Things you need to know
- Buyers take advantage of sale prices – but be careful – the sale isn’t over!
- Global markets are under pressure again.
- Oil spikes, Vix spikes, Yields spike.
- Try the Leg of Lamb.
Good morning – strap in and buckle up! Yesterday, like Tuesday saw investors jump back in – albeit cautiously – as the geopolitical narrative began to cool, cool enough to allow buyers to become a bit more aggressive and that sent stocks higher.
In addition, we got more good news on the economic front here at home….
ADP employment – came in stronger than expected at 62k new jobs vs. the expectation of 40k – that is bullish.
Retail Sales came in stronger than expected at +0.6% m/m (up from -0.2%) and Ex Autos and Gas – they came in at +0.4% up from 0.2% last month and both read ahead of the estimates. In addition – manufacturing in this country is also showing strength – as the S&P Manufacturing PMI came in at +52.3 while the ISM Manufacturing PMI came in at +52.7 – leaving both those data points well into the expansion zone – and that is bullish.
Remember — both indexes measure U.S. manufacturing activity but come from different survey pools. The S&P Global PMI surveys more than 600 companies across small, medium, and large manufacturers, while the ISM survey polls roughly 300 purchasing managers, generally from larger and more established firms. Readings above 50 indicate expansion, below 50 contraction. Because the surveys sample different companies and weight responses differently, they can sometimes diverge — but as of yesterday they are clearly in sync, both suggesting that U.S. manufacturing is doing just fine.
And that distinction is particularly relevant right now as investors try to assess what the “Big Beautiful Bill” means for U.S. manufacturing. If it delivers on its promises of tax incentives, domestic investment support, and policies aimed at reshoring supply chains, it could provide a tailwind for factory activity in the months and years ahead — something that would likely begin to show up first in forward-looking components of these surveys such as new orders, production expectations, and hiring plans. In other words, investors, traders and even the algo’s will be watching both (future) PMI reports closely to see whether it translates into real momentum in the sector.
So, how do you play it?
A look at the iShares MADE etf – gives you broad exposure to the manufacturing sector in one easy product. It invests specifically in U.S. companies tied to manufacturing and manufacturing supply chains – focusing on companies that produce equipment, industrial technology, and infrastructure products. This is the closest to a pure manufacturing play that you can get.
Think – Deere, Honeywell, Caterpillar, Vertiv, Cummins, Parker-Hannifin, GM, RTX and Eaton. So far this year – it is up 9% ytd. Not bad if you consider the fact that the Dow is down 3% and the S&P is down 4% ytd. Other ways to play it via an ETF include the XLI +6% ytd or the IYJ +0.8% ytd.
Now – before you go saying I only show you the ‘good’ data – let’s consider what the Prices Paid component had to say. This reflects the prices that producers have to pay to manufacture products and it rose to 78.3 – up from 70.5 last month…and that suggests that the input costs are rising rapidly and that suggests that inflationary pressure are starting to build up. Now a reading above 70 is considered hot and the further north of 70 – causes the temperature to get even hotter – something that Trump, JJ, Kevy Warsh or the bond market do not want to see.
In any event – At 4 pm – we saw the Dow had gained 224 pts, the S&P up 46 pts, the Nasdaq up 250 pts, the Russell added 16 pts, the Transports rose 320 pts, the Equal Weight S&P jumped by 25 pts while the Mag 7 added 410 pts.
Leadership yesterday reflected a return to cyclicals AND growth.
The industrials took the lead – up 1.7% (see above), Tech + 1.5%, Basic Materials + 1%, Healthcare +0.8% and Consumer Discretionary + 0.75%. This mix suggests that investors are becoming more comfortable with the broader geopolitical narrative and are now refocusing on economically sensitive and growth-related sectors rather than a more defensive posture that has dominated the tape this year.
And we saw this in the VIX – the fear index….it continued to decline – falling 2.8% to end the day at 24.50 – But this morning – the story is changed once again and the VIX is surging – up 11% at $27.25. Trump took to the airwaves last night to bring the country and the world up to date on the state of the Middle East conflict. He left the door open to another 2 or 3 weeks of bombing them ‘back into the stone ages’ UNLESS they (Iran) come to the table to essentially surrender. Something that no one thinks they will do – at least not yet – but let’s see what another 2 weeks of destruction will do. I mean next up on the agenda are power plants and infrastructure projects…. think electricity, oil and plumbing. And so, the story continues.
Oil had backed off a bit yesterday – slipping back to $100/barrel, but this morning is up $7 or 7.7% at $107.80. The move higher a direct result of renewed or ongoing geopolitical risk and that dampened any hopes that this conflict will end quickly. The speech reintroduced the “risk premium” into the oil market, as oil traders begin to price in the possibility of prolonged disruptions to supply and shipping in the Persian Gulf. And let’s not forget – this is Easter weekend, it is a long 3 day weekend, and it is the beginning of Passover – all reasons for traders to go Risk OFF.
