Things you need to know –
– Algo’s go ‘all in’ – Stocks surge.
– AAPL does NOT disappoint – Duh! They raised the divy and announced a big buyback.
– Bonds rally on the No Hike narrative.
– Oil and Gold – hold steady.
– NFP due out at 8:30.
– Try the Penne Rigate – Spinach and Cherry Tomatoes…Yum!
–
And BAM! Stocks rallied and rallied hard – all on the idea that JJ has assured us that rates are absolutely, positively NOT going up…..Now while he did NOT say exactly that, that is what the market heard…Recall – it’s always about what the market hears vs. what JJ says……and in my mind, while he held off on cutting rates now for the seeable future, I did not hear him say that a possible rate hike is off the table…..I just didn’t – and if you can show me where that is in the statement, I’ll be happy to change my tune, but – you can’t because he didn’t.
Saying that ‘I think it is unlikely that the next policy move will be a hike’ is not saying rates are NOT going up….but this is just about semantics….you heard it one way, and I heard another way…..and that caused some to scramble to get back in while I just rode the wave….
And in the end – as I suggested yesterday – the algo’s went into hyper drive – (because they heard ‘no hike’) tripping over themselves trying to get ‘back in’ just as they did on Tuesday – when they tripped over themselves trying to ‘get out’ ahead of the FOMC meeting when they didn’t know what he was going to say….. In any event – it was an exciting day – stocks rallied hard across the board and if you were an investor that stayed the course you would have seen your portfolio perform beautifully. The Dow gained 322 pts or 0.85%, the S&P up 46 pts or 0.9%, the Nasdaq jumped 235 pts or 1.5%, the Russell added 36 pts or 1.8%, the Transports – ended up with the gold star – rising by 370 pts or 2.5% while the Equal Weight S&P added 41 pts or 0.6%.
Eco data revealed that the Challenger Job Cuts came in at -3.3% (poz), Initial Jobless Claims and Cont. Claims both lower than expected (poz), Factory Orders up 1.6% and Durable Goods up 2.6% (both in line which is viewed as a poz). But what did not get any attention at all – was the explosive Unit Labor Costs – they were expected to be up 4% and they came in at +4.7%! (That is not a poz number) – but it doesn’t fit the no hike story – it supports a hike story – and so they shoved it under the rug – not one word about it – Poof! Nothing to see here…move on…
And it was all about AAPL…. you could feel the excitement all day…what would CEO Timmy (Cook) have to say? What would CFO Lucas (Maestri) have to say…. Now remember – AAPL has been this year’s underperformer – coming into yesterday it was -12% ytd…all on China concerns and what it might mean for the iPhones, Revenue growth and gross margins…. etc…. you know the drill….you also know how I felt about it….I think it’s AAPL – that’s what I think….Now to be clear they took AAPL up $3.70 or 2.2% during the trading day….to end the day at $173.03 (remember this – see bold text below).
Yesterday I told you that.
My friend Stephanie Link – Chief Investment Officer at Hightower reminds us that AAPL has the ‘strongest installed base of any company in the world with 2.2 billion users’….
I said – they would have to report nothing short of a disaster for me to change my outlook on my APPL…. Not happening…. they earn $90 billion + every 3 months. In the end – it will be about their AI strategy and how they are dealing with any slowdown…..the balance will be about the usual data points – Iphone, Mac, Ipad, Wearable and Service revenues….Knock yourself out…The stock is down 12% ytd – below all 3 trendlines as it hugs the line at $169. This morning the stock is quoted UP $2 at $171.20…. trendline resistance is $172.59 – a push up and threw will see it challenge the next trendline resistance at $181 fairly swiftly. I guess you know what I think….
And guess what happened on the way to the forum? At 4:05 pm – AAPL earnings hit the tape…..EPS of $1.53 vs. the expectation of $1.50 – so that’s the first beat, Record Services Revenue of $23.86 bill, – second beat, Mac and iPad Revenues also outperformed – that’s the third and fourth beats, Now – iPhone Revenues missed – but we knew that – that is not a surprise, China sales lower – again NOT a surprise, Wearables also missed – again we knew that, so not a surprise…..they raised their dividend by 4% payable on May 16th to holders of record by May 13th (poz) and they authorized an additional $110 billion share buyback program (another poz) – and BAM….they took it up another $10.13 or 5.85% in the afterhours to end that session at $183.16! It sliced right thru trendline resistance at $181 before the ink was dry…and this morning it is quoted up $10 at $183/$183.50.
Need I say more? I didn’t think so…
Today brings the much-anticipated NFP (Non-Farm Payroll) report….and you can feel the tension…. what will this report say? Will job growth be stronger than the already expected strong number of 240k? – Recall – last months number was expected to be +214k and it came in at +303k – up 41% and that caused all kinds of consternation in the markets…suggesting that JJ was stuck between a rock and a hard place – and that is when the rate hike story started to take root….
What about Avg hourly wages? – Last month they were also up over the prior month (again not a poz for JJ) – this month they are expected to be up 0.3% m/m and 4% y/y, Unemployment to remain anchored at 3.8% (historically low and not helpful to JJ) – so we wait….and if the report is stronger that would suggest that JJ might want to reconsider his ‘thoughts’ about how likely or not a rate hike could be…..which only means – brace yourself for more volatility…..
