Things you need to know –
– Bernstein upgraded AAPL – stock advances 2.5%.
– Lonnie has lunch with XiXi and sells his soul – TSLA advances 15%.
– Earnings continue to satisfy, Guidance remains strong.
– FOMC to do nothing, NFP expected to show a strong labor mkt.
– Oil and gold retreat – think easing tensions and no rate cut.
– Try the Paglia & Fieno al Forno.
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The Cow Guy Presents –
“Greener Pastures with the CommonsensOcrats”
It is a panel debate/discussion & dinner with Scott Shellady, Mike Lee, Jim Iurio, Bob Iaccino and me – Nashville, TN – June 13th, 2024.
You can find the event info and registration here.
The hotel info is here.
https://www.hyatt.com/en-US/group-booking/BNARN/G-COWW
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Stocks powered higher on Monday – led by 2 key headlines.
One was that SC Bernstein UPGRADED AAPL causing that stock to surge by 2.5% while Lonnie surprised the markets/investors by making an unplanned, top secret trip to visit Xi Xi in Beijing where he got what is being called an ‘In Principle Approval’ for its ‘driver assisted’ technology in the world’s biggest market – this after reaching a mapping and navigation deal with (Chinese Tech company) Baidu and meeting all requirements about how it handles data security and privacy issues – meaning that Beijing will collect ALL time and travel data on anyone that chooses to drive this car (and by default my guess is that they will also collect all time and travel data on anyone ANYWHERE in the world that chooses to drive this car) – in any event – that news caused the TSLA cult members to trip over each other as they tried to get in on the action – sending the stock up 15.5% or $25/sh to end the day at $194.05. TSLA has now gained more than 45% in just 5 days…and don’t kid yourself – this one move has made an outsized impact on the direction of the S&P and the Nasdaq indexes.
Investors and traders and algo’s also sifted thru the ongoing earnings season as they prepare for a bevy of economic data points along with the latest FOMC announcement due out on Wednesday at 2 pm. At the closing bell – we saw the Dow gain 147 pts, the S&P up 17 pts, the Nasdaq up 56 pts, the Russell up 124 pts, the Transports +42 pts and the Equal Weight S&P +9 pts.
Now – while the earnings and the economic data remain a mystery, I don’t think there is anyone that thinks the FED is prepared to do ANYTHING when they announce their decision at 2 pm on Wednesday – not now, not in June, not in July……. In fact – the market is now pricing in a 57% chance of a September cut, which is comical – when will they stop and just listen to what JJ says? He is in NO rush to cut rates, no rush and if he were an honest man – he would not cut rates 6 weeks before a Presidential election – I’m not sure it could be any clearer…. …..…… Now, while I continue to believe that ‘it ain’t happening’ there are clearly some that believe it is happening…so they will position themselves ‘as if’….and that’s what makes a market…. buyers and sellers.
So, let’s be clear about this – First – the September FOMC meeting is on Wednesday. September 18th – just 6 weeks ahead of the Presidential election – so that is one reason it is NOT happening – the FED is not supposed to do anything in either direction within a 6-month window, never mind a 6-week window. – and two – unless the FED can convince the world and the country that the US economy is going down the drain – the data does NOT support a rate cut – you could argue – in fact – that the eco data remains robust and inflation remains alive and well so we could see a rate HIKE before we see a rate cut – So, before you go betting the whole ranch – consider the data…..
Next – we do have a strong earnings season under way…. yesterday I told you that.
“The first quarter earnings season really kicked into high gear last week. – 37% of the S&P reported results – and that now brings us to 50% of the total index having reported – 81% of those results are beating the estimates (vs the usual 74%) and the magnitude of those beats is running at a healthy 7.8% (this vs. the usual 6.5%)”
First qtr. earnings are now expected to increase by 4% y/y – compared to the pre-season estimate of flat.
After that – we have eco data that is sure to create all kinds of conversation and speculation around the state of the economy especially if it remains robust and healthy – once again leaving me to ask – Why do we need to cut rates to stimulate an overheating economy? It makes no sense….but you can argue that all of the spending that the Bidens have done has created a massive funding problem for the gov’t and that the amount of treasuries that Janet will need to bring to the market to fund/pay for all of this excess spending is a reason for them to try and cut rates in order to cut future interest expenses (yeah, ok….) – but look – the funding issue is a Supply/Demand issue – Janet along with the administration is going to have to realize that the more supply she brings to the market – the lower the bids will be and that will send yields surging (lower prices = higher yields). I mean why would buyers bid aggressively with so much supply overhang? So, if you think the FED will cut rates as yields surge – think again…. It ain’t happening….
Ok – so now that that is clear – let’s move on….
After a weak start to April – something that I said was a real possibility that should surprise no one (think concerns over coming earnings as well as Tax Day)– the first 2 weeks saw losses across the board – The Dow gave up 5.6%, the S&P lost 6.5%, the Nasdaq gave up 7.5%, the Transports coughed up 8.1% while the Russell lost 9.5% – Since then, we have seen stocks stage a bit of a rally (not completely but worthy) as we moved into the second half of the month….again – a typical chart pattern that is clear as a bell. What’s that rhyme? April showers bring May flowers. Capisce?
Then yesterday we had those 2 announcements and BOOM – the place lights up….and stocks push higher…..This week is loaded with even more data and more earnings – results from more BIG tech – AMZN*, APPL, AMD, & QCOM are all in line – we are also going to hear from MCD, KO, PYPL, APD, LLY and more. …the jury is out on what the Big Tech reports will reveal…AMZN is expected to stun them, AAPL is expected to struggle over iPhone sales in China (but it is interesting that Bernstein upgraded them ahead of the earnings) while AMD and QCOM are expected to ‘eke out’ small revenue gains.
