Things you need to know.
– Risk Off is Alive and Well
– The 10 Yr. Bond is now yielding 4.49%, the 2 yr. kissed 5.2%
– Stocks close on the lows of the day….
– Eco data is weaker than expected.
– Kevin McCarthy suffers an embarrassing defeat…Chaos on Capitol Hill
– Try the Shrimp Scampi
**My appearance yesterday with Charles Payne on Fox Business
https://video.foxbusiness.com/v/6337574718112
Ok – what have we been saying for months now? Get ready for some weakness….as the Risk Off mentality takes root.
And this story is not anywhere near over….the recent weakness in risk assets turned uglier on Thursday ….Stocks continue to retreat, bonds continue to sell off sending yields up and the VIX – Fear Index shot up by 8% – yesterday alone….This now takes that index up 38% in 4 days…..while the VIXY etf is up ~10%…during that same time frame.
In the end – it is the ongoing relentless surge in treasury yields that is now causing all the angst. The 2 yr. ended the day yielding 5.14% but this was after yielding 5.2% earlier in the day…. all while the 10 yr. ended the day yielding 4.49%….4.49% – that is 36 bps higher than it was on September 1st…. just 3 weeks ago. Now, the US followed the lead of the Europeans…. where we saw all the markets in the zone close near the lows of the day on Thursday…. …. with all of those market centers down more than 1.4% with the exception of the UK – which only saw a retreat of 0.7%.
At 4pm we assessed the damage…. The Dow was down 370 pts or 1.1%, the S&P’s down 72 pts or 1.6%, the Nasdaq got whacked again – losing 245 pts or 1.8%, the Russell gave up 29 pts or 1.5% while the Transports lost 107 pts or 0.7%. Each one of them closing on the LOW of the day…. only adding to the ongoing angst….and when they do that – they usually test lower again….
Now unlike Wednesday, every sector yesterday in the broad 11 S&P sectors were lower……Again – the best ytd performers in that group saw the most selling…. (Ah hello??? What have I been telling you???) Tech -1.5%, Communications – 1.2%, Consumer Discretionary – 2.7% – this makes sense and should surprise nobody. All of the other sectors though were not far behind…. with most seeing better than 1% losses….
If we move down the list – we saw Homebuilders down 2.5%, Semi’s down 1.8%, Disruptive Tech down 3%, Oil Exploration & Production down 1.2%, Metals and Miners – down 2%, Robotics and Automation – 2.5%, Aerospace and Defense – 1.7%, Cybersecurity -1.8%, Pharma – 3.5%, the American Industrial Renaissance etf down 1.7%, Airlines -1%, the Growth trade – 1.7% while the Value trade lost 1.5%.
And if you hedged your portfolio with some simple hedges – you were able to offset some of those losses with …. The DOG gained 1.1%, SH + 1.8% and the PSQ added 1.9% while the VIXY added 8%. Remember – these are strategic, these are not long-term holdings…they are pointed and specific. And if you went out a bit further and bought the Direxion 3X’s levered short etf – SPXS – you would have gained a whopping 5.1%. Conversely, if you were long the Direxion 3X’s levered long etf – SPXL you would have lost 5%…. See how that works?
The economic data also was weaker – which maybe should have been a positive – only added to the angst….(I say positive because it would suggest that the FED is succeeding in slowing it down)…..The Philly Fed Survey -13.5 was worse than expected, Existing Home Sales down 0.7% – this vs. the expected gain of 0.7% – (think 7.5% mortgages) and the Leading Economic Index of -0.4%. Today’s eco data incudes US Manufacturing and Services PMI’s…. expected to be 48.2 (contractionary) and 50.4 (expansionary) respectively….
