3 yr Note Auction Goes Well, 10 yr is Next. Chip Stocks take a Breather, Reg Banks – Oh boy! Try the Short Rib Bur…

Kenny PolcariUncategorized

Free Stock Exchange Wall Street photo and picture

Things you need to know.

–         3 yr. note Auction goes well, the 10 yr. auction is today.

–         More FED Heads repeat the same narrative – Change your expectations.

–         Chip Stocks come under a bit of pressure.

–         Regional Bank stocks under pressure too…. NYCB gets smashed.

–         And look at those transports!  Shippers/Rails having their day in the sun.

–         Try the Short Rib Burgers this weekend.

Stocks churned most of the day…. while bonds – which have been under pressure of late, did rally back – the TLT and TLH up 0.9%…. sending yields down…the 2 yr. and 10 yr. yields lost 6 bps – this after surging 27 bps in 2 days…. all this happened as investors digested the $54 billion 3 yr. note auction and awaited the $42 billion of 10 yr. treasuries coming to the market today.  Now the 3 yr. note auction did see strong demand – and that sent a signal to the markets helping traders shrug off a host of cautious remarks by all of the FED heads that have come forward since the FOMC meeting….JJ, Kashkari, Goolsbee, Mester and Harkin…all suggesting that the central bank is in NO rush to do anything – specifically cut rates…..  The message being sold by the FED now is that ‘policymakers will probably gain confidence to ease later this year, if the economy evolves as expected.’  Later this year was left undefined – which means it’s left open to interpretation…and we know – everyone’s interpretation is different…. People hear what they want to hear vs. what is actually being said….

Look – even Izzy Schnabel – a member of the ECB’s executive board – said it out loud……’Policy makers must be patient and cautious’ – so the message continues to be the same…. Today we will hear from the FED’s Adriana Kugler – member of the board of governors and Tommy Barkin – Richmond FED President – will they buck the trend and say something different, or will they fall in line to show a united front – finally putting the March and May narrative to bed?  

At the 4 pm bell – the Dow gained 140 pts, the S&P gained 9 pts, the Nasdaq added 11 pts, the Russell up 15 pts or 0.8%, the Transports added 322 pts or a whopping 2% while the Equal Weighted S&P lost 55 pts or 0.8%.

Chip stocks – which have been on fire – took a break – the Semiconductor ETF falling by 1.2% on the day…. AMD – 3.6%, AVGO -1.6%, LSCC – 2%.  NVDA which has surged by 37% ytd – came under pressure – falling 4.4% (and raising all kinds of alarm bells for some investors) by noon before rallying back to end the day down 1.6%.  A headline suggesting that Super Micro Computer (SMCI) – a name I highlighted 3 weeks ago when they reported…..was a ‘backdoor to AI’ – demand for their servers has grown exponentially and it is those servers that provide the infrastructure for the chips that run the AI applications…SMCI is up 700% since the start of 2023 – 137% of that in the first 6 weeks of 2024.  SMCI closed at $681/sh last night.

And look at those transports! Amazing performance and if you look at the index- you’ll see that it is only up less than 1% ytd…but it is just 4% below it’s all time high……and if you look at the IYT – iShares Transportation ETF +2.7% ytd – it has broken out and made a new intra-day high and a new closing high at $269.54.  Now, let’s be clear – there is nothing ‘sexy’ about the transports at all….but you can’t argue with their performance…..The top 3 holdings that make up 45% of that etf are – UNP, UBER & UPS, the next 3 are – ODFL, CSX and NSC – and they total 60% of the etf…and of those 6 names….all of them except UPS are kissing or making new highs – the story?  We are ‘officially’ out of that shipping ‘recession’ that we’ve been in; p/e multiples are trading at a 5.5% premium to the S&P and the environment is getting ‘more constructive’ providing a catalyst for the group.  The rails as a group are up 3.3% ytd – with Canadian Pacific – CP, CSX and Norfolk Southern – NSC all up ~ 6.5% or better….

The chatter all around the street is that no one is talking about a broad recession any more….we are and have seen – rolling recessions thru different parts of the economy – the transportation sector just the latest to ‘emerge tremfyant’ (sorry, I couldn’t’ help myself!)….yet – let’s not get too far ahead of our ski’s…..and as we churn at the highs – you can feel the exhaustion….you can feel the tiredness….look – stocks are expensive right now…S&P trading at 22.5 x’s forward earnings…much of this a result of the expected multiple rate cuts….which don’t seem to be the same multiple rate cuts that they were pushing only 2 months ago….what was 6 or 7 cuts is now maybe 2 or 3 and I don’t even see that…..If we get 1, I’d be impressed – Why?  Because the current data does not support any cuts…….and while we can say that we expect the economy to weaken – we’ve been saying that for 18 months now….and we are still going strong…..Now at some point – it will weaken, at some point the bears will have their day and then the FED will cut rates – It’s just not today.

Now NYCB – oh boy – that is ugly…and getting uglier – Moody’s downgrades them to ‘junk status’ – the stock getting kicked in the gut…down 22% – the 4th time in 5 days that investors have taken double digits out of it…..NYCB is now down 50% from last week when they announced their earnings, slashed their divvy and exposed some of their exposure to the NYC CRE market and it was not pretty….and apparently its getting uglier by the day….what was a $14 stock in July 2023 is now a $4 stock in February 2024… The KRE – which is the S&P Regional Bank ETF lost 1.6% yesterday and is now down 10% ytd…. names in that sector include TRC – 1.8% ytd, CFG – 4.8% ytd, RF – 7.8% ytd, PNC – 3.6% ytd, ZION – 11.3% ytd….and a dozen more….  Get ready – the CRE market is beginning to show even bigger cracks in the foundations…. but don’t worry – all of the big PE firms and Asset Management firms are salivating to pick these buildings up for pennies on the dollar……

As noted, – there were (are) no economic data points to drive the conversation this week – it is all about the slew of earnings reports that we have been getting…todays include HLT, BG, CG, ARCC – all beat…. traders await UBER, EMR, RBLX, CVS, YUM…. After the bell – look for PYPL, WYNN, EFX, DIS, MCK etc.….

