Things you need to know
- Geo-political issues take center stage – Iran is ready to play nice in the sandbox. (or so they say….)
- Oil declines, bond rise, yields come in just a little bit.
- Earnings suggest ‘no recession in sight’.
- After the bell – PLTR crushed it…Stock up 15%.
- Try the Lemon Herb Thighs w/White Wine, Capers and Roasted Potatoes.
Stocks came roaring back yesterday, in fact they exploded higher as investors finally got what they had been waiting for—a break in geopolitical tensions – the strait is supposedly opened today with NO conditions, lower oil prices and higher bond prices which means lower yields. Inflation – the markets biggest worry was apparently NOT a worry yesterday. That’s exactly the combination the bulls needed (wanted) to see and allowed a lot of those investors – that panicked and sold mega-cap tech – to go ‘plowing’ back into those same names …. So, I ask – what did you really do other than create noise in your portfolio?
By the time the closing bell rang – the Dow gained 695 pts, the S&P up 110 pts, the Nasdaq up 540 pts, the Russell gained 50 pts, the Transports gained 190 pts, the Equal Weight S&P added 80 pts while the Mag 7 added another 1212 pts on top of the 1060 pts it added on Friday for a total of a 7% move in 2 days. And what is amazing – AAPL again that did not participate in the party – it lost 4 pts or 1.3% while AMZN – gapped open by $5 only to push up another $10 – putting it into the $3 trillion club before – rising 13 pts or 5%.
Of the 11 sectors – Consumer discretionary, Communications, both ended more than 2% higher, while Industrials, Tech, Basic Materials were all more than 1% higher, while Financials gained 0.7% and Real Estate ended the day up 0.2%.
Utilities, Consumer Staples, Energy and Healthcare all ended the day a bit lower.
Further down the chain – Homebuilders up 2.5%, Retail +2%, Airlines up 4.2%, Disruptive Tech up 3%, the Value trade up 0.6%, the Growth trade up 2.1%, Metals and Miners gained 2.1%, Software up 3%, Semi’s up 0.5%, Aerospace & Defense up 2.8%, Mid-Caps up 1.8% while small caps gained 1.1% – and the list goes on….
But to be really clear – this rally wasn’t about tech (although it was a big beneficiary) – it was about oil and the geopolitical atmosphere…
After spending weeks worrying that the conflict in the Middle East would choke off energy supplies, or the Houthi’s would join in the fight, or the Iranians would drag the Saudi’s in or that Trump would say something inflammatory only to retract it the next day, investors suddenly had something new to chew on.
Reports suggested negotiations aimed at bringing the conflict to an end were making real progress after Trump called off what he described as a major military strike against Iran.
Now, here’s the deal. Whether you like the politics or not doesn’t matter. Markets trade on expectations—not opinions and not on politics in the long term. They don’t care if you’re red, blue, or purple. And yesterday’s expectation was simple: the risk of another major spike in oil prices had just been taken off the table again.
That sent WTI tumbling $4.50 to settle near $80.20 a barrel, easing fears that another surge in energy prices would reignite inflation and force the Fed to rethink its outlook. That’s certainly how the algos and many traders interpreted the move.
But remember what I told you yesterday. The bond market had already begun doing the heavy lifting for the FED. Long before oil sold off, treasury prices had been falling and yields had been climbing. The 10-year was pushing above 4.70%, while the 30-year was hugging 5.27% – evidence that financial conditions were tightening all by themselves. And what did the Fed do? Absolutely nothing.
That’s exactly the point I made yesterday, and one Kevin Warsh has been whispering as well. Financial conditions tightened – not because the bond market demands higher yields – it tightens because investors demand higher yields – That’s the market doing the FED’s work.
Remember, the Fed only controls the overnight lending rate. It doesn’t control the 10-year Treasury. It doesn’t control the 30-year Treasury. Those rates are determined every day by millions of buyers and sellers around the world—and those are the rates that matter most to consumers and businesses.
Fed Funds may currently sit at 3.50% to 3.75%, which I would argue is not restrictive – dare I say it is somewhat ‘accommodative’? But the 10-yr treasury yielding more than 4.70% and a 30-year above 5.25%? Those are more restrictive borrowing costs. So, the next time someone says the Fed has to “do something,” remember this – sometimes it can do something by NOT doing anything… It’s like investing – choosing to sit tight and do nothing IS an investment decision. Point in fact – I did nothing when tech was getting wrecked – I rode that wave (uncomfortable, yes, unbearable, no) as of last night – the portfolio value is at a new high! Proving that patience IS a virtue (as long as you stay calm during a selloff!)
And the eco data was a pretty balanced report – Manufacturing is accelerating. Employment is improving. New orders remain strong and Prices Paid is still hot—but it’s moving in the right direction.
