Things you need to know.
– Stocks bounce – don’t be fooled.
– Negative Headlines everywhere…China, Russia, Argentina, UK, US
– Dollar Index Surges to the trendline – Commodity complex under pressure
– Treasuries remain steady.
– Do NOT let the political drama ‘make your decisions’.
– Try the Veal
Stocks thrashed around on Monday….as investors attempted to sort it all out. Tech taking center stage after the 7.8% decline in the Nasdaq over the past 3 weeks…some individual names that have suffered were the day’s darlings….Over the past 3 weeks – META – 7%, AAPL – 10%, MSFT – 11%, NFLX – 12%, NVDA – 15%, ARKK -16%…..but yesterday – they were the ones that found the most interest….META +0.9%, AAPL + 1% MSFT +1%, NFLX + 1.4%, ARKK + 0.4% … in fact anything tech was up on the day….the XLK +1.6%, Semi’s – SOXX +2.8%, AI +3%, Cybersecurity + 0.6%, Robotics and Automation – BOTZ + 1.1% etc.
US Steel was the day’s winner – surging by 36.75% to end the day at $31.08 after Cleveland Cliffs makes an unsolicited bid for the company that was rejected after the company said it had multiple offers…. Expect more fireworks in the days ahead….
There was no eco data to drive the action – so it was driven by sentiment and bargain hunting and a knee jerk reaction to the recent weakness…weakness that I think is not over yet and I have been saying so for a while now….….And while the indexes did end the day higher – don’t be fooled. At the end of the day – the Dow was up 26 pts or 0.1%, the S&P was up 25 pts or 0.55%, the Nasdaq rallied ahead by 144 pts or 1.05% – (again it has sold off the most recently), the Transports added 42 pts or 0.25% while the Russell (smids) actually lost ground – falling 4 pts or 0.25%….
In the end it was a mostly boring day….but the headlines this morning are anything but and that is causing European markets to sell off – all down more than 1% and US futures are in the red as well….with the Dow down 180 pts, the S&P’s down 20, the Nasdaq lower by 55 and the Russell down 9.
Negative Chinese headlines all over the place – and they run the gamut – there is a large wealth manager apparently in trouble, there is a private real estate developer in trouble, and the Chinese economy is circling the drain……forcing some big American companies to become more cautious as they become more pessimistic about the post pandemic boom…. A story in the WSJ this morning lays it out this way –
“China’s Worsening Economy is Hurting Corporate America – CAT, DD are among the big companies lowering expectations for a post Covid – 19 boom.”
It goes onto say that ‘Companies embedded in China’s ailing manufacturing, construction and export industries are reporting weaker sales. In some cases, they are warning of further trouble to come as growth grinds to a near halt and economic readings are dour. The global knock-on effect in other parts of the world will also surely feel the pain from reduced demand out of China….’
The most recent weak eco data has forced China to cut rates by the most since 2020 – slashing them by 15 bps taking them to 2.5% as they try to stop the bleed of a worsening property slump, a weak consumer and a weakening economy.
And then we learn that Russia hikes rates after the Ruble crashes…taking interest rates in that country to 12.5%. In Argentina – prices rose 20% overnight causing panic in the streets, In the UK – record wage pressures will keep the BoE on its hike path, rising US inflation and upward pressure on wages will also keep the FED on its hikes path, Japan 2Q GDP exploded higher – rising 6%, Lonnie Musk rolls out a new Tesla ‘base model S’ that is $10k cheaper with Lonnie telling us that he will keep lowering prices if interest rates continue to rise – saying that he is willing to sacrifice profitability to increase sales – the stock is down 1.5% in the pre-mkt – this on top of the 20% decline it has suffered since mid-July, the State of Georgia – as expected – indicted DJT over his efforts to overturn the election results….and it appears that there are cracks in the Democratic party – with more and more democrats suggesting that it is time for Jo Jo to pass the torch….They aren’t even hiding it any longer….even the msm is joining in…..Names being floated include Newsome, Whitmer, Pritzker (all running failed states) – funny but they aren’t giving RFK any airtime…..and while the politics of it all, won’t price stocks in the long term, it will add to the negativity of the economics while providing plenty of entertainment. And if that isn’t enough – Fitch (3rd rate – ratings agency) is now threatening to downgrade ‘dozens of banks’ saying that ‘they may be forced’ to do so… This after they cut the credit rating on the US two weeks ago…as they fight to remain relevant.
It’s a big retail earnings week…. look for results from TGT, TJX, WMT, LOW, & HD…. What will these reports say about the US consumer? What will these reports say about the US economy? In addition – we will get Retail sales figures today…. which are expected to be up 0.4%, Ex Autos and Gas of +0.4% – both readings that are stronger than last month. In addition, we will get the latest out of the Empire State Manufacturing Index which is expected to be negative 1 vs. last month’s +1.
