Things you need to know.
– Stocks surge…but was it a one-day deal?
– NVDA? Stock Split?
– Bitcoin readies for its ETF debut – surging up and through $47k.
– China threatens Taiwan – with a spy balloon.
– Try the Sicilian Swordfish
Yahoo!!! The rally is back on……! The Mag 7 is in fact alive and well…. (Well, it was yesterday – today is a new day and futures are lower….…)
Bam! Stocks rose on Monday – TECH which has been beaten up (a bit) – making a rebound as investors, traders and algo’s reconsider the tone of the markets ahead of some key inflation data and the start of earnings season easing the anxieties created in the first 4 days of 2024…..….And as a result, you can expect that anything in the ‘tech’ universe outperformed (since they have been the underperformers) …..AAPL – the poster child this year of tech underperformance – down 6% – advanced by 2.5% to end the day up $4.40 sh….after testing and bouncing off of its long term trendline at $180.20 – ending the day at $185.56…..In yesterday’s note – I pointed out that the RSI (Relative Strength Index) was flashing ‘well oversold’ and while it could still trade lower – a bounce was likely….and BAM! There it is….
NVDA (also a wonder drug of a stock) now has a 5 handle on it…. advancing by 6.5% or $31.50/sh to end the day at $522.35. News that they are introducing new chips to ‘help’ the PC industry create even more artificial intelligence lit that stock on fire. In addition they are planning on ‘mass production’ in the 2nd qtr. of an AI chip designed specifically for Chinese use….that meets the US export rules – locking in the nation as a customer solidifying his income stream….and then the ‘rumor’ that suddenly the street is talking about is the idea that NVDA is readying to split the stock – now this is NOT confirmed – but speculation is building – since the last time they split it (July 2021 – 4:1) the stock was trading at $560…..And if that is true – if you own 100 share at $522 – you would end up owning 400 shares at $130.50.
And not to be left on the sidelines – Cathie Wood – is talking her book and repeating her call for declining inflation in 2024 that will result in the FED slashing rates to prevent inflation from becoming deflation – and if they ‘slash’ rates – we can expect tech and ‘disruptive tech’ to surge….Woods’s ARKK etf rising 2.9% on the back of those comments….
At the end of the day – the Dow gained 216 pts or 0.6%, the S&P up 66 pts or 1.4%, the Equal Weighted S&P +68 pts or 1.1%, the Nasdaq gained a whopping 320 pts or 2.2%, The Russell added 38 pts or 2%, and the Transports added 138 pts or 0.9%.
And as you can imagine – anything in the TECH universe – got ‘sucked up’ in the move higher…. Disruptive Tech +2.9%, Cybersecurity + 2%, Semi’s +3.25%, AI +4.8%…Capisce. In fact nearly every sector – barring energy ended the day in the green….the XLK gained 2.5%, Consumer Discretionary + 1.7%, Communications + 1.6%, Real Estate +1.4%, Utilities and Consumer Staples both up 0.7%, Industrials and Financials up 0.65%, with Basic Materials up 0.5% leaving Energy to hit the skids – down 1.2% – this as oil collapsed (more on that below) – falling $3 or 3.9% dragging Oil Services – OIH down $7 or 2.4% and Oil Exploration & Production – XOP down $1 or 0.8%.
And while BA and Spirit Aerospace were the dogs of the day – BA falling by $20 or 8% and SPR down $3.50 or 11%, the airlines did NOT end the day weaker…..in fact the JETS etf closed up 2%…UAL – which discovered some ‘lose’ bolts on some of their planes (fuselage) ended the day up – adding $1.20 or 2.8%. ALK (Alaska Air) which managed to take back some of the early losses did end the day down 8 cts or 0.2% – but there is so much more scrutiny happening there…..as it was learned that the plane had been flashing ‘warning lights’ on the dashboard for weeks now…yet no one apparently thought it was an important indicator light…… The other major airlines all ended the day up…. DAL + 2.7%, AAL +7%, AC – +3.4%, HA + 0.4%, & JBLU + 3.2%.
And with all that excitement – the VIX – fear index – did as you would expect – it traded down…. because when the market goes up – fear goes down…. it’s just the way it is…. It ended the day down 30 cts or 2%.