And to add salt to the wound – the house GOP is once again creating chaos amongst themselves as Kevin McCarthy appears to be unable to bring the group together for a vote on funding the gov’t for another 30 days…. sending them all on recess after a failed procedural vote on defense funding – just one piece of the larger bill and a piece that should have cleared the vote without question….….and this means that we are closer to a gov’t shutdown than not – an embarrassing failure for the Speaker – putting him on the hot seat……..Now again, while this will not price stocks in the long term – it can have some short term implications – especially after JJ’s comments on Wednesday. Essentially – anything negative is only adding to the overall negative tone….and when that happens – the place goes to hell in a handbasket…. But alas! That’s the silver lining – because when this happens, it creates opportunity…. you just need a strong stomach…
This morning futures are churning around the flat line…. either up or down small as the sun rises over the Atlantic…. AT 6 am – Dow futures +2, S&P’s +5, Nasdaq +50 and the Russell is +4 pts. Shawn Fain – UAW President will take to Facebook Live as the clock strikes 12 pm to make his next announcement about what plants will shut down as workers walk out the door as the strike continues. On the flip side – Timmy Cook – Apple CEO – delivered the new iPhone 15 to Apple stores around the world….and in NYC – Apple cult members are lining up on 5th Avenue – some showing up at midnight with beach chairs trying to be the first one to get it……The line is now snaking down the street and around the building as the sun rises….Apple is quoted up $1 in the pre-mkt – but that could just be because it is down 8% off the early September high…..and the fact that the futures markets are attempting to trade up.
European markets are all lower…. with the exception of the UK – which is up 0.4% all of the other market centers are down about 0.3%…. Recall – the UK market is only up 3.5% ytd…. which compares to Italy +20% ytd, Spain +15% ytd, Germany +11% ytd, leaving France and The Eurostoxx up 10% ytd. Yesterday’s announcement by the BoE and the Swiss National Bank to pause rate hikes is not helping the mood there – because they also kept future hikes front and center…
Oil is trading back about $90/barrel, Gold is trading at $1945, and the dollar index is up 28 cts at 105.64 and the short term trendline has now cut through the long term trendline creating a golden cross – which suggest more upside…. Capisce?
Now yesterday I said that I thought the VIX – which has made a strong advance – would kiss the long term trendline but fail to push up and through….….Well, we kissed it (17.61) and are now backing off – this morning the VIX is trading at 17.17….And while I think its just a bit of a pullback – I do expect to test it again before month end….What happens then?
The S&P ended the day at 4330 – slicing right through trendline support at 4373 yesterday like a hot knife through butta (a favorite Barbara Streisand quote – so NY). We are now in a new trading range…. with the long term trendline support at 4189 and resistance at 4373…. I’m thinking that today will be about consolidation and digestion of the move this week…. Next week is the end of the quarter – so we could see more volatility as asset managers prepare for the quarter end marking period. Sit tight. It’s all good.
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.
Shrimp Scampi Over Linguine
This takes all of 20 mins to prepare and serve….an easy dish that appears harder than it is….
You need only a couple of things….1 lb. of large cleaned, deveined shrimp, butter, olive oil, onion, garlic, lemon, white wine, chopped parsley, s&p….and a lb. of linguine….and of course some fresh grated parmigiana cheese….
Bring a pot of salted water to a rolling boil ….
In a sauté pan – melt butter and add a splash of olive oil, add crushed/sliced garlic and sliced onion……and sauté for about 10 mins……. keep heat on med so that you do not burn the butter, garlic, or onions…
Now add the linguine to the boiling water…. stir…
Next add the shrimp, s&p, and sauté quickly until nice and pink on both sides…no more than 5 mins……
Now add juice of one lemon, complement with some white wine…about 1/4 cup…in pan – and a glass for you – turn heat up to high and let the wine steam away…no more than 2 mins……strain pasta – reserving a mugful of water – add pasta to sauté pan and a handful of fresh grated parmigiana cheese…. – mix and serve…. You may need to add back a bit of the pasta water to keep moist -as the pasta sucks up the juice…. Serve in warmed bowls with fresh grated cheese at the table.
Buon Appetito