Here is how to read it – The ISM report reinforced the idea that the economy remains on solid footing. Manufacturing activity surged to its strongest level in more than four years, New Orders expanded for a seventh straight month, and the Employment Index climbed back into expansion for the first time in nearly three years. While the Prices Paid Index remained elevated at 71.1—confirming inflation pressures haven’t disappeared—it did ease a bit lower from last month’s reading.
Gold continues to stay in place…not doing much of anything. This morning it is at $4,050 still rangebound.
Now what happened with earnings…because that is a big deal…. we heard from TSN – they beat and margins improved – MAR – leisure travel is strong…business travel is strong and int’l travel is strong – have you tried to get a hotel room anywhere in the big cities? Both these names suggest that the consumer and the economy remain strong – there is nothing here that screams recession.
After the bell – we heard from Palantir – PLTR and they crushed it…Revenue up 93%. EPS at 41 cts vs 34 cts, Full year guidance – stronger than expected. Commercial revenue (subset of total revenue) expect to grow at 134% THIS YEAR….and they took it up 15% or $18.50. This morning it is quoted at $144.50/$145. Just another example of investors rewarding AI monetization.
Today brings us CAT, AMD, PFE, MRK and SPCX… (we discussed that yesterday, I did a whole Elon/Odysseus comparison….). So here is the deal, CAT will take the temperature on Industrial demand & AI infrastructure spend. PFE & MRK will speak to how big pharma is doing. AMD is another look at ‘chips’ while SPCX will discuss the commercial space economy and the satellite communications industry. It’s going to be an exciting afternoon…..
European markets are mostly higher…Italy in the lead up 1%, Germany and the Eurostoxx up 0.4%, the UK up 0.2% while France and Spain are lower.
This morning US futures are up. Dow up 22 pts, S&P’s up 5, Nasdaq up 135 pts while the Russell is up 1. Markets taking a breather after yesterday’s surge.
The S&P 500 closed at 7,600, up 110 points, leaving it just a hair below the all-time closing high of 7,609 set on June 2.
There’s no question about it—we busted up through trendline resistance at 7,468, and once resistance is broken, it becomes support.
Now, we’re sitting just 10 points away from matching the record high. A move of 20 points or so would give us a convincing breakout into uncharted territory. And when markets break into new highs, there isn’t any overhead resistance left—only psychology.
That opens the door to a run toward the high-7,800s, which suddenly makes the year-end S&P 8,000 look a whole lot more realistic.
Oh boy…I love this.
For now, though, we are in the 7,468-7,609 trading range. A decisive move above that upper boundary changes the conversation completely.
If you’d like to discuss your goals, evaluate the risk in your portfolio or simply get a second opinion, give me a call at 561-931-0190 or better yet – click on this link to connect. https://slatestone.com/contact-us/
I’m always happy to provide complimentary portfolio review and risk assessment.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Lemon Herb Chicken with White Wine, Capers and Roasted Potatoes
This dish is all about balance. The wine and lemon cut through the richness, the capers add a little bite, and the butter brings everything together at the end. That’s what happened in the market yesterday. Oil prices backed off, inflation fears eased, the economy continued to show signs of strength, and investors finally got a chance to exhale. Sometimes all the ingredients are there—you just need one thing to settle down before everything comes together. Yesterday, that ingredient was oil.
For this you need: 6 bone-in, skin-on chicken thighs, s&p, olive oil, 5 garlic cloves, smashed, 1 large shallot, sliced, 1 cup dry white wine (Pinot Grigio Santa Margherita), Juice of 1 large lemon, Zest of that same lemon, capers, butter, Fresh parsley & thyme.
For the potatoes – 2 lbs. baby Yukon Gold potatoes – cut into bite sized pieces, Olive oil, Garlic powder, Fresh rosemary & s&p.
Heat the oven to 425°F.
Toss the potatoes with olive oil, rosemary, garlic powder, salt and pepper. Roast for about 40 minutes, turning once until they’re crispy and golden.
Pat the chicken dry and season generously with s&p. Heat olive oil in a large oven-proof skillet. Sear the chicken skin-side down until golden – about 6-7 minutes. Flip and cook another 3 minutes. Remove and set aside.
In the same pan add shallots and garlic. Cook for 2 minutes. Pour in the white wine and scrape the bottom of the pan. Let it reduce by half. Stir in the lemon juice, zest, capers and thyme.
Return the chicken to the pan and place it in the oven for about 20 minutes. Remove from the oven, swirl in the butter and finish with chopped parsley.
Serve over the crispy potatoes with plenty of that lemon-caper sauce spooned over everything.
Buon Appetito