Things you need to know 

• Markets churn ahead of Friday’s CPI report
• 10 Yr Treasury yields top 3.04%
• UK PM ‘Bojo’ survived a vote of No Confidence – by a whisker
• Oil continues to march higher taking gas along with it.
• Try the Classic Meat Sauce

It was a relatively quiet day on Monday, no eco data, no earnings data, no drama….…stocks opened higher and managed to remain in positive territory all day….at 4 pm the Dow was up 16 pts, the S&P added 12, the Nasdaq gained 48 pts, the Russell rose 6 and the Transports added 110.

The 10 yr. treasury surged up and thru 3%, oil kissed $120/barrel, the FED voting members have gone into hiding – otherwise known as the blackout period – which is the time before the FOMC meeting starts until the time of the (any) announcement all while UK PM Bojo survived a vote of No-Confidence by the hair on his chin.

There was no eco data to present – So, much of the conversation was around last Friday’s NFP (Non-Farm Payroll) report and what IT means vs. this Friday’s CPI (Consumer Price Report) report and what it WILL mean – as many of the street analysts, economists are now speculating about what the FED will do in the coming months…..because to be fair- the FED is set to raise rates by 50 bps next Wednesday – and by 50 in July…..what is unclear is that what happens in September, November and December?  And since Friday is really the only day this week that matters (because of the very important CPI report) I suspect that we will see more churn…. until we get that report. 

Now – I told you yesterday that the official estimates suggest that the CPI will decline – which again makes ZERO sense to me because April’s PPI (Producer Price Index) was higher (again) on top of higher reports for March, February, and January.  And we know that higher prices at the producer level filter their way down to the consumer level over a period of about 6 weeks….So, by that line of thinking – CPI can only go up (as it has for the last 12 months), unless of course someone in the accounting department at the state makes it go down in order to support their story that inflation is ‘peaking’…..LOL (Laugh out loud). I mean – do not tell me that – THAT never happens…. Come on, Man!

In addition we got to start a new chapter in the Lonnie Musk/Twitter drama…..In this chapter Lonnie sent a letter to Chief Legal Officer Vijaya Gadde demanding that they release the necessary information regarding the number of spam/fake accounts on the platform or risk having the deal fail…… – because up until now – they have not provided that information – in fact the letter states that they have ‘refused to provide the data necessary’ for him to facilitate his own analysis.

It goes onto say that –

“This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.”

And that caused some investors/traders to bail – sending the stock down another 5.5% on the opening bell.  Understand that the deal was struck at $54.20/sh (a rich bid for sure) back in April – when the company was trading at $39/share – after the agreement the stock traded up to the low 50’s – suggesting that most of the arb guys were betting that the deal gets done and the time value of money was playing out as it should vs. pushing the stock above the deal price – which would have suggested the price was too low. (Clearly that is NOT the issue).  But the doubts started immediately…. members of congress opining on the legality of it while other started whining about the threats to ‘free speech’ – which is comical because that is exactly why Musk is going after it – in order to maintain ‘free speech’

In the last 6 weeks, the price of TWTR has declined by 30% as details of the deal and concerns were raised – taking it back to the pre-deal levels – $39.56- in a move that now suggests the deal doesn’t get done at the deal price – resulting in a revised bid or suggesting that the deal doesn’t get done at all….resulting in NO bid…..

And to add fuel to the human vs. bot argument is now an investigation being conducted by the Texas Attorney General – Ken Paxton – who is now questioning those same fake accounts – saying that the company falsely reported its ‘fake bot’ accounts in violation of the Texas Deceptive Trade Practices Act.  The investigation notes that ‘Texans rely on TWTR’s public statement that nearly ALL of its users are real people.’ It goes onto say that regular Texans relay on the veracity of its claims but so do Texas businesses and advertisers who are using TWTR for their livelihoods’…  The outcome of this drama is no longer guaranteed, so sit tight, sit back and grab the popcorn because if Ken is right – think of the other states that could make the same argument…..and then think of that drama series that Netflix could create – it would be enough to challenge the very successful ‘Yellowstone’ drama series which is sweeping the nation.

US futures are lower this morning in what looks like another ‘risk off’ day….as investors woke up this morning and decided that the risk remains elevated…. keeping the story alive that one day it is all good and the next – ahhhhh not so much.  At 6 am – Dow futures are down 100 pts, the S&P off by 13 pts, the Nasdaq down by 55 pts and the Russell is off by 7 pts.