CVS just announced and beat the number but WARNED of HIGHER medical costs…. forcing them to cut their full year projections – stock is quoted down 0.3%……Higher medical costs?  I thought prices were coming down.  Oh, right, I forgot – that’s in the used car industry…. Not in industries that affect you and me on a daily basis – think food, utilities, housing and medical expenses….

This morning US futures remain mixed…Dow futures down 20, the S&P’s +1, the Nasdaq up 25 and the Russell is down 8.  Fed Presidents Loretta Mester and Patty Harker both warned of getting too excited about rate cuts and today we prepare for 2 more FED heads to speak.   Treasuries are steady ahead of today’s sale…. the 10 yr. is hovering around 4.12%…. Now the sense is that the sale ‘should go well’ given the move in bonds that have forced yields higher over the last week….so let’s see if buyers stand ready to just ‘scoop them up’!

Oil is trading at $74 after testing $71.40 on Monday…. The story now?  US production is not expected to exceed 13.3 mil bpd (record production) until February 2025…. OK – let’s go with that……Whatever…. The fact is we remain in the $70/$75 range…

Gold is holding steady at $2,050 – Yesterday’s successful $54 billion 3 yr. note auction helping gold steady while today’s $42 billion – 10 yr. note auction is expected to go off without a hitch as well. Gold also remains in the $2,030/$2,100 trading range as well.

European markets are all lower this morning…. Markets across the region down about 0.4% – 0.9%. Weakness today being credited to rate cuts…or lack of….

The S&P closed at 4954 – up 11 pts….….…. …. Look, we continue to churn in a tight range….4850/4970…. I think it feels a bit toppy here…. but that does not mean you bail….it just means you remain patient and take advantage of the weakness when it comes…. I guess the question is – when is it coming??? 

Remember – a move within 9% is considered normal trading…. which means we could trade as low as 4500 before it raises ‘alarm bells’ – Now, I am not suggesting that is going to happen, I’m just reminding you of normal trading bands.

Talk to your advisor, if you are concerned.

Take good care.


Sources:  Bloomberg, CNBC, Reuters, Wall Street Journal

Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. 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 Kenny Polcari or SlateStone Wealth.

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, which may not necessarily align with our firm’s standpoint.

While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.

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.

Chef hat, knife, and fork icon

Short Rib Burgers with Puerto Rican Pink Sauce aka Mayo ketchup


6 to 8 beef short ribs, s&p (for seasoning), Olive oil (for browning),

2 large white onions, chopped, 1 bunch of celery, chopped, 1 bag of carrots, chopped, 5 cloves of garlic, smashed, 1 can of beef broth, 1 can of tomato paste, 1/4 to 1/2 bottle of red wine.


Your short rib meat (shredded), Ground chuck (not lean), s&p, Caramelized onions, Monterey Jack cheese, Brioche buns, butter (for toasting buns), Arugula.


Ketchup, Mayonnaise

These goes beyond your basic burger. And this one isn’t fast food. It takes a bit of work, and that’s my favorite kind of recipe. So, make these when you can take your time and enjoy the process. They’re a great labor of love for when you want to impress your guests or treat your family to something special. They’re crazy good.


First, let’s talk about the heart and soul of this burger: the short ribs. You’ll want to get these goin the night before because we’re slow-cooking these beauties until they’re fall-apart tender.

Pre-heat the oven to 350 degrees Fahrenheit/177 degrees Celsius.

Start with half a dozen short ribs. Season with salt and pepper.

Brown in a frying pan with a bit of olive oil. Make sure to brown all sides, being careful not to burn the meat.

After you’ve browned them, place them in a deep baking pan, lining them up on their sides.

Next, large chop 2 white Spanish onions, 1 bunch of celery stalk, and 1 bag of carrots. Smash 4-5 cloves of garlic and add to the meat, making sure you disperse the garlic all around.

Next add the chopped veggies right on top.

In the frying pan that you used to brown the meat, add: 1 can of beef broth, 1 can tomato paste, and 1/4-1/2 a bottle of red wine.

Mix well and let the broth come to a boil for a couple of minutes as you steam away some of the alcohol in the wine.

Bathe the short ribs in this mixture and cover tightly.

Place the baking dish in the oven and let it cook for 4 hours.

When cooked, let it cool. Then shred the meat using two forks and set aside.


Bring the shredded meat to room temperature and then mix the cooked short rib meat with ground chuck (and use real ground chuck, not lean hamburger meat — you want it to have the fat for flavor). Season with salt and pepper and form the burger patties.

Light the grill and let it get nice and hot.

Cook the burgers and melt the cheese — the melt is non-negotiable.

Toast the brioche buns for that perfect crunch.


Alright, now for the fixins. Our Mayo ketchup—pronounced “my-oh-ketchup”—is a staple in Puerto Rican kitchens. Mix some mayo and ketchup together in a bowl and you’re done.

This classic condiment goes by a number of names around the world — Mayo-Ketchup, Pink Sauce, Fry Sauce, Salsa Rosada, Salsa Golf, Marie Rose sauce — depending on where you are. But on my wife’s side of our family, I’ve known it simply as “my-oh-ketchup.” Slather on your sauce and top with arugula and caramelized onions. Outstanding.

Buon Appetito.