And look what’s happening to the Dollar index! It continues to push higher – it ended the day at 103.19! Recall – yesterday I told you that the dollar will push higher if it believes that interest rates are on the rise….Hmmm (It will also push higher as global unrest continues to take center stage)……Look at that….yesterday – it rallied to kiss trendline resistance at 103.36 – a level I identified yesterday morning…..I think it takes a breather for now….but more global angst will also push the dollar higher in the days ahead…..and there appears to be plenty of global angst….. The stronger dollar is putting pressure on the commodity complex…Gold, Oil and food products…. The BCOM – Bloomberg Commodity Index fell by 0.5% yesterday and is down another 0.3% this morning….
Oil is down 30 cts this morning at $82.22/barrel….and why do you think? Exactly, the stronger dollar and all the negative headlines coming out of China – weakening Chinese demand blah, blah, blah….funny on Friday – the story was the complete opposite…China was the the biggest buyer of oil in the global markets yet today they are imploding….In any event – oil has had a nice run, so some profit taking is expected – it’s just that the Chinese headlines make it easier to take those profits.
And as you would expect – Gold came under pressure as well….falling $7 yesterday and down another $9 today….which is a bit curious….yes, the stronger dollar is one reason, but all the global angst should put a floor under the shiny metal – but sometimes it’s just better to step aside and let it go until it finds its level….…We are now below all 3 trendlines and it looks like we want to test the March lows of $1900…
There is no real change in the Treasury markets…. The 2 yr. yields 4.96%, the 10 yr. – 4.215% while the shorter duration 3- and 6-months bills continue to pay you 5.4% and 5.45%. The Fidelity Gov’t Money Mkt Fund is paying you 5% to just sit tight…. So – you do have options….
Look – while the headlines are dramatic – the fundamental story for the US economy hasn’t really changed that much – the economic data is NOT horrendous, yes inflation is still going up, but it is going up at a slower pace, Unemployment is at historic lows, interest rates are nearly what is considered historically ‘normal’ – but we are in a seasonally weak time of the year….. Lower liquidity and flashy headlines can cause exaggerated moves in the market – in either direction…….and that creates opportunity…. for the savvy investor.
The S&P sits at 4489 – up 25 pts – but futures are suggesting a lower open….and history suggests the market will pull back a bit…. which only means – take your time…do not chase and do not rush… Go thru your portfolio – make sure the fundamental stories have not changed in the names you own…. If they have – then you have to reconsider owning them. Put new money to work in the places that will improve your overall average…and help to stabilize your portfolio. Don’t’ be emotional….
I think the bounce yesterday was just that – a bounce…. My sense is that the trend is still lower and will remain so throughout the next 5 or 6 weeks….as we get ready for the next FED meeting in late September that could see rates rise again. Currently the terminal rate is set at 5.25% – 5.5%…. My guess is that they take the rate to 5.75% – 6%…
Patience is a virtue – There are plenty of opportunities that will balance out and stabilize your portfolio for the longer term. Remember – Investing is a ‘long game’…. And that point can’t be any clearer in today’s WSJ….
“Wall Street is Ready to Scoop UP Commercial Real Estate on the CHEAP” – remember all those dooms day stories about the CRE market? Well, the big boys are all lining up to steal these properties for ‘pennies on the dollar’, they are all raising funds to go after these ‘distressed properties’ and there are plenty of investors willing too participate….… – you see, there is always a silver lining….someone always wins…
Reach out to discuss – always happy to engage.
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 Polpettone
This is a great dish.
It is a veal meatloaf – this one is stuffed with fresh grated Parmegiana, scrambled eggs and cappicolo – seasoned with s&p and then bathed in white wine at the end… It looks beautiful when sliced and presented.
For this you need: 1 lb. of veal, 4 garlic cloves – sliced thin – 5 Eggs, 3 cups of fresh grated Parmegiana – s&p, Olive oil, butter, chopped cappicolo – (I used about 1 cup) and finally the dry white wine – The Santa Margherita works well here. The recipe also calls for chopped parsley -more for color than taste.
Preheat your oven to 350 degrees.
Begin by mixing the garlic, veal, cheese, s&p and 3 of the 5 eggs. – Now go easy on the salt – because the cheese can be fairly salty – so I would err on the side of less salt when mixing – (you can always add a bit when you eat it) – then set aside. Now take the remaining 2 eggs and scramble them – melt about 1 tblspn of butter in a frying pan and over low heat add the eggs – let them set – rolling the pan a bit to get the eggs to set. Now flip the eggs to cook the other side. Once done – remove and slice into strips.
On a long piece of wax paper – lay out the veal mix and form into a rectangle about ½ thick. Using the width of the wax paper as a guide – spread the mix lengthwise. Now spread the cooked eggs and the chopped cappicolo over the meat. Using wax paper – slowly roll into a loaf.
Find a suitable baking dish – add the olive oil – enough to just cover the bottom of the dish. Place in the oven to heat the olive oil – (you have not added the loaf yet). When the oil is hot – remove the dish and now carefully place the loaf in the dish and return to the oven to bake for 45 mins – do not cover it.
After 35 mins – add the wine – about 1 ½ cups – pouring it generously over the veal loaf so that it was bathing in the wine – not drowning in the wine. Return to the oven and cook for another 15 mins. Remove and let it sit for 3 mins – slice into generous portions and serve hot with a simple salad…. simply dressed with s&p, oregano, olive oil and fresh lemon juice.
Buon Appetito
