Things you need to know.
– Stocks struggle at the highs – lots of geo-political and economic stuff to consider.
– Earnings season is now officially underway…so far – it’s a 100% beat rate…Amazing, no?
– Taiwan elections take place – Beijing not happy.
– Iowa – votes for Donny, then Ronnie, then Nikki. Vivek Drops out.
– Hootie’s threaten to continue to attack US and British ships.
– Try the Pan Seared Thighs in an Onion/Mushroom/Spinach Orzo.
So much going on……
We awoke on Friday to learn that the US and the UK had taken retaliatory strikes against the ‘Hootie’s’ overnight (Thursday), after they keep challenging and taunting us and the civilized world – raising the temperature in the Mid East – sending global oil markets surging and leaders on the edge.
We were also preparing for the results of the Taiwanese election – which took place on Saturday. Who would win and how would China respond? Well, Saturday morning – we found out that Lai Ching-te won the Taiwan Presidential race – now just to be clear – he is China’s LEAST preferred candidate and Xi Xi is NOT happy…..the media says that ‘China is not pleased with Ching-te’s win and now he (Ching-te) is tasked with preventing Beijing from coming in to take over…..His victory is being seen as a failure by Beijing because his party lost Parliamentary control….which means there is a split gov’t. Beijing is playing this off as a non-event (of course they are) – the media is saying that there is no immediate threat to Taiwan, I am playing it as if there is – Xi Xi cannot be trusted – he is in bed with the enemies…Russia, Iran and Syria. My guess is that the plan for ‘re-unification’ has now entered stage 2.
We also were also anxiously awaiting the start of earnings season with the kickoff by the big banks – and if that wasn’t enough – we were also awaiting the latest PPI report – considering that the latest CPI report on Thursday was HOTTER than expected….and so, there was PLENTY to focus on – it was just a matter of what you wanted to focus on….You got your choice – Geo-political, Earnings or Economic data…or any combination thereof….
And then the beauty pageant began – At about 6:30 am we started to hear from the big banks – JPM, C, WFC and BAC, we heard from a very large asset manager – BLK and then one of the biggest, if not the biggest insurer in the country – UNH….and guess what??? Not one of them missed their earnings – can you believe that? And all of them presented caution ahead. It was 8 for 8…100%…. Were you expecting something different? Didn’t we discuss this?
Jamie Dimon – said that the US economy is resilient – due to large amounts of gov’t deficit spending, he expects inflation to be stickier than markets expect, he also thinks interest rates may be higher than the market expects and while their profit slipped – it was still the MOST profitable year ever…and they allocated $1.4 billion to the loan loss reserve account.
WFC – beat on revenues, beat on earnings, increased their efficiency ratio, but they are seeing some ‘deterioration’ in customer credit, Credit losses were $1.28 billion vs. $937 million last year….yet – guess what – they expect to issue MORE credit cards in 2024…..(something seems off about that, no?) Whatever…
BLK – beat on the top and bottom lines, they raised their dividend, they topped the $10 trillion mark for AUM for the second time, Fink (Larry) thinks that inflation will be stuck at 3%+ but sees the FED cutting rates in June (not March) and he is now the FACE of crypto as an asset – saying “I believe, I believe!” – Of course, he does – the Blackrock Bitcoin ETF saw $500 million of inflow in just the first 2 days of trade – which equates to 11,439.2198 bitcoins – and that along with the other 10 ETF’s pushed bitcoin to a high of $49k before it settled back in and this morning it is trading at $43k up 1% ytd.
UNH – they beat too! 4th quarter revenue of $94.43 billion vs. the estimate of $92.1 billion – think higher insurance rates (at who’s expense?) They reported that they added 100k Medicare members during the enrollment, but they did report higher medical costs (Duh! – we see that in the CPI figures every month) and that sent the stock down 3.3% or $18/sh….
