No Follow Thru on Monday – But it’s Turnaround Tuesday – Try the Scampi

Kenny PolcariUncategorized

Employee Spotlight: Katie Dexter

Things you need to know 

I will be in NYC this week attending the Headstrong Project 10th annual benefit galaon Thursday evening – May 19th Recall that the Headstrong Project is the veteran’s organization that my wife and I are intimately involved with.  Click here to see the video created for the 10th anniversary of this amazing organization that details my personal 911 story and why I got involved.

https://vimeo.com/586884329/8d37bfc6a1
Click here

https://getheadstrong.org/

To donate – no matter how small or how big – $10, $20, $100 – whatever makes sense for you.  I would be forever grateful and so would our veterans.  
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Well sports fans….so much for the ‘rally’ (at least on Monday – US futures are pointing much higher this morning…) …. stocks choked…. Nasdaq taking it on the chin – falling 145 pts or 1.2%, the S&P losing 16 pts or 0.4%, the Russell down 9 pts the Transports off by 120 pts or 0.8%.  The Dow was the only one that ended the day in the green – rising 26 pts.

Now – get ready…. because here it comes…. they want you to believe that weakness in US stocks is because of a weak industrial production and consumer spending report out of CHINA!  Come on…. First of all – Ask this questionDo we even believe anything that comes out of China? Answer:   Absolutely not….so you can toss this argument right into the ‘circular file.’  That weak report in China has absolutely nothing to do with yesterday’s action. 

But here are just a couple of thoughts on what it could have been.  First – word that former Fed Chair Ba Ba Ba Benny (and the Jets – you remember him, don’t you?) came out swinging – saying ‘the Fed’s slow response to inflation was a mistake’! What is really funny about this is that his interview came out the day before Benny is set to launch his latest book…

“21st Century Monetary Policy: The Federal Reserve from the Great Inflation to Covid – 19”

Official release is today – Tuesday May 17th.   Isn’t that just a bit curious?
And here we go again…. He went onto say that one of the reasons was because they didn’t want to ‘shock the markets’

Reminding us that JJ was at the FED during the May 2013 Taper Tantrumwhich was a very ‘unpleasant experience’ (the S&P fell 7.5% between May 22nd and June 24th)  – so instead – JJ wanted to avoid that same reaction by playing ‘therapist’ and having you come and lie down on the couch, offer you a Xanax or Valium, ask you if you were ‘OK’, hold your hand, ask if you needed more time to process the idea of the FED moving to manage policy? They didn’t even move yet – it was just the idea that they were ‘thinking about thinking about moving it’ Remember that?    Well- how’s THAT working out…. because JJ and his band of merry men – wanted to be so ‘sensitive’ to everyone’s feelings they have created a situation that is now on the verge of making the Temper Tantrum of 2013 – look like a pimple on his (fill in the blank). 

The Nasdaq is down 26%, the Russell is down 21%, the S&P off 16%, the Transports off 13% and the Dow off 11%…. all because JJ wanted to play nice in the sandbox….

And then if that wasn’t enough – they resurrected former GS CEO Lloyd Blankfein – took him out of whatever cave he has been living in and put him on TV on Sunday morning appearing on Face the Nation with Margaret Brennan.  He told her that we are headed for a recession….we had too much growth and too much stimulus…..too much fiscal spending  – blah blah blah…you can find that interview here :
https://www.youtube.com/watch?v=e-4LIDCJwRs

(On a side note – doesn’t he sound like Mickey Mouse when he speaks?  I can’t get it out of my head – I laugh every time I hear him speak.)

And then – at 8:30 – we got an extremely weak Empire State Manufacturing report which surprised even the most negative economists….the street was prepared for a 15 read – which was already down from last months’ 24.6 and it came it at a stunning negative 11.6! – a 35 pt. swing from just one month ago……and those headlines,  my friends, might explain why American investors may not have charged ahead building on Friday’s gains.

10 Yr. US Treasury’s yields traded in a 2.86% – 2.93% range all day to end the day at 2.88%.  This morning the 10 yr. is yielding 2.91%….as money is set to move out of this space and back into stocks – at least for today.

The VIX – fell 4.8% as fear subsided……we are now well below 30 and with the action around the world this morning- expect the VIX to continue to move lower….at 5:50 am – the VIX is already down another 3.5% at $26.62 and if the early bullish tone remains – then look for the VIX to test the May 4th low at $24.94.