And speaking of volatility…..the VIX declined yesterday (no kidding)….the VIX is a FEAR index – and yesterday there wasn’t any…..therefore the contra trades as discussed did not have a good day – the DOG – 0.8%, the SH – 0.9%, the PSQ – 1.2% the SPXS (triple levered short) – 2.6% – but if you played it from the triple levered long side with the SPXL – you would be happy as a pig in ***T. It ended the day up 2.68%.
Of the 11 broad sectors – we saw 1+% gains in TECH – XLK +1.45%, Communications – XLC +1%, Real Estate – XLRE +1.45%, & Consumer Discretionary – XLY +1.4%. (Recall that Real Estate has been this year’s dog…down 9.7% coming into yesterday – so If you believe JJ and are betting that rates are going down – then moving money into this sector makes sense…. Lower rates will benefit Real Estate – Capisce?) The usually boring Consumer Staples sector – XLP gained 0.85%…and that tells you that investors are also adding large stability to their portfolios. Further down the chain we saw Industrials – XLI + 0.6%, Utilities – XLU +0.5%, Energy – XLE +0.6%, Financials – XLF +0.25%. Healthcare – XLV and Basic Materials – XLB though – disappointed falling 0.1% and 0.5% respectively.
Oil is holding steady at $79 and this morning it is trading up 30 cts at $79.30. It’s the same story…. the possible ceasefire in the mid-east (which has now been ‘possible’ for 2 weeks). The other factors driving oil continue to be the usual suspects… production (in the US), production cuts (OPEC+), the Hootie’s and the RED Sea (disruption) and seasonal (summer driving). None of this is new. We remain in the $77.50/$81 trading range. A test of $77.50 is key – why? Because both the Intermediate term and long term trendlines are converging at that price…. If we test and bounce that is good, if we test and fail – then I suppose we could see oil move into the mid $70’s. That is not my position. My position is that we test and bounce.
Gold continues to bounce off of $2300 – ending the day at $2310. This morning gold is down $1 at $2309. It’s the same story…. the possible ceasefire in the mid-east, inflation concerns (or not), and interest rate policy.
Bonds – gained on the back of the excitement – right – no hike is a positive for bond prices and that is what we saw…the TLT rose by 0.4% while the TLH gained 0.5%…the 2 yr. is now yielding 4.87% – this is down 3% off the most recent high of 5.033%, The 10 yr. is now yielding 4.56% and this is down 11 bps off the most recent high of 4.68%.
This morning – US futures are UP, UP and AWAY (Thank you AAPL and AMGN!) – AMGN giving an update on how ‘encouraged’ they are about Maritide – their experimental obesity drug – AAPL quoted up 6% while AMGN is quoted up 14%! – Stocks are also gaining as the ‘rate relief’ narrative takes root. At 7 am – Dow futures are +300 pts, S&P’s + 20, Nasdaq + 110 and the Russell is down 2. The pre-mkt action suggests that no one is concerned about today’s eco data……it’s all good…and JJ (apparently) said no rate hike, so jump in…the water is fine! Oh boy…. but look – if you are invested – sit tight…. you’re good…this is why it’s important to have the plan…. it’s called ‘riding the waves’ – you remember that as a kid, right? Sometimes you rode them onto the beach and other times – the wave broke on you and smushed you into the sand…. Oh, to be a kid again…. Weren’t those the days?
European markets are up. French banks gaining on profit beats…. think Société General and Credit Agricole. UK retail a bit weaker while inflation in Istanbul is now running at 70% (again not a typo). Markets across the board up by about 0.5%.
The S&P closed at 5064 – up 46 pts. It’s Friday and with futures pointing up this morning and with all the excitement around AAPL and AMGN – it feels like we are in for a good day…. Up 1.3% takes us right back to trendline resistance at 5129 – and once again – that is key…. And while I wanted us to test support at 4975 – I guess that is NOT happening (at least for today). Remember I said that IF AAPL does not disappoint – then stocks were poised to go higher…and guess what? AAPL did NOT disappoint.
Call me to discuss. 212-381-6194.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Penne Rigate w/Spinach, Tomatoes
This is simple to make, takes no time and is the adult version of pasta and butter!
For this you need – cherry tomatoes (sliced in half), Olive oil, stick of butter, sliced garlic, s&p, Fresh Spinach, 1 lb. of Penne Rigate, and plenty of fresh grated parmegiana cheese.
Begin by bringing a pot of salted water to a rolling boil – and add the pasta. Cook for 8 mins.
In a large sauté pan – add the olive oil, and the butter – heat until you’ve melted the butter – now add the garlic – sauté for 3 mins…add 2 cups of sliced cherry tomatoes, season with s&p – and let them simmer for 5 mins.
Strain the pasta (reserving the water) and add pasta to the pan – toss to coat. Now remove from the heat and add in 3 handfuls of the fresh spinach and 1 c of parmegiana cheese. Mix well and serve immediately. Always have extra cheese on the table for your guests.
This should take you a total of 18 mins…start to finish…and the colors look beautiful…You have red, green, white – Hmmm? Looks like the Italian flag!
Buon Appetito.
