Things you need to know.

– It’s TAX collection day…. just in case you are unaware – you have until 11:59 pm to get the postage stamp.
– Charlie Schwab does NOT disappoint –
– STT on the other hand missed the ‘pre-announce memo’ and investors weren’t happy.
– Treasuries rise, the dollar index rises, commodities under slight pressure.
– Lots more earnings ahead
– And Lots of FED speak all week.
– Try the Veal Scallopine in White Wine & Porcini’s

Stocks resumed their move up…. although not significantly, but they did end the day higher… At the end of the day – the Dow added 100 pts or 0.3%, the S&P gained 14 pts or 0.3%, the Nasdaq added 35 pts or 0.3%, the Russell tacked on 22 pts or 1.22% – the clear winner while the Transports added 73 pts or 0.5%.

The tale of two cities (or two stocks) SCHW and STT

Now as the clocked ticked so many investors/traders and algo’s waited to hear from Charlie – Charlie Schwab…. after the beating it has taken ever since the SVB collapse and one that investors are watching very closely. And as far as I’m concerned – they did not disappoint…. they reported 93 cts/share vs. the estimate of 90 cts/sh. They reported a revenue increase of 10% or $5.12 billion….Net Income rose 14% y/y to $1.6 billion…. Bank deposits came in at $325.7 billion vs. the estimate of $325.9 billion, Total new assets were $150.7 billion – up 25% y/y and well ahead of the $114.4 billion estimate. Total client assets of $7.58 TRILLION was off 3.6% y/y….

They increased their quarterly dividend by 14% to 25 cts/share. They paused their buyback program in light of the expected ‘regulatory uncertainty’ that lies ahead and if they regulatory uncertainty never materializes then I expect them to reinstate it….1st Q money mkt funds are up 150% – totaling $358 billion vs. the $143 billion last year. (And that makes sense since money markets funds are now paying 5+% guaranteed… So of course, there will be more money in those funds).

Now – look – they took SCHW down 40% in 4 days back in early March….when the VC community was creating hysteria all over the place….for reasons I’m not sure I still understand…SCHW was not SVB, nor was it in the same category as Signature Bank, nor was it Credit Suisse – but when the hysteria started, it started….and like any hysterical situation, it barrels out of control until cooler heads prevail – The money center banks rising while the regional banks got smashed…the KRE (S&P Regional bank ETF) fell 33% during that same time frame and has yet to really recover as investors await those earnings which will start any day now…..…

But back to Charlie…..my sense is that now that they reported and revealed the latest corporate data – that investors will see this as a huge opportunity…The stock initially sold off – driven by the algo’s but then when investors digested the news – sellers turned to buyers and BOOM – up we went…taking the stock up 4% to end the day at $52.80. 17 street analysts have it rated a BUY, while 7 have holds and 1 is a seller…. Median target of $66.75 by year end…. which represents a 28% increase over last night’s close. Keep your eyes on this one…. They served it up on a silver platter…. The hysteria in SCHW was a mistake…. Just sayin’

State Street on the other hand – one of the largest custody banks in the US was not so lucky…..that stock got slammed – Deposits dropped by 5% (not a disaster at all), They missed earnings and reported $1.52/sh vs. the expected $1.68/sh…they took the stock down 9.2%…remember what I said last week…any company that knows that they are going to miss the estimates significantly – MUST forewarn – because if they don’t investors are not going to be happy and yesterday investors weren’t happy…..it closed at $80.03 on Friday and opened at $67.07 yesterday….a $13 move in the opening trade…OUCH…..but apparently – the C-suite didn’t get the memo about pre-announcing….I guess that won’t happen again….the action in STT took some of the other custody banks down with it….Bank of NY/Mellon -5% and Northern Trust -2.5%.

Eco data revealed that manufacturing activity in the Empire state (NY) made a stunning reversal – going from -24.6 last month to positive 10.8 this month…..when the expectation was for it to go to -18….this was the first time in 5 months that we saw new orders and shipments snap back and go positive.

The move up in stocks was muted by comments from Richmond FED President Tommy Barkin – who said he wants to see more evidence that US inflation is in fact making its way back to 2%….before he is convinced that the FED should pause……and this mimics what we heard last week out of Fed Governor Chris Waller…and some of his colleagues.
Treasury yields moved up…. The 2 yr. rose by 9 bps ending the day yielding 4.19% up from 3.97% just last week. The 10 yr. rose by 8 bps ending the week yielding 3.59%, up from 3.44% last week. The move up in rates sent the dollar higher as well….and that continued to put some pressure on the commodity complex – oil and gold….

Oil fell by 1.9% to end the day at $80.95 and Gold fell 0.4% or $8 to end the day at $2,007/oz….all this as the dollar index rose by 0.5% to end the day at 102.09…Now if the dollar continues to recover the we should expect some ongoing pressure on commodities….but if the FED pauses after the May hike – then we could see the dollar retreat again and that will give strength to the complex….so sit tight….my sense is that that’s what we will see….So look for oil to find support at $80 and for gold to find support at $2000.

Eco data today includes Housing Starts – expected to be down 3.5% and Building Permits – also expected to be down 6.5%, but we are entering the spring building and buying season…so we could get a surprise, we could….

