Things you need to know
- Russia takes the largest nuclear plant in Europe as the fighting continues
- Stocks around the world under pressure as the geo-political situation worsens
- Energy has now been weaponized – the US has the answer…. Wake up!
- Today’s NFP report is a non-event – Jay already told us what is going to happen.
- Try the Halibut with Mushrooms/Leeks & Clams
Stocks sold off a bit yesterday, which is NOT a surprise after the ‘oversized’ move on Wednesday. Investors, traders, analysts, strategists all getting a whack at what Jay said on Wednesday during his testimony on Capitol Hill. And while he appeared to ‘define it or settle it’ the end game is that investors are now realizing that Jay and his team at the FED may have in fact ‘missed the boat’. The idea that inflation was transitory was wrong, the idea that they were ahead of it was wrong, the fact that they left stimulus on the table for longer than they had to is now coming back to bite them on the backside, and the fact that the FED will have to move more aggressively is now their ‘truth’.
Jay’s second day of testimony (yesterday) only confirmed all of that – Jay admitting that the current situation is not what the FED expected but attempting to assure us that there is no need to worry, they got this….with a 25 bps rate increase in March and then more to come…leaving the door open for not one, not two but maybe even 3 ‘aggressive’ moves in the months ahead. Now I say that, because let’s face it – they missed the boat and if inflation continues to spin out of control – the FED will have NO choice but to entertain every possible choice and those choices include being more aggressive.
By the end of the day the Dow lost 100 pts, the S&P off 25, the Nasdaq lost 215, the Russell gave back 27 and the Transports ended the day nearly flat – off 9 pts. The 10 yr. treasury ended the day yielding 1.77%, while the VIX traded as high as 32 before settling in at 30. The commodity complex which includes – precious metals and food along with energy also continues to advance as the Russian/Ukraine situation remains front and center.
Now, on top of the embedded inflationary forces that are now present, the war between Russia and Ukraine will only exacerbate this…. Oil – up 24% since February 25th…. when WTI was trading at $90/barrel and is now trading at $112/barrel. And this affects more than just gasoline at the pump – which now has a $5 handle on it in parts of the country, Portland Oregon serving gasoline up at $6/gal +. Think shipping costs, think airlines, think trucking and transportation….exploding energy prices will be met with rising prices for any and everything across the board to make up for the increase in energy costs….but remember what Joey told us on Tuesday evening during his SOTU speech when he intimated that big US multinationals were taking advantage of the situation – telling business owners to ‘cut their costs’ not their wages. Cut their costs? It’s laughable…. exactly how would you like business owners to ‘cut their costs’ when everything is exploding higher.
Tanker rates are skyrocketing….and the cost of tanker fuel – called ‘bunker fuel’ has soared…… And with 3 – 5% of all tankers now off the market because they are owned by Russia – this only adds fuel to the fire. Western Europe needs to replace Russian oil and how do they do that? They get oil from the US and the Arabian gulf, but the trip to transport is longer and costs more money to get it there, so get ready……. Even higher prices to come, and that is going to add pressure to global central banks to act more aggressively as they all attempt to control inflation in their own countries. Names in the shipping space that have and will continue to potentially benefit include: EURN, TNK and INSW.
OK – now onto today…. Yes, we have the Non-Farm Payroll report due out and while we all expect 415k or so jobs to be created (or replaced) will this report really be the directional driver that it usually is? The answer to that question is a resounding NO. Jay pre-empted this…he told us what will happen at the next FED meeting, so this report while investors will watch it, will not cause new speculation about what the FED is about to do…we know what they will do, he TOLD us. And will the individual data points drive any investment decision today – Doubtful.
And considering what happened overnight in Ukraine – today’s report is a non-event for investors. Reports this morning – detail how the Russians have attacked and taken over Europe’s largest nuclear power plant (located in Ukraine). Bombs dropping at or near the site raising all kinds of concerns about damage to the plant and what that means for another ‘Chernobyl’…. But we are told not to worry, because this site is ‘fortified’, the tortoise shell that covers all 6 reactors is supposedly safe and is impenetrable…which is exactly why we should all be worried……An incident here would make Chernobyl look like a child’s game.
