Things you need to know.
- Qtr. ends on a high note – Dow goes positive.
- OPEC + CUTS production – Why are you surprised
- WTI +5.5% today, Big Oil following suit
- Remember – It’s a holiday shortened week – Mkts closed for Good Friday
- Lots of eco data out this week
- Try the Butterflied Leg of Lamb
WoW! What an ending to the quarter! Stocks surged going into the final bell of the 1st Quarter 2023….And it was beautiful……Recall that I said on Friday that all the indexes were in positive territory other than the Dow and that it needed to rise by 245 pts in order to bring to flat on the year….well – the Dow rose by 415 pts or 1.25% – taking it up 0.4% ytd! The S&P rose 58 pts or 1.45% up 7% ytd, the Nasdaq rose 208 pts or 1.75% taking it up 16.8% ytd, the Russell added 35 pts or 1.9% taking it up 2.35% ytd and the Transports – they rose 310 pts or 2.2% – taking that index up 7.8% ytd!
An amazing performance considering everything that happened during the past 3 months…..between rising rates, conflicting commentary between street analysts, big name investors and the FED, a shrinking and then exploding FED balance sheet, the ongoing war in Ukraine, the implosion of 3 banks here in the US – Silicon Valley Bank, Signature Bank and Silvergate Bank – the rush to protect all depositors at all US banks – up to infinity (said Janet) – then the pushback (said Janet) and then the reiteration (said Janet) that caused all kinds of confusion and anxiety – forecasts of both a soft landing and a long hard one remained top of mind along with the coming recession, forecasts of doom and gloom, the rush of investor money into the treasury markets that are now offering 4.8% yields on short duration money – think 3 & 6 month bills, bank cd’s that are now in the 5% range to tie you up for 12 months…an erratic and emotional commodity market that saw oil trade in a $22 range $63/$85 while Gold ended the qtr. up 9% at $1986/oz. And finally – we saw both Bitcoin and Ethereum rally nicely up 71% and 50% respectively. Shall I go on?
Economic data that remains somewhat confused – but inflation is making slow steady progress lower in SOME parts of the economy while remaining stubborn in other parts of the economy….in fact the very parts that everyday Americans feel it the most – food, energy, utilities and healthcare. The latest inflation report – the PCE which is the FED’s favored data point – did show improvement m/m and y/y and that is part of the story that helped to send stocks higher on Friday. The FED has continued to remain steadfast in their commitment to kill inflation – at what appears to be at any cost….Expectations for a May rate increase remain above 50% and investors and the markets appear to be ‘ok’ with that…and so it is what it is.
At the end of the quarter – we see anything TECH at the top of the leaderboard….XLK + 21.3%, SOXX (SEMI’S) + 28%, BOTZ (ARTIFICAL INTEL) +25%, CIBR (CYBERSECURITY) + 10.5%, ARKK (DISRUPTIVE TECH) + 29% and some of the big names up even more – NVDA +90%, AAPL +26%, AMZN + 23%, AI +200%, CRWD +30%, FTNT + 36% – is that clear enough? Behind that we have Communications – XLC + 21%, Consumer Discretionary – XLY +15.7%, and then the performance dropped significantly….Basic Materials – XLB + 3.8%, Industrials – XLI + 3%, Real Estate – XLRE +1.2%, and then we go negative on the qtr. – Financials – XLF -6%, Energy – XLE -5%, Healthcare – XLV – 4% and Utilities – XLU -4%.
If we drill down we see more of a mixed bag – Super Regional Banks – KRE – 24%, (that should surprise NO ONE), Housing XHB +12%, Airlines – JETS +9%, Metals and Miners – XME + 6.7%, Aerospace & Defense +3%, Energy Exploration & Production -5% and the Invesco Dynamic Building & Construction ETF – PKB +12% and the First Trust RBA American Industrial Renaissance ETF – gained 9%.
Economic data this week includes. S&P Manufacturing PMI of 49.3, ISM Manufacturing of 47.5 – both in contractionary territory, Factory Orders expected to be -0.5%, and Ex transports they are expecting 0%, Jolts Job Openings of 10,500k (down from last month), Durable goods of -1%, ADP employment of +210k new jobs, S&P Services PMI of 53.8, ISM Services PMI of 54.3 – both in expansionary territory….and then on Friday – when the markets are closed for the Good Friday holiday – the gov’t will announce the NFP report. And that is expected to show an increase of 223k new jobs….Unemployment rate of 3.6% and Avg Hourly earnings m/m +0.3% which up over last month while y/y up 4.3% is down over last month. Consumer Credit of $19 bil up from $14.8 bil last month.
It is the start of a new qtr. – reports cards for the 1st qtr. are in the mail – earnings season begins in earnest next week – officially – on the 14th – with the release of the banks…kicked off by Dow member JPM…..followed by GS, C, WFC, MS, BAC, and the list goes on… Beginning this week – we have all kinds of ‘investor days’ sponsored by all the big investment banks and Third Bridge – where research is ‘re-imagined’. This week we will hear from FRBK – which is Republic First Bancorp on the 6th – this is NOT FIRST REPUBLIC Bank (FRC) which announces on the 13th – so don’t get them mixed up.