Oil was a bit higher again this morning – trading up to $119.50 before backing off it to trade at $118.25 cts…. Calls for ‘US energy independence’ are now starting to ring louder and louder – but if anyone thinks that the oil companies are suddenly going to start new projects – you need to rethink that.  Why?  Because the administration has launched an energy war in this country – they have made it clear that fossil fuels have no place in the American dream – so tell me – Why would any of the big energy companies spend the time and money – billions of dollars – in infrastructure to pump and refine more oil when the left is screaming about climate change and ESG mandates and the push to go wind, water and solar power?  To be clear – these same companies ARE investing money in ‘clean energy’ at the expense of fossil fuels –  But clean energy is not anywhere near close to filling the gap, and fossil fuels are being branded as the ‘bad guys’….So, you can’t have it both ways at the moment – clean energy is still decades away from powering the country never mind the world, so someone has to be the adult in the room and take charge if we really want the energy independence that they are now screaming about.

10 yr. treasuries are yielding 3.01% but should now remain above 3% now and going forward – as the FED readies to raise rates…. Unless of course they can spin the CPI story – suggesting that the FED has won the war on inflation (that would be a fairy tale) and looks to pause – something that has also been debunked the last week.  Look – rising yields only add to the worries about the risks to economic growth as global central banks tighten policy – we have talked about this…. this is not new….

I suspect – and have been saying – that there will be continued back and forth – with the path of least resistance lower over the next couple of months as investors and portfolio managers attempt to find clarity, a sense of direction and whether or not the FED can manage to navigate a soft landing….to be clear though, lower does NOT necessarily mean a collapse….I still believe that 3800 is a level of real support and will only change my mind if the fundamental story changes over the next couple of months.

European markets are also all a bit lower…down about 0.7% across the board.  European investors also waiting on the US CPI data on Friday……which may give them a clue about what the ECB (European Central Bank) might have up its sleeve in the weeks ahead.  Remember – inflation across the zone has surged to all time highs and the ECB continues to stimulate…. but that is expected to end this Thursday when then make an announcement.

The S&P closed at 4121 – and remains in the very tight trading range of 4075/4175.  This morning’s action suggests that we could test the lower end of the range again….as many tell us that the worst is over and that the bottom is in…. I am not convinced yet….and remain on the cautious on side of the equation. Expect this week to be about all of the speculation around the CPI and the Consumer confidence report – which is expected to come in at 58.3 – which is flat m/m.  We remain in the broader trendline support / resistance range of 3800/ 4275.    
 

Take Good Care

Chief Market Strategist
kpolcari@slatestone.com

Spaghetti and Meat Balls

This is another economical meal that feeds a lot of people for little money.  You should be able to feed a family of 4 with leftovers for about $50.

For this you need: Meat sauce – you need:  4 chicken thighs with the skin, 4 country style pork ribs, onions, garlic, olive oil s&p. 4 cans crushed tomatoes (NOT PUREE) Fresh basil.

Now – slice 3 large white onions, chop 4 gloves of garlic and sauté (med/hi) in a heavy bottom pot.  After about 5 mins…add the chicken thighs and brown for about 15 mins…. remove the thighs and set aside. (When it cools you can remove the skin if you prefer) Now add the ribs to the pot…. brown these for about 15 mins… Remove and set aside.   Now add – 4 cans of kitchen ready crushed tomatoes….if you cannot find then buy the plum tomatoes and run them thru the food processor – add  1 ½ – 2  cans of water – stir – bring heat up to high until it boils then reduce to simmer….season with s&p, add the fresh chopped basil – like 6 / 8 leaves.  Add back the meat – chicken, pork, and meatballs*. Add in the oil and bits from the fried meatballs.    Let simmer for at least 45 mins – stirring occasionally….at this point it is all done.  (But if you turn it off and let cool and refrigerate until the next day – it is always better.)

*The Meatballs:

You cannot use lean beef – Absolutely not…. they will taste like cardboard…. you need GROUND CHUCK…. You need at least 75/25…. (75% lean/25% fat)

Now that we got that right – (you can also add some ground pork or veal if you like) I always use 1 lb. of ground chuck and 1 lb. of ground pork…..2 eggs, pepper, handful or two of grated Pamegiana, (if you only have Romano then that’s fine),  2 med cloves of crushed and minced garlic*,  2 slices of Italian bread soaked in whole milk and a splash of olive oil….no need to add salt – the cheese will provide it.

Wash your hands…. now form the meat balls…. bigger than a golf ball, but smaller than a baseball…. next – I fry my meatballs and then add to the sauce…you can also place on a baking sheet and bake in the oven for 15 mins or so on 350 degrees and then add to the sauce.  If you are in a rush -then just add them to the sauce raw and they will cook in about 15 mins……but for me – I prefer to fry them first.

Once you have the sauce you can use it for a number of pasta and parmigiana dishes…. Today it will be about Spaghetti and meatballs – tomorrow I will bring you Baked Rigatoni and later in the week – watch for eggplant, chicken, veal or even pork cutlet parmigiana.  Yum!

Buon Appetito.