Things you need to know.
– Dow CLOSES above 40k and the S&P retakes 5300.
– Nasdaq just 1.8% away from piercing 17k – is this the week?
– NVDA and AI will be this week’s focus – Hold onto your hats!
– Gold surges up and through $2400 as the rate cut narrative gains new life and tensions in the mid-east HEAT up.
– Oil kisses $80 (again).
– Try the Oven Roasted/BBQ Thighs
I joined Maria Bartiromo on Friday evening on Maria Bartiromo’s Wall St Week program…. Click on the link below to see.
https://www.foxbusiness.com/video/6353133279112
And I will be joining her this morning at 8:20 on Mornings with Maria – Grab the coffee…. So much to discuss.
And so it’s done….the Dow which pierced 40k on Thursday but failed to hold it, teased it all day on Friday, trying desperately to take it back – Many betting that it was not possible as the Dow teased in a 39,858/39,996 range during the day – seemingly unable to push up and thru, but then at 3:59 – in a dramatic move – the MoMo guys (algo’s) couldn’t stand it any longer and they gave it one last college try – sending the Dow up and thru 40k to close at 40,003.59!
All they had to do really is focus their buying on a couple of names….CAT, UNH, GS, JPM – which all closed on plus ticks….Remember – the Dow is a price weighted index….Cat is a $350 stock, UNH is a $525 stocks, GS is a $468 stock and JPM is a $205 stock so if they go after the highest priced stocks – they can move the average fairly quickly – so they waited until the final moments and then BAM…..The other indexes ended the day mixed, the S&P up 6 pts, the Nasdaq lost 12 pts, (NVDA – 2%), the Russell down 1 pts, the Transports down 60 pts while the Equal Weighted S&P gained 10 pts.
Remember – last week we discussed the Relative Strength index…recall that the Dow was just a hair below the 70 line – which is the line that suggests ‘caution ahead’ – the market appears to be a bit stretched – well, as of Friday night the RSI for the Dow is now 70.2374 – putting us in official ‘overbought’ territory – which again only means – be patient…. The S&P remains sub 70 at 67.9669, the Nasdaq is at 65.2135, the Russell is at 61.3401, the Transports 51.7155 and the Equal Weight S&P is hugging 66.0116. So, it’s a dog fight… Can we continue to push up – sure…. I’m just saying be strategic.
Now in addition to the Dow 40k, the S&P did take back 5300 – after teasing it earlier last week, failing to hold, only to take it back on Friday. While Nasdaq 17k remains elusive – the Nasdaq closed the day at 16,685…. meaning it needs to gain 1.8% to get us to that number – with many betting this this will be the week – Why? Think NVDA! They are due out on Wednesday after the bell….and the sense is that they are going to crush it again…that they can’t make their chips fast enough and AI IS the story…and remember – they just announced a new chip…so be patient….don’t make a rash decision…..Listen to what Huang says about data centers – because data centers drive demand for NVDA chips.
NVDA is expected to report $5.63/sh, they are expected to report revenues of $24.5 billion – up 265% over last year (the whisper number is more like $26 billion – which means if the market is looking for the whisper number and they report the expected number – It’s a disappointment!) It’s ridiculous. Net Income of $12.28 billion up 768% y/y…..Net Profit Margins of 55.5% – the stock closed down 2% on Friday….but remember what they (algo’s and traders) did in February – during the last earnings season….they sold the stock in the days just ahead of earnings ($737 down to $659 – a 10% move lower)….as many were suggesting that NVDA was priced to perfection and that it was going to be tough for them to surprise…Do I need to remind you what happened…..Jensen Huang did his thing and surprised….and the rest is history….all the guys that got out in the days just prior – suddenly wanted back in…and NVDA went from $659 – to $974 (up 47%) in early March…since then it has traded in a tight range…$845/$945…This morning NVDA is trading up $13 or 1.4% at $937.20.
So how are you positioning yourself? Are you betting against Huang? I am not….and while I have not added to my position (I’m a bit overweight)– I have not sold it, nor do I intend to….I’m thinking that this will be $1000 stock on Thursday….Recall that in February it surged by 11% the next day ….if we have the same reaction – then NVDA will be trading at $1025 (assuming it remains here in the $925 range). If they sell it off today, tomorrow and Wednesday – then we’ll have to recalculate….But one way or another – it’s NVDA….I’m hoping that they announce a stock split, but my gut says they do not want to, they like the idea of being an ‘expensive’ stock –
In addition – we are going to get earnings from SNOW, PANW, TGT & LOW.
It’s a decent week for eco data….data that will add to the FED conversation and the inflation conversation….Look for the Philly Fed Non-Manufacturing (services) Activity tomorrow, Mortgage Apps, Existing Home Sales (expected to be +0.6%), FOMC minutes (where I do not expect to hear ANYTHING new), Thursday brings us S&P Manufacturing and Services PMI’s – expected to be 49.9 and 51.4 respectively. New Home Sales -2.1%, Kansas City FED Manufacturing Activity and then on Friday we will get Durable Goods, Cap Goods ordered and Cap Goods Shipped, Kansas City Fed Services Activity and of course the U of Mich sentiment surveys.
