Things you need to know
- Stocks ended the week strong but are churning this morning
- Oil rallies back towards $110/barrel, Gasoline making new highs
- Vlad continues to push while Ukraine pushes back – There is no peace yet
- Try the Pork Chop Pizzaiola
Good Monday morning…. Stocks ended last week with strong gains…. notching their best week since November of 2020! This as Putin continues to push into Ukraine, Oil moved higher again after a swift pullback, food commodities – wheat, corn and soybeans also moved higher, 10 yr. treasuries ended the week yielding 2.15%, 30 yr. treasuries yielding 2.42%. Gold fell 1.14% to end the week at $1,926/oz – down from $2,050 – 2 weeks ago, but still up from the early February levels of $1,800/oz.
At the closing bell yesterday, the Dow added another 275 pts or 0.8%, the S&P up 52 pts or 1.2%, The Nasdaq up 280 pts or 2%, the Russell up 21 pts or 1% while the Transports gave up 86 pts or 0.5%.
The enthusiasm for stocks – after weeks of declines is due to the ‘solid fundamentals’ that many analysts continue to push saying that these very fundamentals will allow US companies to deliver strong profits even in the face of rising costs. These same analysts saying that the strong labor market will keep consumers spending like drunken sailors. Look – last week Jay made it clear that the economy is on solid footing which is why he is comfortable now with starting to tighten without putting the US into a recession……and that is what I and many others are challenging….
Fed Fund rats are now between 0.25% – 0.5%…. the 10 yr. treasury is yielding 2.4% and inflation is running at 10% at the producer level and 7.9% at the consumer level. This suggests that the FED is WAY behind the eight ball and needs to get more aggressive if they are serious about tamping it down, considering they missed the signs on the way up – or maybe they didn’t – Maybe this is what Jay and members of the FED wanted to see happen…..and while that is difficult to understand, it is an interesting thought considering so many of us saw the signs of brewing inflation in the spring/summer of 2021. At this point – it doesn’t’ make a difference – we are here, and it is what it is, and rates are expected to increase by another 1.5% before year end…. which still leaves us well below where we should be.
Of the 11 S&P sectors – Consumer Discretionary – XLY led the way higher gaining 2.1%, followed by Tech – XLK gaining 2% and Communications – XLC up 1.3%…. Note that these 3 sectors have been the biggest losers this year….and so that is where bargain hunters will look for ‘value’. Makes perfect sense. And that caused the growth trade – SPYG to rally by 1.3% leaving it still down 11% ytd while the value trade – SPYV only gained 0.3% leaving it down 1.3% ytd.
The weekend didn’t bring any new news concerning ‘peace talks’ at all…. while Turkey appears to be taking the lead – Vlad has made it clear that he has no interest in having any discussions until Kvyv, Mariupol and other key cities surrender. And at the moment – that does not appear to be the case…. the Ukrainians are a tough crowd, and they are not going down without a real fight…. Vlad thought this would be over in one week – we are now entering our 4th week of constant bombardment and there are no signs of surrender, no white flags. Over the weekend – Ukraine President Zelensky warned that if Peace Talks failed – it would mean the start of WWIII.
The sanctions imposed on Moscow by the civilized world are putting pressure on Vlad, yet he continues to thumb his nose at the world ready at any moment to ‘ramp it up’, which is keeping NATO in check. The Sunday talk shows dissecting the latest moves detailing how he is trying to take control of the whole southern region from Odessa to Mariupol – effectively cutting Ukraine off of the Black Sea and giving Russia complete control of the port cities.
On Friday morning – Joey had a zoom call with Xi Xi -warning him of standing back and not supporting Vlad during this war…. saying that China risks ‘normal’ relations with the US if Beijing provides ‘substantive’ assistance to Moscow. During the call – he laid out the unified allied response, the range of economic sanctions imposed on Russia and the oligarch’s, the withdrawal of foreign business and the global condemnation of this invasion – suggesting that the same could come true for China if they supported Russia in this war. Xi Xi making it clear that this crisis is ‘something we don’t want to see’ and that ‘conflict and confrontation are not in the interests of anyone’ but that China would respond in kind to any punishment that any country attempted to impose upon them. Joey went onto say that Beijing does have a responsibility to use its influence to help end this war while Xi Xi remains steadfast saying that China remains a neutral party and can and would facilitate ‘peace’ negotiations to help bring this to an end. While this all sounds good – it isn’t making much headway partly because Xi Xi is talking out of both ends.
This morning Joey is due to have a zoom call with France, Italy, and Germany – this ahead of his trip to Europe later in the week to address the allies about what’s next and what to do.
