Things you need to know
- Stocks tried to advance – and then failed
- The failure being credited to caution at Apple – Ridiculous
- IBM beats across all lines but warns of $ strength – algo’s take it down
- T-48 hrs – what will Vlad do with Nordstream
- Try the Linguine and Clams
So the Fear of Missing Out – blew up on Monday….stocks which were strong in the pre-market and then stronger after GS, BAC, SYF, SCHW reported their earnings ended lower on the day…..the Dow swung 663 pts from high to low to end the day down by 215 pts or 0.7%, the S&P swung 84 pts ending the day down 32 pts or 0.8%, the Nasdaq lost 94 pts or 0.8% after swinging 307 pts from high to low, the Russell lost 6 pts and swung 38 intraday, while the Transports gained 70 pts after swinging 245 pts adding 0.5%.
The bank earnings continued to tell the same story…..Revenues fell y/y and increases in loan loss reserves rose as many of these financial institutions prepare for increases in defaults…..GS reported a decline of 47% in earnings y/y but reported earnings that BEAT the lowered estimate for the quarter – reporting $7.72/sh vs. the $6.64/sh estimate – Investment banking revenues suffered while trading revenues surged on the back of all this volatility.. suggesting that it is all good at GS. BAC’s earnings fell by 32% ($6.2 bil vs. $9.2 bil last year) and missed on the quarterly estimate – reporting 0.73 cts vs. the estimate of +0.75 cts. SYF earnings fell, but did manage to beat lowered estimates, while Charlie Schwab reported a 42% increase in profits. Now much of these results were in line with what we have seen from JPM, MS & C – falling revenues y/y and then an additional hit due to the direct result of having to hold more cash in reserves to prepare for what is expected to be difficult times ahead for the economy.
Now – much of the early market action was – in my opinion – the result Friday’s rally and the idea that the market was a bit oversold all while the speculation swirls around the next FED move. Is it 75 bps, 100 bps or is it something else….?
And then in the afternoon – news hits the tape that Apple is planning ‘slowing hiring’ in the months ahead – which speaks to Timmy’s concern over a slowing economy….and that is what is being credited for the reason stocks did a 180…which is ridiculous – why? Because we have heard that from nearly every earnings report so far – the forward guidance is and has been cautious – every report suggesting that the C-suite is pulling back on hiring and is in fact firing some people – as they manage to navigate a slowing economy. Some sending the message that they expect tougher times, while other are not defining it as negatively, but are making it clear that they are not looking at this through rose colored glasses.
Headlines like this only causing the algo’s to get more anxious
“Apple To Slow Hiring in Latest Economic Warning”
“Apple to Slow Hiring, Spending in Some Divisions Next Year”
I mean – when the Apple headline hit the tape – the Nasdaq and tech names went into reverse…. suggesting that when a market leader like Apple says the same thing that others have been saying – it is somehow different. When Tesla, Rivian, MSFT, JPM, FB, COIN and NFLX – said the same thing – it was viewed as ‘company specific’ (aren’t these names market leaders in their own industries as well?) but suddenly when Timmy Cook says it – it suddenly changes the narrative? Come on, stop the insanity…. Get ready, we have been discussing this for weeks now – this was going to be THE concern this reporting season…. What will they all say about forward guidance….and what they are all saying is – Be Careful, Watch Out, Slippery When Wet!
And then the NAHB (National Assoc of Home Builders) Index which had reported a big decline in its survey – had NO effect on early morning sentiment – suddenly was also the focus when the market turned…Why? Because it was negative….and when they only wanted to focus on the positives – they conveniently pushed that aside, but when the tone changed (think APPL) then they had to look for other negative headlines to support the change in psyche.
And then after the bell – Big Blue (IBM) reported earnings…. of $2.31/sh vs. $2.28/sh – good right? Revenues rose by 9% to $15.54 billion- software, consulting and infrastructure revenues all growing more than expected…they even gave a fairly positive forecast for the rest of the year – saying that they expect full year revenue growth to be at the high end of our mid-single digit model.
And what happened? They punished the stock…it was down 1.3% during the regular session and then after the announcement that included a warning about the strengthening dollar and what that would do to second half revenues – trader types and after-market algo’s took it down another 4% and this morning it is quoted at $131/sh – down $7 from last night’s close. In any event – you have to decide if this move lower is an opportunity for long term buyers or not….(hint: I like it)
NVDA – which has made all kinds of headlines over the past week – because of Nancy & Paul Pelosi’s $1 mill bet on the stock – when SHE is voting on the huge $52 billion ‘chips’ bill in congress – has advanced nicely…. the stock was up 12% in the last 3 days (3.5% yesterday) and is quoted higher this morning…. Which only confirms why no elected official or immediate family member or member of the administration/gov’t or immediate family member should be allowed to have a trading account – while they are serving….Period…but hey, what do I know…..I only spent 40 yrs. in an industry that handcuffed me for 90% of that time BECAUSE I could have been assumed to have ‘inside information’ that no one else had – which makes sense…and which I agree with – so why do members of congress that have inside information all day long have trading accounts? It is a rhetorical question – do not expect to get an answer. And that chips bill has helped the semi’s tremendously…. the SOXX is up 16% in a week, SMH +15%. Other names in the group – include AMD, QCOM, AVGO, and INTC – all up in anticipation….