At 8:30 we got the all-important PPI – Producer Price Index – which kept many on the edge of their seats coming in ‘weaker’ than expected….(Which is good) and that just ignited the whole – FED will cut rates in March story (again) and that initially sent markets surging – at 10 am all of the indexes were printing at the day’s high….- but then they weren’t…..Recall – it was a 100% chance of a cut 2 weeks ago, then it fell to sub 50% chance after we got the hotter than expected CPI and then after the weaker PPI – that percentage jumped back to over 80%…… so like they say – the inmates are running the asylum……..Taken individually – the eco data points suggest one thing, but taken as a whole – the data points suggest – ‘not so fast’ and that was once again confirmed by FED officials pushing back on that narrative….Yet, the inmates are not hearing it…..So, let’s see who wins this battle….
At the end of the day, it was a mixed performance…. – the Dow lost 118 pts, the S&P gained 4, the Nasdaq gained 3, the equal weighted S&P lost 12, the Russell fell by 5 and the Transports gave up 65 pts.
Oil – which was up by 4% in the early morning hours on Friday – did tick as high at $75.25 on the back of the confrontations in the RED Sea – but did end the day only up 1% at $72.76…..this morning oil is trading up 25 cts at $73 as the conflict continues and ship tracking data shows that more tankers and container ships are avoiding the RED Sea and the Suez Canal and you know what that means? Egypt, Jordan and to a lesser extent Israel are all facing threats to their economies – remember 70% of global shipping is now being re-routed around the Cape of Good Hope -rather than thru the canal and that means a drop in revenues for the canal….
Egypt has 3 major sources of revenues…. The canal produces about $10 billion/yr., tourism produces about $10 billion and gas exports produce about $10 billion. All 3 of these sources have been disrupted since the events of October 7th between Hamas and Israel and now the events taking place in the RED Sea – between the Hootie’s and the Western world….both events being funded by Iran…..Leaving us to ask – How much longer will Egypt (and the civilized world) allow this to go on?
Gold ended Friday up $35 or 1.7% at $2053/oz…this morning it is pulling back just a bit- down $7 at $2,046/oz. Yes it rallied on the back of the conflict (think safety trade) and the idea that the March rate cut bets are now pushing 80% – but nothing dramatic happened over the weekend in the RED Sea so the focus returns to what will the FED do…and if the FED is not going to cut rates (as expected) in March – then Gold will back off and that is exactly what is happening….Gold remains in the $2,030/$2100 trading range.
The VIX – which has been trading at historic lows for 3 months now – is suddenly lifting its head….this morning it is up 5% at 5 am…but was up as much as 7% overnight…..Remember – I told you to pay attention to this fear index….it was suggesting a lot of complacency and it was just a matter of time before something (or things) came out of left field – so think – earnings, the RED Sea, and the FED and while NONE of this is new – each one of them is heating up, so taken together – it raises the temperature and when that happens – fear goes up and stocks back off.
The WEF (World Economic Forum) is taking place in Davos, Switzerland…so expect to hear all kinds of commentary from ‘important’ people all around the world…. The theme this year? Rebuilding Trust! Are you kidding me? Apparently, they are going to discuss ‘pressing economic and geo-political issues’ – think inflation, supply chains, AI, global conflict and security challenges…. funny, I didn’t see anything about climate.
Today brings commentary by Chinese Premier Li Qiang, EC President Ursula von de Leyen, US National Security Advisor – Jakey Sullivan (can’t imagine what he has to say) and Ukrainian President and Biden supporter – Volod Zelensky…
This morning US futures are lower…. (interesting, no?) VIX up, Stocks down? Dow futures -200 pts, the S&P’s down 27, the Nasdaq -125 and the Russell down 18 pts…Again – why is anyone surprised? And BTW – what does that really mean? Nothing…we are still kissing near all-time highs – It’s not like stocks have fallen out of bed….I like so many others – would like to see more of a shift lower in prices in order to put more money to work……So sit tight….I do believe that the 1st quarter will remain volatile…
We are now all in on earnings…. the next 4 weeks are going to be full of it…and today we will hear from GS, PNC, MS, IBKR. Later in the week – we will hear from USB, SCHW, DFS, AA, KMI, KEY, RF, HBAN, ALLY, STT, CMA and the list goes on….
