Things you need to know.
– CPI does not surprise – it’s all systems go…
– Stocks Rally, Bonds Advance
– Oil under pressure, Gold suffers some profit taking
– Retail Sales due out this morning.
– Try the Chicken Pieces with Hot Sausage and Cherry Peppers.
CPI comes in as expected so nothing to report here….and nothing to change the course of what the FED is expected to do in September. Expect a cut of 25 bps to be the move even as swaps traders keep betting on more. The report reinforced the recent trend of slowing inflation -not deflation – remember prices are still going higher just at a slower pace.
And this news brought some relief for investors/traders and even the algo’s after the nail-biting session last week. Add in the cooling job market and you can see how the FED has cover now to begin the process. Now while I continue to believe that the FED will not be bullied into a jumbo cut, I recognize that IF the data over the next 6 weeks suggests an economy about to go off the rails – then yes…we would most likely get one…But that is NOT my base case.
At the end of the day – the Dow gained 242 pts or 0.6%, the S&P gained 21 pts or 0.4%, Nasdaq managed to advance by 4 pts, the Russell fell by 11 pts, or 0.5%, the Trans up 13 pts, while the Equal Weight S&P added 15 pts or 0.2%. Now recall yesterday I said that we were about to try to pierce the short term trendline at 5455 but I thought it would offer some resistance. Yesterday – the S&P kissed and closed at 5455 – let’s see what happens today. (S&Ps are up 1 pt. in the pre-market – but it’s only 7 am!)
Financials led the way higher yesterday the XLF + 1.55%, Energy & Tech advanced by +0.55%. Industrials + 0.4%, Consume Staples + 0.45%, Healthcare +0.35% and Real Estate gained 0.35%. Basic Materials ended the day flat. The losers were led by Communications – 0.6%, Consumer Discretionary – 0.5%, and Utilities – 0.1%.
Bonds continued to rally – The TLT ETF rose by 0.6% while the TLH ETF rose by 0.4% while the AGG gained 0.2%.
Oil lost 1.5% yesterday – to end the day at $76.98 – all on persistent concerns about weaker global demand led by China…. This morning it is up 0.6% as traders are betting on the start a rate cutting cycle. The thinking there is that a rate cut will stimulate the US economy and increase demand for crude oil…all while demand in the US remains strong already. And with other central banks around the world doing the same thing – we should expect demand for oil to grow beyond our borders as well. And the China story? Yeah – I don’t believe anything that comes out of China – which is why I also do not allocate any money in my portfolio to Chinese stocks. Not worth the risk and beyond that, the rest of the developed world offers more than enough opportunities for investment dollars.
Gold traders took some profits yesterday after the recent surge higher…. up nearly 5% in 2 weeks…sending it down $21 to end the day at $2480 on the idea that the FED is cutting rates by 25 bps rather than the hoped for 50 bps. This morning, they are taking it back up $17 to trade at $2497. It remains in the $2430/$2530.
Economic data today includes Empire Manufacturing, Initial and Continuing Jobless Claims, Industrial Production and Capacity Utilization…but the ones that everyone is waiting for are Retail Sales. They are expected to advance by 0.4% m/m on the top line, Ex Autos and Gas are expected to advance by 0.2%.
A Strong Retail Sales number should suggest the consumer is doing just fine, while a weaker number should suggest a struggling consumer. But remember – prices are up double digits on the things we need to live – so the consumer is forced to spend more to buy the basic needs….so be careful how you interpret the number. Is consumer spending more because they have plenty of money or are they spending more because everything costs more?
US futures are up (again)….…. Dow +70, S&P’s up 1, Nasdaq up 20 and the Russell is down 6 pts. Once again – we have had a strong rebound rally this past week – the S&P up 6% but still 4% below the July high of 5660.
European markets are mixed – France down 0.1% while Italy is up 1% Nothing new to report as investors there take in the latest UK and US inflation prints. This morning – the UK reported on their 2nd qtr. GDP and it ‘expanded by 0.6%’ inline with the expectations.
The S&P closed at 5455 up 21 pts…. As noted above – right at the trendline. The question now is -will it prove difficult to pierce or not? WMT just reported and they beat and raised guidance…the stock is up 1.7% in the pre-mkt….and that can be interpreted two ways…. One good for them or two – the consumer is exhausted….and continues to trade down to WMT to try and save money on everyday items – from food to consumer staple needs.
Again, If we move up thru resistance at 5455 – and close above it – then that puts us in a position to challenge the highs….but I do not think that is going to happen…remember – we are in a seasonally weak time of the year…and I, like many, expect the markets to trade lower and test those Monday lows at some point before the end of October.
In the end – be confident in your portfolio – take advantage where it makes sense while building in some defensive positions.…. make sure you know what you own and in times like this talk to your advisor if you are concerned.
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.
Chicken w/Hot Sausage and Cherry Peppers
You will need: Thighs & legs, (bone in/skin on), s&p, olive oil, hot Italian sausage, Cherry peppers, garlic, white wine, chicken broth, marinated artichoke hearts, thin sliced potatoes, s&p, and flour. Total time 1 hr… start to finish….
Preheat oven to 375 degrees – Preheat grill for cooking the sausages.
Season chicken pieces with s&p – heat up oil in frying pan – when hot – reduce heat to med/hi – now add chicken and brown on all sides – maybe 10 mins total. While this is cooking – place the sliced potatoes in the baking dish – season with s&p – add a splash of oil. Now remove the chicken from the frying pan and place in the baking dish and put in the oven and continue to cook for about 30 mins….
Next – cook the sausage on the grill – careful not to burn…. maybe like 10 mins total…. remove from grill and let rest for 3 or 4 mins then cut into bite size pieces. In the meantime – add the chopped garlic to frying pan (that still has the juices and oil from chicken) along with sliced cherry peppers – sauté. Now add the sausage and some white wine and reduce (5 mins) – next add chicken broth and the artichoke hearts…. sauté for another 5 – 8 mins…
In a separate bowl – whisk together some flour and milk (you can use water) and add to the frying pan – allowing it to cook and thicken a bit….do not let it get too thick – you can add a bit of broth if you need to. Re-introduce the chicken/potatoes to the frying pan and allow to simmer for 2 or 3 more mins.
Now serve on a large, warmed platter family style.
Buon Appetito.