This morning we are going to try it again….US futures are up…Dow futures up 180 pts, the S&P’s up 30, the Nasdaq up 75 pts and the Russell is up 15. Eco data today is also about housing…. Housing Starts, which were down 14 % last month, are expected to show an increase of 2%, while Building Permits also down 7% last month are expected to be down another 2.7% this month. This data point will speak right to mortgage rates and what is expected to happen in the months ahead. Current rates are about 5.3% for 30 yr. money, soon to be approaching 6% when the Fed raises rates next week….and all that means is housing prices, housing starts and building permits (which reflect future sentiment) will come under pressure.
Earnings today include SBNY and TFC – both beat on the top lines……LMT, HAS, HAL, JNJ (better than expected), ALLY and after the bell – we will hear from NFLX, JBHT, and IBKR.
European markets are mixed – but not dramatic in any way…. Spain up 1% while Eurostoxx is down 0.3%. The ECB (European Central Bank) is due to announce this Thursday…and the conversation there is NOW about a 50 bps rate increase after she kept telling the world that she would only raise by 25 bps….I made this point yesterday….she is way behind the 8 ball….inflation is running at better than 9% and her rates are still negative 0.25%….The FED is raising rates in 75 bps increments and she appears to be ‘asleep at the wheel’….something has to give….In addition – Europeans are also digesting earnings as the season in now in full swing.
Treasuries across the curve remain inverted and suddenly that does not appear to be an issue any longer…. remember – all of the angst around the inverted curve when it inverted for an hour 3-months ago? Do you remember what that meant? The media could not stop talking about it…. An inverted yield curve spells disaster….and now it has been inverted for 2 weeks and suddenly it does not even make the front page…. much like the Russian/Ukraine war, now relegated to the back page
The Dollar index has cooled a bit….and is down 2.5% in 4 days…. but remains strong vs. the others…. this morning it is down 84 cts at 106.25 and it appears to want to test support at 104.45….
Oil is churning here at $102.50/barrel and gasoline is starting to back off at the pump. T- 48 hrs. until we find out if Vlad is going to re-open the NordStream pipeline that delivers nat gas to Europe….If not – expect nat gas prices to skyrocket….and like I said yesterday Nat gas is up 40% since July 1st….and is kissing resistance at $7.50/per therm….If Vlad keeps the valve shut – watch Nat Gas surge to the June highs of $9.65/therm if not higher. Watch CHK, CRK, DVN and EOG.
US Treasury Secretary Yellen is in South Korea today. The RBA (Reserve Bank of Australia) is due to release their minutes, the BoE (Bank of England) Governor Andy Bailey is a featured speaker at the Mansion House Financial and Professional Services Dinner today. Thursday brings us the BoJ (Bank of Japan) and ECB (European Central Bank) rate decisions.
The S&P closed at 3830.85 – down 32 pts…We tested 3900 and failed yesterday…and while futures are up again this morning, my sense is that we will continue to churn in place remaining in the 3600/4000 trading range at least until next week’s FOMC meeting. Expect the action today to be driven by earnings and forward guidance and more speculation about what the Fed will do next week. I think the markets have completely reconsidered 100 bps and have now settled on a 75-bps move. What will be interesting is what the PCE Index reports on inflation – recall – that is the FED’s preferred inflation gauge but will not be published until after the FOMC meeting….so hold on….We haven’t seen the cut in estimates yet for the 3rd and 4th qtrs.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Linguine and Clams Sauce
It summer and you can feel the sand between your toes, the sun on your face – the saltwater splashing on your body…..
Start with the clams – a couple of dozen or so should do nicely (in the shell) – wash thoroughly to remove any sand from the shell.
Drain. In a saucepan – heat olive oil next add sliced and crushed garlic – sauté around until it takes on a nice golden hue.
Next add a sliced onion and let it saute with the garlic until it softens. Now add the clams, S&P, a splash or two of white wine a bottle of clam juice and cover. Reduce heat to med….continue to move the clams around to get them to open up. If you need a more juice – feel free to add another bottle of clam juice. At this time….remove some of the clams from the shell – return the clam itself to the sauce and discard shell – While keeping some in their shell for the presentation to come.
Put the linguine in the pot of boiling salted water to cook for 8 / 10 mins….or until aldente. Strain – always reserving a mugful of water…..return the pasta to the pot – add back 1/2 mug of water to re-moisten. Toss – wait a min or two and then add the clams and the clam sauce….re-toss and serve immediately in warmed bowls. You should have grated Romano cheese available on the table for your guests – although some Italians would cringe at the thought of putting cheese on a fish dish….but I gotta tell you – it is delicious!
Enjoy this dish with Sliced Italian garlic bread – recipe was included in a note from last week…..and a glass of white wine. Nothing fruity…..I always like a Pinot Grigio with this dish as I find it complements the sweet taste of the clams. This dish should take you no more than 40 mins…start to finish.
Buon Appetito.