Next up – OIL! Oh boy….if anyone says they are surprised – you have obviously not been reading my morning blog…. I have been telling you for weeks now that the Saudi’s (and OPEC+) were not happy with the price of oil sub $80….…I have said over and over that they have $80 as their minimum price target for oil – but would love to see it in the $90’s. Last month we saw oil struggle to stay in the $70’s until it couldn’t – falling to the low $60’s before it found any stability…..
Last week – we saw oil rise on the rumors that Crown Price MBS is not happy……and then – Over the weekend – OPEC + led by the Saudi’s made a ‘surprise’ – announcing that they are cutting production by 1.5 million bpd – abandoning all assurances that they would hold production steady….OPEC + and the Saudi’s clearly want to see higher oil prices – DUH…of course they do….Just a quick question – how much oil did Joey buy to refill the SPR when we saw the price decline to $63/barrel last month? Answer: Zero….and this morning WTI is up 5.5% or $4.15 at $79.84…(overnight it did trade as high as $81.69…..) fulfilling my bet that we would see $80 before $60 as the price of oil was in decline – Street analysts now telling us that $100 oil is just around the corner…..….This morning we see XOM up $4, CVX up $5, COP +$3, VLO UP $5, HAL +$4 and the XLE quoted up $4.
US futures are confused – Dow futures +103, S&P’s down 5, Nasdaq down 85 and the Russell is down 5. Now, again – this should surprise no one….after the performance we saw last week – it is no surprise that at the beginning of the new quarter – we see some initial profit taking….on top of that – Morgan Stanley’s Mikey Wilson – had this to say…..Tech has gotten WAY ahead of itself…..remember – Mikey is also the one calling for a ‘significant’ pullback in the S&P – think 3000 or down 27% from Friday’s close. Whatever…. and now that oil is headed towards $100 – expect inflation to remain stubborn and that will change the narrative out of the FED….as of this morning – FED fund futures are now pricing in a 65% chance of a 25 bps rate hike. (last week it was 55%).
European markets are mostly higher….The UK +0.7% while Spain is down 0.2%…everyone else is somewhere in between. Oil and gas stocks leading the way higher….up about 3% and that is causing travel and leisure stocks to decline…..(think more expensive energy will raise prices for travel and gas). Banks are moving up even as UBS gives up 2% on job cut rumors as part of it Credit Suisse takeover……
Gold is down $2 at $1984/oz and will most likely retest $1950….Why? Because with this latest news out of OPEC+ – the concern is that inflation will remain strong and that will force the dollar higher which will put some pressure on the commodity complex. It is consolidating between $1950/$2000 – with $2000 proving to be a difficult level to pierce for now. The question is – Will $1950 hold?
And bonds – they continue to be confused as well….prices are down this morning and that is sending yields up….the 2 yr. yielding 4.07% up from 4.02%, while the 10 yr. is yielding 3.50% up from 3.47%. Shorter duration 3 month and 6-month bills are yielding an annualized 4.86% and 4.92%
The S&P closed at 4109 up 58 pts….and while the momentum is on our side – it would not surprise me at all to see the S&P pullback a bit and consolidate above – maybe test the 50 dma trendline at 4020. Today’s eco data – Manufacturing PMI’s will set the tone…..Remember – the next two weeks are vacation weeks….Passover and Easter – This is also a shortened trading week with the NFP report being released on Friday when markets are closed. My sense is that we are in the 4020/4200 trading range. Look at that – the same numbers – just in a different order.
Take good care,
Chief Market Strategist
kpolcari@slatestone.com
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Butterflied Leg of Lamb
Here is a holiday classic.
For this dish – you will need: 1 butterflied leg of lamb, sea salt, pepper. For the marinade you will need: Red wine, balsamic vinegar, Worcestershire sauce, garlic, shallots, oregano, and rosemary……
Prepare the marinade: Mix 1 cup of red wine, 1/2 cup of balsamic, about 1 tblsp of Worcestershire sauce, 4 smashed/chopped garlic cloves, 1 minced shallot, oregano and fresh rosemary…..Now the rosemary is up to you….you can put as much as you like…..more or less….your call.
Marinate the lamb overnight….remove from the fridge about 2 hrs. before you intend to cook so that it warms up to room temperature….Leaving it in the marinade.
Preheat oven to 475 degrees. Remove the lamb from the marinade and place in a slightly oiled roasting pan. Season with sea salt and pepper. Put in the oven and roast for 10 mins…. flip – season the other side with sea salt and pepper and roast for 10 mins. Now – add a bit of the marinade and reduce heat to 325 degrees and cook for an additional 30 mins…..or until a meat thermometer reads 160 degrees.
Remove and cover with tin foil and let rest for 10 mins. Slice thinly on a diagonal – always against the grain. Arrange on a serving platter that you have decorated with fresh Kale. Remember it is all in the presentation…..the meal must be pleasing to the eye as well as the pallet.
Serve with the pan juices on the side. Accompany this meal with roasted red potatoes, either steamed asparagus with hollandaise sauce or French cut green beans that you sautéed in onion and tomato sauce* and some wild grain rice. Always have a large mixed salad dressed with feta cheese, s&p. oregano, lemon juice, olive oil and balsamic vinegar. A nice Barolo works well with this.
Buon Appetito