Bonds got sold yesterday – both the TLT and TLH lost 0.5% and it looks like we will see more selling today. This morning – the 10 yr is up 4 bps yielding 4.36% while the 30 yr is up 4 bps too, yielding 4.94%. Remember – the line in the sand for many investors is 4.5% and 5% respectively.
And gold? It’s getting hit this morning — down about $135 to $4,625 — as the dollar firms – it is up 55 cts or 0.5% and yields push higher, two things that almost always create headwinds for gold AND stocks. Remember — when yields rise, the opportunity cost of holding gold increases because it doesn’t pay interest or divys. Higher yields also give investors a choice of where to allocate investment dollars. At the same time, a stronger dollar makes gold more expensive for foreign buyers, which tends to dampen international demand. For now – gold remains stuck in the $4100/4,650 trading range.
Eco data today include the Challenger Job Cuts and Initial Jobless Claims along with Cont. Claims. But it will be tomorrow’s NFP report that will be the next economic macro mover – but markets are closed for Good Friday so investors will not be able to react until Monday. The NFP report is expected to show 65k new jobs created, Avg Hourly Earnings of +0.3% m/m and 3.7% y/y. Unemployment is expected to remain stable at 4.4%.
European markets – as expected are all lower…. Germany getting hit the hardest – down 2%. The UK is the winner only down 0.2%. Pressure is building on big Pharma after Trump suggests that he is preparing to put new tariffs on the ones that have NOT made deals to guarantee low drug prices.
And US futures – they are getting kicked in the gut…. Dow futures are down 500 pts, S&P’s down 82 pts, Nasdaq is down 390 pts while the Russell is down 42 pts.
The S&P closed at 6,575 — up 46 pts. Now, even after that rally, the S&P remains below the long-term trendline at 6,638, leaving us stuck — for the moment — in a 6,350 to 6,638 trading range. After last night – it appears that we will not kiss the trendline anytime soon and in fact may retest the lows – 6,350 – seen last week.
Separate from all of this – we all witnessed the launch of Artemis II last night…. And there is a lot to consider……The successful launch reflects the coordinated effort of several of the largest aerospace and defense companies in the US and Europe, each responsible for a critical piece of the mission architecture. Boeing built the core stage of NASA’s Space Launch System (SLS) rocket — the massive backbone of the launch vehicle that provides the structural framework and houses the propellant tanks that power liftoff. Lockheed Martin developed the Orion spacecraft, the capsule designed to safely carry astronauts on their journey around the Moon and back to Earth. Northrop Grumman produced the solid rocket boosters attached to the sides of the SLS, which deliver the majority of the thrust during the first minutes of launch. L3Harris Technologies — through its acquisition of Aerojet Rocketdyne — provides the RS-25 engines that power the SLS core stage, the upgraded versions of the engines that flew on the Space Shuttle. Meanwhile, RTX supplied critical avionics, navigation, and control systems that help guide the spacecraft and manage communications and onboard electronics.
Together these companies form the industrial backbone of NASA’s Artemis program, and their roles will continue for years to come as the US builds out a sustained human presence on the Moon — including the lunar Gateway station, and eventually – missions to Mars. I’ll be watching from the heavens.
Call me at 561-931-0190 and let’s talk about risk and reaching your goals.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Delicious Sticky Leg of Lamb
Preheat your oven to 300 degrees.
For this you need: lots of garlic cloves (8 cloves), fresh rosemary, s&p, olive oil, cinnamon, orange zest, orange slices, 1 leg of lamb – bone in, red onions, sliced orange, chicken stock, 2 tbspn of honey.
Begin by making the spice paste…..put the garlic, rosemary, s&p, zest, a ‘whisper’ of cinnamon and the olive oil into a food processor – blend to make a thick paste. If you want to include any other spices that you like – include them now. (paprika, oregano, cumin etc).
Next – make small slits all over the leg of lamb. Massage the spice paste all over it – making sure to put the paste into the slits – allowing all that flavor to seep into the meat.
In a large roasting pan – place the sliced red onions, 4 or 5 orange slices and some rosemary as the base. Season with s&p.
Place the lamb on top. Pour chicken stock all around the lamb – do not pour it over the lamb. Cover tightly and place into the oven to slow cook for 6 hours making sure to baste the lamb every hour or so.
At the 5 ½ hour mark – remove the foil and drizzle with honey and place back in the oven.
Remove and let rest – if done right – it should fall of the bone. Serve it from the roasting pan – it makes a bold statement – being sure to spoon all of the juices and onions on top.
Buon Appetito.