And then there were 3…… – Iowa held their GOP caucuses on Monday evening and it took all of 5 mins for the pundits to call it for Donny…..by a wide margin….better than 55%….leaving Ronny in the second position, Nikki in the 3rd position and Vivek trailing badly – forcing him to concede and drop out of the race – immediately throwing his support behind Trump – and that should not be a surprise…what did you think he was going to do? Next question is what he will accept – the VP nod or a cabinet position?
Eco data this week includes the Empire State Manf survey, Mortgage Apps, NYFed Business Activity, Retail Sales, Industrial Production, Capacity Utilization, the Fed’s Beige Book, Housing Starts, Building Permits, and Existing Home Sales.
We are about to enter the spring selling season for housing….and the recent drop in rates is causing both sides to reconsider a move…Expectations are for mortgage rates to continue to fall – with some saying we will see a 4 handle pretty soon…– I am not in that camp…But, it is a Presidential election cycle so anything goes….
Stocks in Europe are all lower …. Banks and retailers all weaker…. ECB telling us that ‘it is too early to declare victory on inflation’ Markets across the region are all lower by about 0.7% to 1%.
The S&P closed at 4783 – Leaving it kissing up against its most recent highs- but unable to pierce it…. There is a lot happening – and expect to hear all kinds of commentary out of Davos. Watch what the C-suite has to say about the future, there is plenty of money to put to work, but sitting in cash for the long term is not the best investment strategy…. Talk to your advisor to see what the right mix for you is. There is an increased level of caution…. Investors want to see how this earnings season plays out and how the geo-political situation plays out.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Pan Seared Chicken Thighs in an Onion/Mushroom/Spinach Orzo…
This is a ONE pan meal…easy to make and easy to eat….
I made this on Friday and posted a picture on my X account (@kennypolcari) – it was delish…
For this you need: 6 thighs, bone in, skin on, 2 garlic cloves (smashed), 1 lg yellow onion, sliced mushrooms, ½ bag of fresh baby spinach, Olive oil, butter, s&p, chicken broth, heavy cream, orzo pasta.
Start by seasoning the thighs – with s&p – you can add other seasonings if you want…I also used adobo…. (This is a Spanish style seasoning…You can find it in the spice aisle – I use it for a lot of things….)
Start by heating up ¼ stick of butter and a splash of olive oil, now add the smashed garlic and the sliced onions….sauté for about 10 mins – on med/med hi…careful not to burn…now add in the sliced mushrooms – and sauté until all of the mushroom water evaporates and the mushrooms are nicely cooked. Now remove and place on separate plate and set aside.
Now – add a ½ stick of butter and another splash of olive oil to the same sauté pan…. – when it’s nice and hot – add the chicken pieces – making sure to brown on both sides – so that it’s got a nice crust…. remove and set aside. (don’t worry about it being undercooked – you’re not done yet.
Now add the dry raw orzo pasta and let it toast in the hot pan…. stirring to coat with the remaining butter and oil. Now – add back the onions/mushroom mixture, add in the chicken stock – enough to cover the orzo and then some. Bring to a boil and then turn the heat to low – so that it simmers… Now add in the heavy cream and a handful or two of the spinach and stir to mix.
Next – add back the thighs – placing them in the pan, nestled in the orzo – Cover and let simmer for 10 mins…go back and remove the top and mix it just a bit….allow it to cook until all of the broth is absorbed….(should be a total of 15 mins or so). Bang – it’s done. Remover from the heat and set aside….
When serving- make a bed of the onion/mush/spinach orzo and then place a thigh on top…. Enjoy.
Buon Appetito
