Things you need to know
- Santa is still hanging around – Investors remain optimistic
- Apple became a $3 trillion company for 2 mins and this morning it looks like investors will push it even higher
- 10 Yr. Treasuries now pushing 1.64% and going higher
- Try the Simple One Pot – Pot Roast
So, stocks in the US (Asia & Europe) ended the day in the plus column……although off their intraday highs, 5 of the 11 sectors ended up while the other six sectors ended in the minus column. Energy – XLE once again stealing the spotlight – up 3% this on top of the nearly 50% rise in 2021. Consumer Discretionary – XLY came in second at + 2.8%. Basic Materials – XLB lost 1.4%, Utilities – XLU lost 1% and Real Estate – XLRE gave back 0.9%.
Apple became a $3 trillion company at 1:45 pm on January 3rd after piercing $182.88 yet did not hold that level and closed below at $182.01 – leaving it still in the high $2 trillion range! Tech disruptor names finding a bunch of bargain hunters helped to send that sector higher (think the January effect – that is when some stocks tend to rise in the first month of the year following a year-end sell-off for tax purposes.) …ARKK up 2%, ROKU up 2.5%, TDOC +3.25%, TSLA +11%, COIN + 0.4%, PLTR +0.25% etc.…. Home builders – XHB came under pressure – falling 1.9% (after gaining 54% in 2021) …and this makes perfect sense – as 10 yr. yields spiked rising 13 bps (or 6%) in one day…. going from 1.5% at 5 am to 1.63% by the closing bell – suggesting that mortgage rates are soon to follow…and money will become more expensive and that should at least put a cap on runaway housing prices.
The massive airline cancellations that we have seen over the past two weeks and expect to see for the foreseeable future did little to cause some investors to run away…in fact – the airlines were up yesterday…JETS (Airline ETF) GAINED 3.2% on the day…..Recall though that it is down 16% since early November – so this was one of those ‘January Effect’ trades….fast money looking for short term opportunity. And the XLF (Financials) gained 1.2% as the prospect of higher rates caused investors to move into that group with more faith – Understand – the XLF trade is not a short-term opportunity…. that is one of the groups that is expected to do well in a rising rate environment…. I am adding to that position….
At the end of the day – the Dow rose 250 pts or 0.7%, the S&P up 30 pts or 0.6%, the Nasdaq gaining 190 pts or 1.2%, the Russell up 28 pts or 1.2%…. Transports which absolutely killed it last year at +34% – fell 175pts or 1%. Oil – which was up strongly in the early morning pre-mkt ended the day up 80 cts at $76.01/barrel.
The bottom line is that while the outlook is positive – the reality is that the FED is going to have to ‘come about’ to change the direction of the sail….to accommodate the changing winds….and that is not being reflected in the action just yet and maybe that is because – the WH is looking to pack the FED with more ‘doves’ (recall there are 3 open spots and this morning we hear that one of them is Sarah Bloom Raskin – defined as a ‘moderate dove’) and if that happens then maybe, just maybe we won’t get 3 rate hikes….or the more aggressive 4 hikes that some have been suggesting…nor will we get hikes greater than the 25 bps that seems to be the call…remember – in late December – there was speculation that we would potentially see an abrupt end to taper and a more aggressive hike of 50 bps….and that sent shivers through the markets in mid-December. Well, they have been able to shelve that speculation, keeping it out of the media and downplaying that possibility, but I am not convinced yet. I am still in the camp that as we get the latest reads on CPI and PPI later this month – it will become even clearer that the FED needs to move. Which is why, I am building a cash balance in my 401K that will allow me to jump on what I expect to be lower prices in the not-so-distant future.
Remember what I told you yesterday…..pay attention to what St Louis Fed President Jimmy Bullard has to say on Thursday….the day after the FOMC mins are released – now while no one is about to be surprised by what the mins say – Bullard’s comments may catch the markets and investors by surprise….recall that Jimmy has become much more hawkish and is the one that ‘floated the idea that the FED needs to be more aggressive, he indicated that they need to quicken the pace of the taper and they need to consider larger incremental rate increases (50 bps vs. 25 bps) in order to combat inflation….Now he said all this last year when he was NOT a member of the FOMC Committee – so his comments were not supposed to be ‘reflective’ of the sub-committee within the FED…but – in usual FED style – that is exactly what they were meant to do…It is the FED’s way of ‘floating the balloon’ to take the temperature of the markets to help guide policy…..and remember when he said that –the MSM (Main St Media) was becoming hysterical about Omicron – and the markets fell – the media blaming Omicron while I said ‘no way’ (and quietly bought stocks)….Omicron is not the reason the markets sold off – because only 2 days later – investors were pushing the indexes to new highs and two weeks later investors continue to push the markets to new highs… Let’s be clear – The US is a ‘hot red zone’ – Every inch of the map covered in RED as some hysterical journalists try to push the variant story, yet investors take stocks higher – suggesting that Omicron and its cousins are NOT a concern for investors – don’t kid yourself…….it is all about investor expectations and a more aggressive FED was not part of the expectations…
Yesterday’s eco data was in line for Manufacturing PMI but a bit weak for construction spending…. today we will get another read on ISM Manufacturing and markets expect a 60 handle. JOLTS Job Openings are expected to be north of 11 million and Total Vehicle Sales are expected to top 13 million units. Tomorrow we will get ADP Employment, Market Services PMI (which is a KEY number considering the US economy is 73% services) and the FOMC mins….
