Things you need to know
- Stocks anticipated the headlines – the S&P & Nasdaq print new highs.
- Media announces a one pager to end the conflict – but there are strings attached.
- Global mkts on fire, bonds up, yields down, Oil down, Gold up
- Try the Steak Pizzaiola
BREAKING NEWS…. Trump announces, ‘Great Progress’, Pakistan’s foreign minister is saying that the ‘two sides are close to stitching a deal’. The media is reporting that the WH is close to a ‘one page memorandum of understanding to end the war and set the framework for more detailed nuclear negotiations’.
Asian markets closed higher – the Kospi in South Korea up 6.5% after being closed for a holiday, Australia up 1.3%, Japan up 0.4%, Hong Kong up 1.2% and Chinese stocks closed up 1.5%….…European markets are going parabolic – up more than 2% across the board.
Oil is collapsing – 7.2% at $95, Gold is surging, gaining $145 to trade at $4,700 on the idea that upward pressure on inflation is fading which means the pressure on the FED is also fading, think possible rate cuts are back ON the table, the KEY is ‘possible’…….
Meanwhile bonds are being bought and that is causing yields to decline (significantly)…the 2 yr is down 7 bps at 3.86%, the 10 yr is down 7 bps at 4.34% while the 30 yr is down 6 bps at 4.92% – and that is causing US futures to push higher – tech leading the way after last nights ‘blow out’ by AMD – which is trading up 19% or $66 in the pre-mkt at $421.60 ….Dow futures up 1%, S&P’s up 0.8%, Nasdaq up 1.4% while the Russell is up 1.6%.
Oh boy, I’m exhausted already and it’s only 5:45 am!
Let’s first recap the week so far – before we get to this morning’s fireworks…. Monday was ugly. Iran attacked the UAE with a barrage of drones and missiles, the US launched “Project Freedom” to escort ships through the Strait, our Navy sank six Iranian small boats that tried to interfere, and oil spiked over 4%. The market sold off. Fear was back.
And then Tuesday? Investors, traders and algo’s acted like nothing happened, buyers went shopping and took stocks to new highs, the VIX (fear index) fell nearly 5% to end the day at 17.40 – putting it back in the complacent zone….Oil traded as high as $105.48 and as low as $101.08 before closing at $102.27. Gold traded down to $4,513 while bond yields pushed higher…. The 30-yr ticked at 5.02%, the 10-yr ticked at 4.44% while the 2-yr hit 3.95%.
The Dow advanced by 356 pts or 0.7%, the S&P up 58 pts or 0.8% (new high), the Nasdaq up 258 pts or 1% (new high), the Russell added 49 pts or 1.7%, the Transports added 414 pts or 2.1%, the Equal Weight S&P up 65 pts or 0.8% while the Mag7 added 91 pts or 0.3%.
In the end, we are back to trading on the geo-political headlines (I thought we were over that) that continue to cause angst one day and celebration the next.
Earnings only helping the mood – PFE delivered a solid quarter — beat top and bottom line estimates, reaffirmed guidance, revenues up 5% — and investors loved it, taking the stock up 0.5%, Tyson Foods also beat expectations, yet fell 0.5%, PayPal beat earnings… and STILL got taken out back and whacked because guidance came in soft. Stock down hard – 7.7%.
Now we have to talk about the reaction to PLTR yesterday…..because they reported on Tuesday after the bell, so yesterday was the reaction….and it is a perfect example of skittish tech investors….
Fundamentally, they crushed it, the quarter was a MONSTER – revenues exploded, EPS crushed estimates, Gov’t revenues surged 84%, Commercial growth up 133% – YET THEY SOLD IT DOWN 6.6%…..Why? Because it is trading at insane multiples….110 x’s forward earnings and 70 x’s sales…which is well above the software sector that trades at multiples more like 20 x’s forward earnings and 12 x’s sales…so, you ask, How can that be? Who would pay for that?
Well, if you value it like an AI infrastructure company with a defense/intelligence platform that is also a ‘sovereign’ AI provider with hyperscaler qualities it changes how some investors think about it….in the end, buyers are betting that it is less of a software stock and more like a foundational AI stock which just means the margin for disappointment is razor thin, because when you price a stock to perfection, even excellence is no longer enough. And if you love the name and believe in the multiple then – it is on sale – down 23.5% ytd…. the chart suggests it should find support somewhere in the $127/$130 range….and this morning it is quoted down $1 at $135.
Now that is in contrast to AMD – who reported after the bell last night and they too had a ‘blowout’ qtr., EPS crushed it, Revenues beat estimates, Data Center revenues surged – up 57% y/y at $5.8 billion and they raised Q2 guidance to $11.2 billion vs. $10.5 billion. This is not a misprint…. AMD is eating it up and so is the semiconductor complex. It is up 66% ytd, AVGO up 23% ytd, MRVL up 98% ytd, ARM up 91% ytd while NVDA is only up 5% ytd. The SOXX etf is now up 60% ytd.
