Things you need to know.

–         Slippery when wet – markets remain a bit cautious.

–         The Frisky Kitty is back, and the shorts got clobbered.

–         Today brings the April PPI report – tomorrow is the CPI.

–         Markets bracing for a 1% move – many asking which way?

–         Oil is up – think Chinese demand and Canadian supply disruption.

–         Futures are marching in place.

–         Try the Bone Broth – It’s really good for you.

Wall Street puts up the ‘Caution – Slippery when Wet’ (Cuidado – Piso Mojado) sign….as the week kicked off……investors, traders and algo’s all positioning themselves for ‘key’ inflation data starting today, that many say will shape the future policy path for the FED and for the global markets. 

Stocks didn’t do a whole lot – although not true for GME +75% or AMC +79% as the ‘Frisky Kitty’  (Keith Gill) reappeared on X over the weekend causing a reignition the MEME stock frenzy…..Now it has been 3 years since this last happened – and you can imagine the chaos it created….short sellers lost over $1.5 billion yesterday after ‘Frisky’s’ comments (posts) hit the tape, the reddit board, and any other place that the MEME stock trader types gather….In any event – the broader market ended the day a bit mixed.

 Dow -80 pts, the S&P -2, the Nasdaq gained 48, the Russell gained 2 pts, the Transports up 32 while the Equal Weight S&P lost 4 pts.

On the eco data front – we saw that the NY FED’s 1 yr. inflation expectation is now 3.26% and that is up from last month’s 3%.  Today’s eco data includes – you know what…. the Producer Price Index – PPI – and markets are bracing for what we will hear…. Now – we went over this yesterday…. the PPI is expected to be +0.3% m/m (which is up over last month) and 2.2% y/y (which is also up over last month).  Now Ex food and energy is up 0.2% m/m (in line with last month), while the y/y read is +2/3% (down 0.1% vs. last month).  The whisper numbers are suggesting that we will see a ‘hotter’ than expected PPI and CPI this week – and if so – then brace yourself for more volatility….as the trader and algo types run for the door……Which leaves me to ask – can you really be surprised?  Do you really think that inflation is calming down? They have the audacity to say that ‘goods’ are coming down while services remain sticky.  Are you not paying more for car insurance, homeowners’ insurance, groceries, take out, utilities, gas, cars……?  I thought so…. Now – you might be paying less for LULU Lemon stretchies…. but how many of those do you really need? 

Whatever…. I’m just anxious to see how they spin it IF the data shows slowing inflation…I mean what can they point to justify it?  Even used cars – which was one of their bigger components are starting to rise again.  And so we wait…The real test will be tomorrow’s CPI report…and the street is warning investors/traders to get ready…..the options markets are betting that we could see a 1% move (52 pts – not anything to really write home about) in either direction – depending on what the report says….a hotter number would see the S&P lose 52 pts while a cooler number will see it rise by 52 pts….that’s hardly a storm…..that’s more like a rain shower…..a 3% (156 pts) move lower in the S&P would be more like a storm….while a 3% move higher would be celebrated by the markets – I mean who is going to complain if their portfolio rises by 3% in one day? Are you really going to say – OMG – my portfolio rose by 3% – I can’t take this anymore? 

Now to be clear – the trader types are hoping that today’s data will show an easing – and if we are even 0.1% lower – expect them to cheer and push the idea that now the FED has no choice but to cut!  I mean, it’s ridiculous….Last week we heard from 5 FOMC members – and the week before we heard from the chair himself – and all suggested that the path is not to expect any cut (in the near future) – higher for longer appears to be the path….but again – people (traders) and computers (algo’s)  hear what they want to hear rather than what is being said.

Only Tech – XLK +0.5% and Real Estate – XLRE +0.3% rose yesterday….the other 9 S&P sectors ended the day in the red….Industrials – XLI and Financials – XLF were down 0.5%, Consumer Staples – XLP  and Energy – XLE down 0.3%, Consumer Discretionary – XLY and Communication – XLC down 0.15%, Healthcare – XLC and Basic Materials – XLB  lost 0.1% while Utilities ended the day unchanged. 

Heavily shorted stocks – not including the MEME names rose on the back of the GME/AMC ‘Frisky Kitty’ drama. The UBXXSHRT – which is a basket of ‘highly shorted names’ rose by 6.8% as the ‘Frisky Kitty’ continued to tweet cryptic messages…Names like MSTR, DDS, MDGL, TWST, TMDX all rose…but you can see all of the names in this index by going to a Bloomberg machine and typing in UBXXSHRT (INDEX) GO. 

Bonds rose – the TLT + 0.25% and TLH +0.2% leaving these ETF’s down 8.6% and 6.5% ytd.  The AGG (Bloomberg Aggregate Bond Index – includes treasuries and corporates) rose by ½ of 1/10 of 1% but is only down 2.9% ytd…. this ETF is less volatile while giving you exposure to the broader bond/corporate markets.