This morning – US futures are UP again in what has become a broken record…. But it is the new year, there are new monies being allocated to investments and retirement plans in January….and that typically does give an early boost to the markets…. but that fades quickly….as we move thru the month. My continued advice is to add money over time and not in one fell swoop…. Put the money into the account and hold it in cash and put it to work gradually – taking advantage of opportunities as they present themselves…and I expect them to present themselves in the first half of the year. At 6 am – Dow futures are up 120 pts, the S&P’s up 16, the Nasdaq ahead by 60 pts and the Russell is up 10 pts…The 10 yr. treasury is pushing 1.64% and going higher…. Capisce?
Optimism about recovering global growth and expected continued momentum in earnings is what is driving the moves now…. Remember – the earnings season begins next week……and expectations are running high……And so – what you might see is that ‘buy the rumor/sell the news’ type of earnings season……
European markets are in the green – FTSE +1.3, CAC 40 + 1.3%, DAX +1.3%, EUROSTOXX +1%, SPAIN +0.6% and ITALY +0.8% – all this even as some European countries are reimposing some restrictions and lockdowns. Eco expectations include French inflation for December, German Unemployment in December, and Portugal’s consumer confidence – and the way the markets are acting, investors are not concerned.
Oil is up 60 cts to $76.70/barrel – OPEC is holding a meeting today and the expectation is for them to ‘stick to the plan to add 400k barrels to the supply in February’ as energy demand remains ROBUST despite what the media tells you about how Omicron will destroy demand – not happening.
Bitcoin is trading at 46,700 and Ethereum is hovering around $3850.
The S&P closed at 4796 – While we are well above all 3 formal trendlines – you can still draw one from February 2021 to get a sense of where we might run into resistance…and that line suggests 4920 ish and continues to move towards 5000 by early February. Any unexpected negative news could see the market pull back swiftly, but that is not what concerns me – I am focused on the FED and future FED policy to help drive my investment theme. Value, Dividend payers, and big multinationals in the Energy, Consumer Staples, Industrials are overweighted for me while AI, Cybersecurity, space infrastructure and crypto’s remain areas of interest and investment.
Text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.
You can follow me on Twitter and Tok-tok @kennypolcari and on IG @kennyp1961.
You can also find my daily videos on my YouTube channel – Kennypolcarimedia – My URL address here: https://www.youtube.com/user/kennypolcarimedia
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Simple Pot Roast
This is one of those simple ‘one pan’ meals that takes little time to prepare and cooks beautifully in the oven.
For this you need: 1 -31/2 lb. boneless chuck-eye roast, vegetable oil, 1 large white onion- chopped, 2 large carrots chopped, 2 celery ribs chopped, 3 lg cloves of garlic- put thru the garlic press, sugar, chicken and beef broth, fresh thyme, water and ¼ c of red wine. You also need a pot that can go from the stove into the oven with a lid.
Begin by turning your oven on to 300 degrees. Make room in the center rack.
Pat the roast dry with paper towels and season generously with s&p.
Heat the pot with the oil until it shimmers. Brown the roast on all sides. – 10 mins. Now transfer to a plate and set aside.
Reduce the heat to medium – add the chopped onion, celery, and carrots. Sauté for about 10 mins. Now add the garlic and 2 tsp of sugar- stir to mix…. Now add in 1 c each of the chicken broth and the beef broth and the twig of thyme. Return the roast to the pot and any of the juice it produced. Now add enough water to come halfway up the sides of the roast.
This is one of those simple ‘one pan’ meals that takes little time to prepare and cooks beautifully in the oven.
For this you need: 1 -31/2 lb. boneless chuck-eye roast, vegetable oil, 1 large white onion- chopped, 2 large carrots chopped, 2 celery ribs chopped, 3 lg cloves of garlic- put thru the garlic press, sugar, chicken and beef broth, fresh thyme, water and ¼ c of red wine. You also need a pot that can go from the stove into the oven with a lid.
Begin by turning your oven on to 300 degrees. Make room in the center rack.
Pat the roast dry with paper towels and season generously with s&p.
Heat the pot with the oil until it shimmers. Brown the roast on all sides. – 10 mins. Now transfer to a plate and set aside.
Reduce the heat to medium – add the chopped onion, celery, and carrots. Sauté for about 10 mins. Now add the garlic and 2 tsp of sugar- stir to mix…. Now add in 1 c each of the chicken broth and the beef broth and the twig of thyme. Return the roast to the pot and any of the juice it produced. Now add enough water to come halfway up the sides of the roast.