And not to be left out – Bitcoin pierced $46k and is now up 10.4% ytd…. this as the ETF approval appears to be imminent….US regulators are readying to approve ETF funds that invest ‘directly’ into the asset for the very first time. In November – I mentioned that the industry would reach out to Larry Fink of Blackrock fame to legitimize the asset….to put some real credibility behind it – to put a ‘face’ on it….…and that is exactly what they did. Now to be fair – Fidelity, Wisdom Tree, Invesco and Galaxy Digital are among the other firms filing amended applications- but they are not Larry Fink – I mean they could have considered Jeremy Siegal (Wisdom Tree)– but – Nah! Or Abby Johnson of Fidelity fame – but nah again…. she is not a ‘spotlight’ type person…. It was Larry that they chose to legitimize the product – but it is Jonathan Goldsmith (“The Most Interesting Man in the World” – think Dos Equis) that they decided to put on TV…… as the newest voice to support the effort….and in the Bitwise commercial Goldsmith asks-
“You know what’s interesting these days? Bitcoin”! (Kudos to whoever came up with that idea – That is very clever….)
In the end – markets and investors are looking for direction…in fact they are aching for answers – answers that do not seem to be so obvious…. One day it’s all about the FED – and what the next move is…. first, it’s hold here, then it’s a hike and then its 6 cuts…. the next day it’s all about the eco data and the next day it’s all about – The Hootie’s and Hamas…as they continue to create chaos across the Middle East…and then it’s China’s decline one day while the very next day it’s all about how China is importing oil at record rates…as the Chinese economy remains robust….It’s about the Saudi’s and OPEC + trying to control the price of oil while the Non-OPEC producers flood the oil markets causing prices to decline and the Kingdom to stamp their feet…..as the price of oil remains at least $10 below what they want to see…and if the supply side of the equation remains strong then I suspect we will see oil continue to churn a bit lower…. Because as I told you yesterday…. this is NOT a demand story at all…. demand remains robust – it is all about how supply has grown exponentially….and when supply exceeds demand prices fall… (Econ 101).
In the end – that rally that we all witnessed in the closing weeks of 2023 did nothing but pull potential gains from 2024 into the end of 2023…..and this now makes it even more interesting to try and understand the markets in 2024….…especially since the data remains confused, the FED message remains confused and ANY rate cut is already priced into the markets…… but remember – 5% rates are historically normal and markets can function in that environment – it’s the generation of investors and asset managers that only know zero rates that need to learn that lesson…..Us Baby Boomers understand this dynamic very well….and we also understand that stamping your feet is not the suddenly going to change the outcome….or…maybe it will…. – My how times have changed. I remember when the FED used to come out on Thursday mornings at 8:30 – make an announcement and turn around and leave…..there were no questions asked, there was no conversation to have, they didn’t hold your hand or offer you a Xanax – they made a decision and it was up to the markets to reconcile it – Period the end….Oh boy…THOSE were the days… and in a tribute to the British/Welsh singer Mary Hopkin – I present that 1968 hit –
Bonds rallied a bit on the bounce -or maybe we got the bounce because bonds rallied…. Which came first, the chicken or the egg? It’s a conundrum…. but in the end the TLT and the TLH each rose by 1% and that sent yields just a bit lower…. nothing dramatic but that’s the way it works…Price rise and yields fall, prices fall, and yields rise. This morning though – it appears as if bonds are weak as yields rise…. the 2 yr. is yielding 4.374%, the 10 yr. is yielding 4.04% – once again creating a bit of angst for stocks….
Oil fell by $3.25 or 4.4% – after the Saudi’s CUT crude by pricing it only $1.50 above the regional benchmark while OPEC announced a rise in output (more supply). BMO puts out a report suggesting that oil demand will grow by 1 million bpd in 2024 and 1.7 million bpd in 2025 – making it clear that higher inflation and higher interest rates does NOT mean that demand can’t or won’t grow. This morning we are seeing a snapback – with WTI rising $1.25 to $72.03/barrel. It remains in the $68/$75 range.