Stocks around the world are all higher…. – Hong Kong closed +3.4%, Europe – all markets are up 1.5% and now US futures are pointing higher  – Dow futures up 520 pts, the S&P up 80 pts, the Nasdaq up 280 pts and the Russell up 40 pts….

Nothing has changed other than the day….Inflation is still running at 10% at the producer level, 8.5% at the consumer level, 1st Qtr. GDP is still negative,  the FED remains confused while rates are expected to continue to rise swiftly, the war in Ukraine continues as Finland and Sweden now move to join NATO, China is only beginning to roll back major lockdowns across their biggest cities, the supply chain is still backed up and now Lonnie Musk is challenging Twitter CEO Parag Agrawal to prove that less than 5% of twitter accounts are fake or risk ‘no deal’ (or a deal for much less than the $54.20 bid he put forth two weeks ago).

Eco data today is all about Advanced Retail Sales – and the expectation is for an increase of 1% while Sales ex autos and gas is expected to be up 0.7%.  In addition – Industrial Production is expected to be up 0.5%, and Capacity Util of 78.6%…. recall that the closer we get to 80%, the more inflation heats up…. that’s just the way the data point works.  So, a decrease in this number – even small – will be a rallying cry for the FED and the administration to tell us – ‘it’s transitory’ all over again. It’s exhausting.

While we wait for the macro data we will get some big retail earnings – HD (crushed it) and is trading up 1.5% in the pre-mkt and WMT (about to crush it) …. So, sit tight – more to come.  Other retail earnings later in the week include TJX, TGT, LOW and KSS.  I expect they will all do well…. Low price retailers in a high inflationary environment…. vs. the high price retailers in a high inflationary environment.  It’s the Consumer Staple story – XLP +0.25% ytd vs. the Consumer Discretionary story – XLY – 27% ytd…. Capisce?

Oil prices surged yesterday…. up and thru where?  $113/barrel.   Here is what I said in yesterday’s note

“Oil rose 4% on Friday to end the day at $110.16…. Hello? What have I been telling you…? I think right now the range is $100/$113…. a breakout at $113 will take oil back to test the March highs of $120.”

And this morning that breakout has sent oil up again…trading at $115.36 / barrel on its way to $120…. What was the news yesterday and today…? Oh, right – demand in China!  Analysts see significant demand recovery once the covid pandemic begins to recede…. along with a ban on Russian oil and the idea that OPEC can’t replace it….and BOOM…. here we go. Rising oil prices is causing gasoline prices to rise making new daily highs and that is not helping the ‘cooling inflation’ story…. Is that a story or is that fake news?

If futures action turns into a solid rally once the bell rings, then look for weakest sectors that we have been discussing all year to be the best performers….

Tech, Communications, Consumer Discretionary, Retail, Financials, Industrials, Real Estate, ARKK (Disruptive Tech), SOXX and SMH, Cybersecurity names – CIBR, Artificial Intelligence etc.…. there are many more groups we could name.
And the outperformers to continue to outperform.

But this isn’t over yet…. The question remains…. Just how deep could the recession get? And that is going to become the next driving force for the markets –

I still don’t think the lows are in at all and that we could (will) re-test somewhere in the 4200 – 4220 range (that is the down trending trend line).

In the end investors need to prepare for more turbulence ahead…because stocks will continue to thrash around until valuations get even more attractive.  The risk to the downside is still very real.
Take Good Care

Chief Market Strategist
kpolcari@slatestone.com

Shrimp Scampi

This takes all of 12 mins to prepare and serve….an easy dish that appears harder than it is…. This dish should cost you about $30 to feed a family of 4.

 You need only a couple of things….1 lb. of large cleaned, deveined shrimp, butter, olive oil, garlic, lemon, white wine, chopped parsley, s&p, toasted breadcrumbs, and a lb. of linguine.

Bring a pot of salted water to a rolling boil and add linguine…. cook for about 8 mins or until aldente….

In a sauté pan – melt butter and add a splash of olive oil, add crushed/sliced garlic……and sauté…. keep heat on med so that you do not burn the butter or garlic…. next add shrimp, s&p, and sauté quickly until nice and pink on both sides…no more than 5 mins……

Now add the juice of one lemon, complement with some white wine…about 1/4 cup…in pan – and a wine glass full for you – turn heat up to high…. and let the alcohol burn off.  Reduce to simmer.

Strain pasta – reserving a mugful of water – add pasta to sauté pan – mix and serve…. You may need to add back a bit of the pasta water to keep moist -as the pasta sucks up the juice….  Serve in warmed bowls, top with some toasted breadcrumbs and fresh grated cheese.

Buon Appetito.