Earnings today include some BIG names…. BAC, JNJ (just crushed it and is trading up 1.25%), GS, BK, LMT, GS, all before the bell, after the bell look for NFLX, FHN, IBKR, MCB, UAL and WAL.
US futures are UP…. Dow futures + 75, S&P’s +14, Nasdaq +86 and the Russell is up 5. Expect to hear all about AAPL …they launched the first store ever in Mumbai, India today and by all accounts it will be a blockbuster….lines down the street and around the block…India consumers are NOW ready to get on board….a second store will open in the capital of Delhi on Thursday….Timmy Cook – opening the doors and welcoming the first customer…..saying

“India has such a beautiful culture and incredible energy and we’re excited to build on our long-standing history.”

In addition to opening a store – Timmy is aiming to boost sales and manufacturing iPhones in India in a very clear message to China….In addition – the new Apple store is completely energy efficient….dedicated solely to solar energy with zero reliance on fossil fuels….they are running on 100% renewable energy….Bravo for Timmy Cook and all Apple shareholders….AAPL is quoted up $1 or 0.5%.

Now while it is all about earnings…we are going to hear about China GDP (if you believe any of it), FED Governor Mishy Bowman – she is discussing digital currencies, later in the week we will hear from a range of Fed Heads, Johnny Williams, Austan Goolsbee, Chris Waller, Patty Harker, Loretta Mester, Raffi Bostic and Lisa Cook…. – all talking their books! Oh boy….
European markets are UP…. between 0.25% (UK) and 0.7% (Italy) everyone else is in between. UK job figures showed rising unemployment while the number of people classified as ‘economically inactive’ came in at 21.1%. Now that’s a first – now we have a data point for ‘economically inactive’ persons…. That must be the woke way of saying you’re not interested in working nor are you looking for work vs. being laid off which would suggest you were working. (I think…)

The S&P closed at 4151 – up 14 pts…. Earnings are getting off to a good start, but it’s still early days….we have 3 weeks to go…so sit tight….Like I said yesterday the big money center banks are good, its going to be the regionals that potentially present a problem for the banking sector…but let’s remain hopeful….in any event, it might prove to be a boom for investment bank M&A….(Mergers &Acquisitions).

We know that y/y earnings for the S&P are expected to be lower by about 5% on balance…so let’s see how that turns out in the weeks ahead. For now, if you’re a day trader -get ready for the action and if you’re a longer-term investor then get ready to add to your holdings on any weakness. I think we could test the March/December lows of 3800 during this earnings season IF we get some significant misses or worsening inflationary data points.…and that would represent about an 8% decline from here… JPM’s Marko Kolonovich thinks it could be worse – maybe 15% and that would mean S&P 3525 ish….He is also poo pooing the recent rally in tech saying that it is overdone…I guess the JPM trading desk is short tech! LOL!

Either way – it’s an exciting time. We remain at a crossroads…. Stick to the plan…. If you are nervous put some money into short duration T-Bills or money markets at Charlie Schwab!

Take good care.

Chief Market Strategist
kpolcari@slatestone.com

“The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kace Capital Advisors.”

Veal Scaloppine in White Wine & Porcinis

You will need:  3/4 oz of dried porcini, 1/b of fresh mushrooms, 1/2 stick butter, dried sage leaves (finely chopped), 6 veal scaloppines, 3/4 cup white wine, chopped Italian parsley, s&p, 1/2 cup heavy cream.

Soak the dried porcini in 1 cup of warm water for about 1/2 hr.  Once soaked – remove with a slotted spoon – next line a strainer with a paper towel and strain the soaking water into a bowl and set aside.  Rinse the porcini in cold water to remove any grit then large chop – set aside.  

Next cut the fresh mushrooms into thin slices – set aside. Season the veal with s&p – set aside.

Add the butter and the sage into a sauté pan and turn heat to med high. Add a touch of olive oil to prevent the butter from burning.  Next add the veal scaloppine so as not to crowd the pan.  Brown well on one side – then flip and brown the other side…you should probably cook for about 3 – 4 mins total…. they should be pink on the inside….

Add the wine and let it boil – after 30 secs or so…remove the veal and place on a plate.  continue to steam the wine – scraping the bottom of the pan until all the wine is evaporated.  Now add back the mushroom water. And the porcinis to the pan…. stirring – allowing all of the liquid to evaporate…. Now add the fresh mushrooms and the chopped parsley.  Season with s&p – turn heat to low and cover pan…. the fresh mushrooms will make their own juice – keep cooking – stirring every once and a while – remove cover until the juice evaporates.  Now add back a splash of white wine and the heavy cream and stir until it becomes a little thicker – 3 or 4 mins.  Now – add the veal back to the pan – leaving long enough just to reheat.  Turn them once or twice to ensure even heating.

Present on a warmed plate and serve this dish with steamed asparagus – seasoned with s&p and a dab of butter.  Prepare a salad of arugula, Boston bib and maybe some fresh spinach.  Add red onions, cucumbers, and sliced tomatoes.  Season with s&p, oregano, a squirt of fresh lemon juice, and Olive oil.    I like a nice Merlot with this meal as it is a medium bodied red.

Buon Appetito