IAEA (Int’l Atomic Energy Agency) telling us that the situation is under control and that there are no leaks…. but this is not helping the tone – it is RISK OFF today. Stocks across Asia ended lower by about 2% and stocks in Europe are now under attack. Markets across the region all down more than 3.5%. Talk of Vlad wanting to take back any region that was ‘formerly’ part of the USSR is now what some geo-political analysts are suggesting is his plan…. Recall that when Vlad took Crimea during the Obama Administration – there was zero fallout, no consequences by any nation…. everyone just sat back leaving Vlad to feel emboldened. And now you want to know why he is going after Ukraine and then the Baltics?
US futures are lower in concert with global markets on the back of the latest headline. Dow futures down 270 pts, the S&P’s down 35, the Nasdaq getting whacked again down 110 pts and the Russell off 25. Treasuries prices are up sending yields down, gold prices are higher in what is the traditional ‘haven’ plays…I would expect this to continue as today’s headlines unfold.
It is Friday – the weekend is coming, lots can happen, do not be surprised to see another ‘Risk Off’ day as trader types hit the sell button to raise cash. Again, fear creates opportunities, buyers are alive and well and will take advantage of the weakness…. You must decide who you are, what your level of risk is and what allows you to sleep at night. This is not the time to make an emotional decision – and while it is uncomfortable, it is what it is for now.
In the end – surging oil and commodity prices along with the geo-political unrest threaten to unleash more volatility in the days ahead and stocks are still in a downward trend. We are just days away from what could be a death cross – that is when the down trending 50 dma pierces the rising 200 dma…. indicating the potential for a bigger sell-off….so keep your eyes focused on the technicals over the next week or so…. the death cross (if it happens) could see the S&P retest the February 24th low of 4,114 before this is over….
Crypto’s are under pressure with the rest of the market – Bitcoin trading at $41,700 while Ethereum is trading at $2,700.
The S&P closed at 4386 – I defined what to watch for. We remain in the 4114/4460 trading range. A failure at 4114 could see the S&P trade to 3850 before finding any support.
Remember – stick to the plan. Call me to discuss.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Halibut w/Mushrooms, Leeks and Clams
This is easy and delicious. It makes you feel like you are on the beach with the sand between your toes… Enjoy
You need if you can get it Pacific Halibut – because the Pacific Ocean is colder year-round vs. the Atlantic and the fish does not fall prey to some of the parasites that exist in warmer waters. Atlantic Halibut is best eaten in the colder months when the water is at its coldest…
Ingredients: Halibut, mushrooms (preferable oyster mushrooms), butter, 3 large leeks, s&p, chicken broth, 2 doz. littleneck clams and chopped Italian parsley.
Season the Halibut with s&p. Set aside.
Start by melting the butter in a sauté pan over med heat – do not burn the butter – add sliced mushrooms – like 2 cups and the sliced leeks. Trim the leeks and use only the white and light green part of the stalk – discard the rest. Season with s&p and reduce heat to med low and cook for about 10 mins or until the leeks are soft. Now add about 3 cups of the chicken broth and raise the heat to med hi – let it come to a boil.
Now add the fish and clams to the sauté pan – wait for it to re-boil and then reduce heat to low and cover. Cook for about 6 or 7 mins…make sure all the clams have opened. If you still have some unopened clams – remove the fish and the opened clams and continue to cook for another 3 mins or so to give the stubborn ones a bit more time. At this point throw out any unopened clams.
Serve this dish in a full-size bowl (shallow is best) bathing in the clams and broth topped with the mushroom and leeks. Sprinkle with the chopped Italian parsley at the end. Enjoy this with a crisp, chilled white wine.
Buon Appetito.