And the Eco data – yeah, that continues to surprise to the upside – New Home Sales up 7.4% in March up from negative 19.9% in February. Services PMI’s both in the expansion zone, ISM Services Prices Paid fell to 70.7 down from 73.5 (that’s positive) while the JOLTS report came in as expected.
Today we get Mortgage Apps, and the ADP Employment report that is expected to show an increase of 120k new jobs vs. last month’s 62k – and that is bullish too as it speaks to the job market. The real tell is Friday when we get the April NFP report and that is expected to show 65k new jobs – which is down significantly from last month’s 178k new jobs…but remember, last month was the surprise…we were expecting 65k new jobs and got 178k….so be careful how you interpret this month’s number…
Now KEY earnings this morning include some BIG names — and investors are wasting no time reacting in the pre-market.
DIS 5%, Uber +9%, ARM exploding up 13%, MAR + 1.5% ALB up 4%.
Meanwhile… CF Industries getting hit — down 8.6%, APA down 9%.
And what’s interesting is that this lineup touches almost every corner of the economy. Consumer, travel, discretionary, AI, Semi’s and Hyperscaler demand, Agriculture/Fertilizer and supply chain, Basic materials, and Energy..
So once again — earnings are doing more than just moving stocks. They are giving investors a real-time read on the health of the consumer, the strength of the AI trade, the direction of energy prices and the state of the global economy.
And right now? The message is clear – Consumers are still spending, AI demand is still white hot, but energy and commodity-sensitive sectors are starting to feel the pressure from all this geopolitical uncertainty and oil volatility.
And so – onto today – global markets are on fire, the headlines are screaming that an agreement is moments away and that the Strait will open and ship will navigate the canal without fear. But remember – there are 2000 ships stranded, and there are some 10k mines spread across the strait and the sea currents taking them to locations unknown. Estimates suggest it could be 6 months to clear them, so before you go breaking open the champagne, understand that even IF Trump walks out this morning and announces a deal… we are STILL likely months away from the Strait of Hormuz being truly open for business again at scale.
Remember, the mines don’t care about ceasefire agreements, neither do the insurance companies. War-risk premiums on tankers have exploded from roughly 0.125% of hull value to as high as 5% in some cases. Think about that for a minute. That is not a rounding error — that is a MASSIVE increase in the cost of global shipping. And insurers are not suddenly going to slash those premiums because politicians held a press conference and promised to “work together.”
Not happening. Premiums will come down when the mines are cleared, the shipping lanes are verified safe, and tanker operators regain confidence AND the world is convinced ships can move through the Strait without becoming targets.
Until then? The Strait may be “open” politically, but it is NOT fully functional economically. And THAT matters. Because elevated shipping costs mean higher freight costs and that includes oil, diesel, jet fuel, chemicals, plastics and fertilizers. So, even if the shooting stops tomorrow……the economic aftershocks will continue to ripple thru the global economy for weeks. Which only means – Don’t get FOMO’ized…. You have a portfolio, you are invested, you are NOT missing out.
The S&P closed at 7,259 – up 58 pts – closing at a new high. Futures this morning are suggesting that we are going to kiss a new century mark – 7,600! Which means it took us 2 ½ weeks since we pierced it on April 15th…Amazing…. Let’s hope the headlines are really true this time.
Call me at 561-931-0190 and let’s talk about how SlateStone Wealth can help you navigate all of this and reach your goals.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Steak Pizzaiola
YUM!
You will need a couple of things: A nice rib eye, or T-bone – (about 3/4” thick), Olive oil, Oregano, garlic, onions, red and green bell peppers, can of crushed tomatoes (not puree), some red wine, salt and pepper….**crushed red pepper flakes (optional).
In a saucepan – heat olive oil and add crushed/sliced garlic and move it around for a couple of mins until it is nice and golden…. Add a sliced white onion and julienned bell peppers – turn heat to medium and cover.
When the onions and peppers are soft (about 5 mins) add the crushed tomatoes, oregano and *red pepper flakes. Turn heat up and bring to a quick boil then reduce heat to medium. Add red wine (about 1/2 cup) salt and pepper and let simmer and thicken up…. about 10 / 12 mins.
Next – rub steaks with olive oil, salt and pepper – do not drown the steak in oil – just enough to massage the steaks and prepare them for the grill. Sear the steaks on the grill and cook for about 3 mins per side – now remove and add the steaks to the Peppers/Onions and Tomato sauce. Cover and turn heat to simmer and cook for another 3 mins.
This should give you a nice medium steak (depending on thickness) – If you prefer you can let simmer longer for more well done.
When done – remove steaks from the pan – slice into thick strips and arrange on plate. This should be enough to feed 2 – 4 adults. Next – stir the sauce in the skillet pan to deglaze – making sure to scrap the pan for any bits left behind. Spoon sauce over the steak and serve immediately. Present this meal with a large mixed salad of Arugula, Boston Bib & Romaine topped with tomatoes, red onions, cucumbers – dressed in a red wine vinaigrette. For wine – You can keep it simple and go with a Chianti.
Buon Appetito