Oil rose by 1.2% yesterday on the back of rising demand out of CHINA of all places!  See how they do this…last week – China was a disappointment – but today not so much….Chinese data over the weekend showed a rising CPI – and that suggests a strong consumer and a strong consumer ‘demands’ energy…..Additionally – there are wildfires burning across Western Canada and that is bringing up the idea of some supply disruptions – suggesting that disruptions will reduce supply – capisce? In any event – oil rose to $79.20 – and this morning it remains right there as we await today’s PPI report. 

Gold fell a bit yesterday….as trader types took some profits…..ahead of today’s PPI report…..Gold traders recognize that the FED needs weaker data all around….weaker inflation data and weaker employment data before they will CUT rates…..This morning – gold is trading up $10 at $2,350 as it continues to remain in the $2300/$2400 range.  

Recall  yesterday I pointed out that stocks are now kissing their all time highs and the bond market has rallied just a bit – ahead of this weeks latest inflation data that is sure to be the focus for markets…and this suggests that the markets have already priced it in- which then begs the question – so now what?  Well, if you are a long term investor – sit tight, but if you are a day trader -then get ready to ‘trade’….but remember – we did get stronger earnings and stronger guidance and if the market is starting to accept the higher for longer narrative – then I suspect any drawdown will be short – giving longer term investors an opportunity to buy some good names on sale.

Remember – my guess is that IF we get expected numbers then I think the market holds steady and churns right here, If they are worse than expected – then watch as the algo’s once again all go running for the door, causing stocks to decline…and if we see a drop beyond the expectation – then I do think they will try to push higher – but will have some difficulty in doing so – again because it feels like it already priced in a ‘better than expected’ result – so I’m not sure there is much more gas in the engine to push us significantly higher just yet.  

This morning US futures are shy…. Dow futures + 12, S&P’s +1, Nasdaq + 2 while the Russell is ahead by 3.  Markets are looking for any reason to rally, so expect them to tear apart today’s PPI and tomorrow’s CPI looking for the data points that support their story (rate cut) rather than those points that do not… These reports will be this week’s focus and will be a key gauge in determining the near-term future path of monetary policy.  As a long-term investor – I wouldn’t do anything until I see what the data says…. I’m hoping it’s still a bit hot – pushing stocks lower, only because I want to go shopping.  

European markets are churning around the flat line….as investors there await the latest US inflation data…. UK unemployment rose by 4.3% – in line with expectations. Wages were also stronger than expected coming in at 6%. The BoE now needs to consider what this data means for UK inflation before they consider a rate cut.

The S&P ended at 5,221 – down 1 pt……. And this morning – futures are not suggesting anything significant one way or the other.  The mood is quiet…. The next move will be determined by what we hear today and tomorrow.

Fed chair JJ is expected to speak today along with ECB governing council member Klaas Knot, China announces their rate decision tomorrow, Eurozone Industrial production and GDP are due out on Wednesday.  Minneapolis’s Fed President Kashkari to speak on Wednesday, while Philly’s Patty Harker and Cleveland Loretta Mester are due to speak on Thursday. US conference board reports on Friday.

If the data this week creates a substantial reversal – then watch what the VIX does…a spike higher will put pressure on stocks…this morning the VIX is trading at 13.81 – well below all 3 trendlines and very much in the complacency camp – the 55% spike in the VIX from the end of March to mid-April – saw the S&P lose 6% of its value…. While other high growth names lost more….so just something to consider if you are getting your shopping list together.  Now if we don’t see a spike in the VIX – then I suspect that the S&P churns in a tight range.

Take good care.

kpolcari@slatestone.com

Sources:  Bloomberg, CNBC, Reuters, Wall Street Journal

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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.

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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.

Bone Broth – It’s good for you to drink before you go to bed.

Over the weekend – I made a big pot of bone broth…and so you ask why?  Because bone broth has a range of health benefits – collagen for your skin, collagen for your joints, (think anti-aging) good for digestion and gut health and it supports your immune system for those fighting cancer and other diseases.

I drink a about 5 oz before bed – how good do I look?  I will say, it doesn’t help keep my hair dark – but hey, I worked hard for this ‘gray look’!  It suggests time and grade and maturity.

For this I used – Ox tail bones with the meat, Beef bones (full of marrow), veal shank (think osso bucco bone – with the meat), 1 head of garlic, carrots, onions, celery, s&p.  Now – you can also use chicken and turkey bones – I just used meat….

Fill a pot with water – add all of the above – season with s&p, cover tightly –  bring to a rolling boil – then turn down to med low and let it sit on the stove for 6 hrs.….Then remove the cover and let it continue to cook for at least 3 more hours….allowing some of it to steam off  – making the broth more concentrated.

After 9 hrs. – remove from the heat and allow to cool a bit…. Strain the whole thing thru a pasta strainer – removing all the meat, bones and veggies…leaving only the broth.  Put this in the fridge to cool overnight.  The next day – remove the layer of fat the comes to the top – the broth below will be a bit gelatinous – so just reheat it enough to bring it back to a liquid.  Then store in Ball jars and place in the fridge. I made so much, that I put some in a Ziploc and place in the freezer.

At night – before bed – heat it up – just about 5 oz’s and drink it. Then go to bed…. try this for 2 weeks…and then look in the mirror…. 😊.

Buon Appetito.