomorrow when then walk the runway….GM and AMD also beating the estimates while GILD and PYPL missed badly – and investors were quick to reward or punish in the moments after the announcements. GM up 0.9%, AMD up 11%, while GILD fell 4% and PYPL lost 16%. The PYPL report was a stunner – and this morning street analysts at RJ, MS, and BTIG all cut their ratings…. that’s great – after the stock plummets 16%…. Whatever.
Today brings more exciting earnings news – JCI, BSX, EMR, ABBV, ROP, DHI all pre-mkt reports, but much of the excitement will have to wait until the close….FB – now Meta – is due to announce earnings at 4 pm….estimates expect them to announce $3.84/sh – but the whisper number is higher and expect lots of speculation during the day – as many will try to surmise a better number after the GOOG report. Just to be clear – I would not expect Marky Mark to disappoint either and that stock is already quoted up $10 in the pre-mkt. Other names due out post the close include QCOM, MCK, CTVA and MET.
Talk of the FED – has at least for today been banished to the back burner…. Yesterday St Louis’s Jimmy Bullard suggested that 5 hikes during the year would not ‘be a bad bet’ (all 25 bps) – rather than 6 or 7 hikes or moves of 50 bps or more. Now, the big banks are pushing for more, none of the 6 FED officials who have offered up an opinion lately, has shown any signs of supporting that narrative and that too has contributed to the feel-good mood as it has attempted to ease all of the angst. In the end – the longer-term story is still about the FED and the path forward – as detailed yesterday – it is not out the question to see the rally we are seeing – after the beating stocks took in January.
Eco data today includes Mortgage Apps and the ADP employment report – estimates call for an increase of 184k new jobs…..which many think might be a bit high…..Recall that Friday brings us the Non-Farm Payroll (NFP) report that is expected to show an increase of 150k new jobs….but the administration is already preparing for a miss as they try to paint what would be seen as a negative into a positive. In any event, I do not expect this report to really drive the action…because it is what it is…..No matter what this reports shows – the FED is moving, even if the report is weaker than expected – we are too far down this road now for the FED to suddenly pin a pivot on a single data point….it would create more angst and frustration among investors as they are tiring of this narrative not to the mention the complete loss of credibility.
US futures this morning is UP, and this should not be a surprise at all…. after yesterday’s earnings and the ones coming today and tomorrow. Dow futures are 56 pts, the S&P’s up 35, the Nasdaq up 220 pts and the Russell is up 8 pts. The 10 yr. treasury yield is up small this morning at 1.79% as it continues to tease higher.
Oil – which is up 20% this year continues to move higher…. OPEC + is meeting today and is expected to maintain the plan…. which is to raise production by 400k barrels/day…but or friends at Goldman suggest that maybe we could see a change in that plan due to the recent rally in oil prices. This morning – WTI (West Texas Intermediate) is trading at $88.50/barrel ahead of today’s meeting. Supply reports are due out later today from the American Petroleum Institute – and analysts expect them to show an increase of 1.8 million barrels which should put some pressure on prices but do not expect very much…..demand is too strong, momentum is in their favor and as long as the Russia/Ukraine issue continues – prices will remain elevated…and if Vlad moves in and takes Kiev – then expect to see oil prices spike towards $100/barrel. If he doesn’t – then you might see some relief – but that is sure to be short-lived.
Energy – XLE continues to stun investors – up 3.5% yesterday taking that ETF up 22% ytd…. on top of the 50% it was up in 2021. Financials – XLF were also up 1.4% leaving only those two sectors positive on the year…. Every other sector is in negative territory, but it is early in the game……and if the FED can manage the process, then maybe stocks will adjust – in the second half of the year.
European markets are all up. Monetary policy decisions are due out from the BoE and the ECB tomorrow and that will help shape investor reactions this week. Earnings will continue to drive the individual action while the Russia/Ukraine situation will continue to drive the geo-political conversation.
Bitcoin is trading at $38,500 and Ethereum at $2,750 – churning in place.
The S&P closed at 4546 – after trading as high as 4550 and as low as 4483. It has now taken back the longer-term resistance at 4438 and is now kissing intermediate term resistance at 4567…. a push up and thru that level will give it enough momentum to take back its final resistance level at 4630…. all which could happen in the next few weeks. But let’s not forget that investors still have to deal with the rising rate environment – which in itself if not a bad thing – stocks can do well when rates rise – if they are rising due to a stronger economy vs. rising to attack out of control inflation……and that is the issue…. why are rates rising? The answer you arrive at will then drive your investment decisions…. for me- they are rising to combat inflation which is why I am still playing it safe…. Until I get clarity that inflation is not the problem, I view it to be I would be a buyer on weakness and a holder on strength. I am not a seller in my long-term portfolio. I am still in the camp that we 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
Pan Roasted Salmon w/Lemon Herb Butter
You need: Salmon, s&p, or your favorite seasoning, olive oil, herb butter (see directions below), wild rice, spinach.
Make the lemon herb butter – see below*.
Cook the wild rice according to directions
For the salmon – take out of fridge – rinse and allow to come to room temperature.
Brush with olive oil on both sides – season liberally with s&p or your favorite salmon seasoning. In a sauté pan – heat up 1 tbls of olive oil and place the filet – skin side down – turn heat to med/med low and let cook for about 6 min….now turn over and let cook for another 3 mins – A general rule of thumb is that it should cook for 8 mins per inch of thickness – but ultimately – you know how you like your salmon. In a separate pan – steam some fresh spinach and drain. Add a bit of your herb butter to the spinach. Once cooked -make a bed of spinach on a warmed plate, place the salmon on top of the spinach and add a dollop of you herb lemon butter on the salmon. Add some of the wild rice and serve immediately. A glass of chilled white wine and you are done.
*Herb Butters and the many ways to use them –
Any herb can be used to make an herb butter…but you will get better results with bolder flavors. As Simon and Garfunkel said – Parsley, Sage, Rosemary and Thyme are always great…. In fact, any seasoning you use for steak, chicken or fish can be incorporated into a seasoned butter for use in and on your meal. The best part is – once you make it – you can refrigerate/freeze to use later on. Start with a stick of room temperature butter – Do not melt the butter as this will serve to cook the butter and you do not want that.
Next select your herbs – so for today’s dish we will use: lemon zest, dill, thyme & garlic….chop the herbs up finely…..Remember – use only the zest of the lemon….now with a spatula – start to mix the butter and add the herbs slowly….do not over add as this will cause the butter to lose its texture…..When complete – leave the herb butter out (covered) so that the herbs infuse the butter while awaiting the meal.
If not using right away – then form a butter log and wrap in wax paper and refrigerate to use later. Remember – you can use flavored butters on a variety of dishes to augment the depth and tone of the dish – use on veggies, rice, meats, fish, chicken…whatever your pleasure and be bold – experiment with different herbs to create a butter of your choice…
Buon Appetito.