Eco data on Friday showed that Existing Home Sales fell by 7.2% (vs. the -6.2% estimate) and 30 yr. mortgage rates are now pushing 4.5% for conforming and 5% for jumbo and that is going to cause the ‘red hot’ housing market to stall – and once we get conforming rates at 5% then watch the housing market to begin too ‘correct’…. What that correction is, is still unclear. 10%? 20%? 30%? Watch how quickly prices will correct as the FED raises the funds rate pushing mortgage rates to levels never seen by a whole generation of millennials and Gen Z’ers. – it’s a math problem nothing else….as the cost of money increases the cost of home ownership increases – so in order to correct – home prices will have to come down…. It’s econ 101. Today we will get the Chicago Fed Survey and later in the week – look for New Home Sales – exp to +1.3% and Pending Home Sales which are expected to be up 1%.
US futures are down as the sun rises over the Atlantic…Dow futures down 100 pts, the S&P’s down 7, the Nasdaq lower by 55 pts and the Russell off by 7 pts. Fed Chair Powell and Atlanta’s Fed President Raffi Bostic both due to speak today at different events.
Word that a Boeing 737 has crashed in China hit the tape at 5 am and the stock is quoted down $12 or 6% at $180/sh – expect this to be a topic du jour.
Oil is up 4% or $4.20 at $109/barrel, gasoline in CA hits $8/gallon while gasoline along the east coast is pushing towards $5/gal. This is interesting because 2 weeks ago, oil was trading at $130/barrel yet gasoline in CA was closer to $5/gal and gasoline along the east coast was pushing $4/gal. It’s called ‘momentum’ (something that you’ll also see in upcoming inflation data points). In addition – Over the weekend – A Houthi attack on a Saudi Aramco oil terminal in Yanbu could hamper production and that is helping to send prices higher again. News out of OPEC + (which includes Russia) showed that production is below agreed upon supply quotas and that too is causing prices to rise…..Recall last week I told you that MGS and RBC have both upped their year-end price targets to $150/barrel while our friends at Goldy continue to believe that oil is going to $135/barrel but I would expect them to ramp up their outlook when they need to create chaos and trading revenue.
European markets are flat….…. At 6:00 am…. markets across the region are all trading around the unchanged line…. European Central Bank President – Christine Lagarde is due to speak at the BIS innovation summit tomorrow. BoE Governor Andy Bailey is due to speat at that conference on Wednesday.
Bitcoin is trading at $41,600 while Ethereum is at $2,900.
The S&P closed at 4,463 breaking thru the short term trendline resistance at 4435 – now attempting to pierce long term resistance at 4470. The death cross that happened last week doing little to cause any concerns….and while this recent push higher feels good – I am not convinced that the volatility is over yet.
I remain overweight the value plays, financials, consumer staples and large mega cap Industrials. I am being very selective in the tech space but am finding opportunities in some of the classic tech names. Cybersecurity and Defense/Aerospace are also areas to consider in this environment. In any event – it’s a new week and there is plenty of opportunity.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Pork Chops Pizzaiola
Just like its sister recipe – Steak Pizzaiola or Chicken Pizzaiola – this is a hearty, full bodied dish that can be eaten all by itself enjoyed with a glass of Chianti or vino di tavola (table wine) ….no need to go over the top – it’s all about enjoying the moment –
You will need: Thick cut Pork Chops on the bone – (about 3/4″ thick), Olive oil, Oregano, garlic, onions, red and green bell peppers, can have crushed tomatoes (not puree), some red wine, salt, and pepper…. **crushed red pepper flakes (optional).
In a saucepan – heat olive oil and add crushed/sliced garlic and move it around for a couple of mins until it is nice and golden…. add a sliced white onion and julienned bell peppers – turn heat to medium and cover. When the onions and peppers are soft (about 5 mins) add the crushed tomatoes, oregano and *red pepper flakes. Turn heats up and bring to a quick boil then reduce heat to medium. Add red wine (about 1/2 cup) salt and pepper and let simmer and thicken up…. about 10 / 12 mins.
Next – rub the chops with olive oil, salt, and pepper – do not drown the chops in oil – just enough to massage the chops and prepare them for the skillet. Heat skillet (high) and add chops (if you have a ribbed skillet this works best) You can sear for about 4 mins then turn over and continue cooking for another 4 mins.
Turn heat down to med low – then add the tomato sauce to the skillet – cover and simmer for another 10 mins. This should give you a nice medium chop – If you prefer you can let simmer longer for more well done. When done – remove chops from skillet and arrange on plate. Next – stir the sauce in the skillet pan to deglaze – making sure to scrape the pan for any bits left behind. Spoon sauce over the chops and serve immediately.
Buon Appetito.