Bonds were little changed….as investors await more economic data this week…. The 2 yr. is yielding 4.81% after bouncing off of 4.70% while the 10 yr. is yielding 4.41% bouncing off of 4.33%.
The dollar index has been in decline on the idea that the FED is cutting rates…. lower rates make the dollar less attractive…it is not down 2% from the May high – trading at 104.47 this morning.
As the market continues to tread water at the highs – the VIX (fear index) continues to trade lower and that makes sense – apparently there is no fear…. On Friday – the VIX closed at 12.17 – a level not seen since December 2023. In my mind, all we need is one catalyst to ignite that fire – so pay attention.
Oil – continues to rally – trading up and thru $80/barrel on Friday….this morning it is just below at $79.75…..Last week – Brent gained 1% while WTI gained 2% – improving economic data from the US and China being cited for the moves…..Remember – the US and China are the worlds largest consumers…Oil remains in the $78/$81 trading range and will likely continue to do so until we get a new catalyst….think OPEC+ policy statement and you know – they are expected to continue with their production cuts. Apparently, the death of Iran’s President Raisi and Foreign minister is a non-event for the oil markets…Because if they were – we would have seen a spike in oil this morning and we are not.
Gold soared last week… pushing up and thru $2400 to end the day at $2417… This morning Gold is up another $28 at $2445. And why? Because they won’t stop the rate cut narrative, they are still pushing multiple rate cuts before the end of the year. In addition – we have the ongoing tensions in the Middle East – after a Chinese bound oil tanker was hit by a Hootie missile in the RED sea on Saturday. Unlike oil, Gold is reacting to the recent death of the Iranian President over the weekend and the ongoing conflict in Israel…Notice no one is even talking about the conflict between Ukraine and Russia any longer – unless JoJo wants to send more money.
US futures are churning…Dow futures +14, S&P’s up 5, Nasdaq +35 while the Russell is +2. Now expect to hear a lot about AI this week…between the NVDA’s earnings (and PANW and SNOW) we are going to get hit with 2 days of “How will AI Shape Your Future”? – at the Microsoft ‘Build Event’ that takes place in Seattle from the 21st – 23rd. (https://build.microsoft.com/en-US/home).
European markets are mixed – France and Germany are tied at +0.35% while Italy is getting slammed – down 1.4.
The S&P closed at 5303 – up 6 pts. …. As discussed, – the markets churned in place on Friday – and while the Dow closed above 40K and the S&P above 5300 – there weren’t any real fireworks…. expect the conversation to be focused on NVDA’s earnings next week….I mean this stock is up 90% ytd….and up 213% over the past 12 months….And as you can imagine – this is a very crowded trade – there is a lot riding on what Jensen Huang will say about the future……
For investors the question is this bullish fed rate cut narrative sustainable or not? Is the market once again getting too excited about a narrative that they created? Well, let’s see what Wednesday’s FOMC mins have to say – my gut says that if anything – they will be more hawkish than dovish…and while JJ did say that rates are most likely not going any higher, he did not say that they are going lower anytime soon – and he for sure never intimated multiple rate cuts and in fact – every FED head that has spoken has reiterated THAT narrative – higher for longer. Period.
There are 15-year end targets on the S&P by 15 different banks…. As of today – 9 of those targets have been breached with JPM calling for S&P 4200 by December and RBC and Barclays calling for 5300 by December. It is now Bank America and UBS at 5400, Oppenheimer and Deutcshe at 5500, WFC at 5535 and BMO with a 5600 target. Now keep your eyes on those banks that were very bearish – will they change their outlook or not over the next qtr. or are they sticking to their calls?
Take good care, 
kpolcari@slatestone.com
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.
Oven roasted BBQ Thighs.
So, we made this yesterday, haven’t made it in a while – so it was a welcome change. It’s simple, one pan dinner….
For this you need chicken thighs skin on, s&p, Adobo (Spanish spice in the condiments aisle), and a splash of olive oil and Sweet Baby Rays – Original BBQ sauce.
Preheat your oven to 350 degrees.
Place the thighs in a baking dish. Season with s&p and adobo. Add a splash of olive oil and massage. Cover tightly with tin foil and place in the oven. Cook for 1/12 hours…. then remove the foil…. add the Sweet Baby Rays’ BBQ sauce and turn your thighs to make sure they are smeared with the sauce. Return to the oven for 30 mins….
Now – turn all the pieces over so that the skin is facing up – turn the oven from baking to broil and then place the thighs in the middle rack – and let them broil to crisp up the skin. Do not put it right under the heat – they will burn very quickly.
We served this with Wild rice and steamed/sauteed green beans.
Simple but so good. And there is plenty left over for today….
Buon Appetito