(*AMZN + 19% ytd, AAPL -9% ytd, AMD +8% ytd, QCOM +17% ytd – my money says that AAPL is opportunity here – but that’s me….)
And it will be the results that will continue to drive the enthusiasm (or not) – will the excitement continue to drown out any sticky inflation issues? It might – for a short time…. – Look – last week it was GOOG and MSFT that lit the fuse – this week – we’ll find out if big tech can continue to light that fuse to power the momentum.
Now – the S&P did pierce 5100 and it did pierce 5120 – a level I identified as resistance and a level that I did NOT think would be pierced prior to the market testing support at 4920! – And so, I admit defeat (But, I will say – the Musk meeting came out of left field and the AAPL upgrade prior to earnings was a surprise that I did not expect) …..but I am still not convinced yet that the drawdown is over – which only means – I still have cash on the sidelines ready to be deployed.
Now bond yields did retreat (a bit), the 2 yr. is now yielding 4.97%, (down from 4.98%) the 10 yr. is yielding 4.61% (down from 4.62%) – all while the Treasury UPPED the ante for Federal borrowing this qtr. to $243 billion – which is well ahead of what the dealers had anticipated. This move makes no sense – considering she upped the ante – and so I think it was ill conceived….and I suspect that we will see that correct in the days ahead – and this morning both the 2 and 10 yr. bonds are trading a bit lower causing yields to rise.
Now – remember – the market is waiting for this week’s eco data and the FOMC press conference. Again, no one expects anything in terms of change, but as usual, they will be listening to the guidance in order to create the next narrative. Recall that they continue to try and push the multiple rate cut story – even though the US economy remains resilient. Friday’s all-important NFP report is expected to show an ongoing manufacturing recovery and strong job growth – Not what JJ needs to convince us of a reason to cut rates.
Oil fell by 1% on Monday to end the day at $82.60 – this as Antony Blinken pushes for a cease-fire between Israel and Hamas – something that is far from being done. A Hamas ‘delegation’ (which makes them sound and appear legit, they are not legit) – are expected to go to Cairo to discuss this proposal – Look – with no other news – the idea that a cease fire might be possible will cause oil prices to decline….Barring that – Expect a nothing done because Hamas isn’t really interested in a cease fire (and we don’t even know if the hostages are even alive) so I expect oil prices to remain in the $80/$90 range.
Gold also saw a decline…falling $11 to end the day at $2346 and this morning it is down another $24 at $2322/oz. …again – it is the idea that a cease fire is possible….(cooling tensions) but it is also about tomorrow’s FOMC meeting and Friday’s NFP report….We already know rates aren’t going down tomorrow – so that puts pressure on gold (and oil) so the markets will push out and look at the next important data point and that is the NFP report. Expect traders to look for reasons from the NFP report to justify their ongoing multiple rate cut narrative – while I just showed you how that is NOT possible. Gold remains in the $2300/$2400 range.
US futures are lower on this last trading day of April – Dow futures are down 50 pts, S&P’s down 10, Nasdaq and Russell both 30 and 7 pts respectively. Now, no one should be surprised to see a bit of caution on this final day of the month and ahead of the important eco and earnings data that is coming.
Look for 29 earnings reports before the bell…. names like LLY, MCD, KO, TAP, PYPL. After the bell – the market awaits AMZN, SBUX, AMD, CZR and more.
European markets are all lower this morning…. with the exception of the UK – that market is up 0.3% while Spain is off 1%, Germany and the Euro Stoxx Index down 0.5%, France and Italy both off 0.3%. Eurozone inflation data held steady at 2.4% keeping the whole ECB rate cut story alive – something I think is pre-mature. Look for earnings from a range of big European names…. Stellantis, Capgemini, Mercedes, VW, Lufthansa, Caixabank, HSBC among others.
The S&P closed at 5116 – up 16 pts – this after testing as high as 5123! (Yes, I already admitted defeat! But I did say that this week could prove me wrong, and it did). But just to be clear – it did CLOSE just below resistance – leaving us (officially) in the 4950/5120 range. With futures pointing down this morning- it’s anyone’s guess about what happens next. Expect ongoing excitement as the push/pull, ying/yang continues.
Call me to discuss.
Take good care, 
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Paglia & Fieno al Forno (Straw & Hay in the oven)
So, this is the white and green fettuccini– mixed with Peas, Prosciutto, Cream, fresh grated Parmegiana
For this you need: ½ lb. of white and ½ lb. of green fettuccini, diced shallots, frozen peas, garlic, heavy cream, butter and fresh grated parmegiana
Bring a pot of salted water to a rolling boil.
Pre heat your oven to 375 degrees.
Begin by sautéing 2 cloves of sliced garlic in olive oil, add in the diced shallots and prosciutto and sauté for 5 mins… Next add in the frozen peas and 1 tbspn of butter. Season with s&p. Turn heat to med low and allow the peas to defrost. Turn the heat off – let cool and then add 1 pint of heavy cream and a handful of parmegiana.
Add the pasta to the water and cook for 6 mins. When done – add the pasta to the peas and prosciutto and mix well. Add in 1 ladle of the pasta water Mix.
Now in a greased Pyrex dish – 9×12 – add in the pasta mix. Top with more grated cheese and place in the oven and bake for 40 mins. Remove and let cool for 10 mins. Cut and serve. Delish.
Buon Appetito