Gold – which was trading lower yesterday morning did test trendline support at $2028 during the day – ending the day just above the line…at $2034….this morning – Gold is up $8 at $2041…leaving it as discussed between the $2028/$2100 range….and this will remain the case until something changes at the FED….Rate cuts will send gold up while raising rates will send gold down….A failure to hold the trendline at $2028 will see it trade lower …If nothing happens – then it remains in this range.
This morning – it appears as if the party is over….US futures are down…. Dow futures -120 pts, S&P’s -15, the Nasdaq -75 and the Russell is -25. Yes, the rally felt good yesterday but appears to have been nothing other than a technical bounce – you have to ask – did anything really change? The answer is NO – we didn’t get the new inflation data yet, we didn’t get earnings yet, we didn’t get any clarity on the next FED yet and the eco data remains mixed at best….so it appears as if the ‘rally’ was a flash in the pan….
What we did get was a ‘warning’ from Larry Fink (Blackrock) about the dangers of the ‘debt fueled gov’t spending during an election year and we got a warning from former Bond King – Billy Grossman who said that the 10 yr. bond is ‘overvalued’ with a 4% yield suggesting that prices will fall and yields will rise and that will put pressure on stocks……….All this as we ready for that tidal wave of domestic and international gov’t debt that is coming to the market (US, Austria, Italy, Netherlands, UK….) ….Remember – Janet needs to ‘borrow’ $816 billion in the first qtr. of 2024….No idea yet of what she needs in the 2nd, 3rd or 4th qtrs.…..and remember Econ 101 – supply/demand equations….in this case – more supply only means that buyers will bid lower and that will cause yields to rise….as buyers want to be rewarded for their ‘generosity’ and the gov’t NEEDS the help.
Eco data – nothing of any significance today…. The week awaits the CPI and PPI on Thursday and Friday.
European markets are all a bit lower today…. nothing new on the eco front but more of the angst building around earnings, FED, ECB, BoE policy moves and inflation concerns. Markets across the region are all down by about 0.3% other than Spain which is getting clobbered – down 1.7%.
The S&P closed at 4763, up 66 pts. As noted – all of the excitement driven by the TECH sector…in what was viewed as an ‘oversold’ condition….Like I have been saying….I expect the markets to churn a bit lower….during the 1st qtr.….but that doesn’t mean we need to sound the alarm………stocks are not spinning out of control…but I do think they are repricing….and will reprice as we move thru earnings season…. Remember – the markets could trade down 9% and still be within the normal trading bands…. We are nowhere near that move….so let’s put it in perspective.
On a side note –Xi Xi is at it again…. China launched a spy balloon over Taiwan – just days before the election….Taiwan put their citizens on notice as the balloon is being considered an act of aggression…Taiwan has exercised restrained caution, but has not ruled out shooting it down…and this is how it begins….Xi Xi has made it clear that Taiwan belongs to him and he intends on taking it back and will most likely do so when the US is considered ‘weak’…. Just sayin’
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Sicilian Swordfish
This dish is easy to make – it will tease your senses – and tickle your pallet – only takes about 15 or 20 mins to prepare and 20 mins to cook….enough time to set the table, pour the wine, light the candles, put on the music and dim the lights…..
For this you need: Raisins, green olives, capers, pignoli nuts (pine nuts), tomatoes, garlic, onion, s&p, olive oil and swordfish.
**Preheat oven to 400 degrees (f).
Season the swordfish with s&p.
Next soak the raisins in warm water for about 1/2 hr… drain and set aside.
Heat the olive oil in a sauté pan on med high heat…. sauté the diced onion and crushed garlic until soft. Do Not Burn. Maybe like 5 / 8 min’s…. add raisins, diced tomatoes, chopped olives (no pits!), and capers – like 1 tblspn. (If you like capers feel free to add a bit more – but not too much as the taste will overpower the dish). Reduce heat to simmer and cover…stirring occasionally…. for about 15 min’s or so…
Place the swordfish in a baking dish and cover the fish with the raisin/olive/caper/tomato mixture – bake for 15 min’s or until the steaks are firm….
Present the fish on a warmed plate with steamed green beans and a large mixed green salad with red onions, cucumbers, grape tomatoes, maybe some fresh mozzarella…. dress with s&p, oregano, a splash of fresh lemon juice, balsamic vinegar and olive oil.
Buon Appetito
