Things you need to know
- Stocks tossed and turned all day as we await Thursday’s CPI
- 10 Yr. Treasuries are now kissing 1.95% – is 2% far behind?
- NVDA/ARM deal gets cancelled – this is not a surprise
- Crude oil is taking a breather – but don’t expect it to collapse
- Try the One Pot Boneless Thighs – (picture on my Twitter)
Stocks tossed and turned all day…. Investors got to re-evaluate Friday’s Non-Farm Payroll report along with a handful of earnings reports. 10 Yr. Treasuries once again kissed 1.93% leaving many to speculate on when it will breach 2%. Calls of 3% by year end now seem to be all the rage – recall – in early January – the calls were for 2.25% – 2.5% by year end…but with the latest jobs numbers and this week’s CPI report – the talk is getting even more hawkish as so many analysts try to pinpoint the number of hikes over the course of the year. What started out as 2 or maybe 3 has now turned into a bevy of analysts now calling for upwards of 5 – 7 hikes…. Which is comical…because these were all the same analysts that never questioned the FED’s analysis…. they were solidly in the FED camp – reiterating the FED’s story…. Remember the ‘transitory’ story? Yeah, that one…. All of them siding with what was a flawed thesis…. but whatever….it is what it is…or rather it was what it was…
The turbulence that started 7 weeks ago – continues today….amplified by the dramatic moves in the big tech space….and dramatic might not even be the correct word to describe what we all witnessed…..It was a massive record breaking one day decline in FB that dragged not only the FAANGS lower, but dragged the broader market lower as well……and then the reversal the next day inspired by the stunning AMZN results… All of this turbulence ignited by the fact that the FED must correct its mistake in its assessment of the current rate and pace of inflation and the damage it will do (can do) to the system. The FED is now in the position to have to taper, hike and tighten all at the same time and that will continue to be ‘the story’ as we move thru the next 5 months or so.
After the up and down all day – we ended the day both up and down…the Dow ended flat, the S&P off 17 pts, the Nasdaq down 84 pts, the Russell up 10 pts and the Transports down 22 pts.
To date – the earnings season has not disappointed and 79% of reports have beaten on the bottom line – yet it has been (as usual) the guidance being offered going forward that has provided the action and the angst. Even companies that have beaten the estimates (i.e., HASBRO yesterday down 1%) are having trouble performing while those that miss are getting hit hard – suggesting that investors are re-pricing individual names and the broader market as we all prepare for what is ahead. Analysts at JPM telling us that ‘investors have grown overly bearish’ and that once it clears stocks should go higher. Yes? Well let’s see how that works out…. because I don’t see that in the near term at all……by year end, I would expect the market to have adjusted to the new FED policy, but in the near term, I am still in the ‘road is rocky’ camp.
In merger news – we found out that Frontier and Spirit Airlines are getting married – pushing it to the number 4 position – displacing JetBlue….Now, I never flew either of those and am not sure I ever will, but in any event the news sent Spirit (SAVE) up 17% on the day…..JBLU ended the day +3.7% and the JETS ETF ended +2.8%.
10 Yr. treasuries ended the day yielding 1.91% down from 1.93% as it hovers near its highest level since 2019. This morning it is up – at 6:30 am it is yielding 1.945% – clearly aching to pierce 1.95%….and once that happens 2% is in the bullseye.
Futures are drifting…. Dow futures are up 27 pts, S&P’s down 1, Nasdaq – 4pts and the Russell down 2. NVDA is under a small amount of pressure after regulators killed the ARM deal…. leaving Softbank to go down the IPO road sometime now in 2023. NVDA is quoted down $5 or 2%…. This though is not really new news….it has been a dark cloud hanging over NVDA’s head for months…so this won’t be a shocker. I would look for $235 to provide support….and will put more money into this name on a pullback.
There are no economic reports to add to the conversation today – but expect the focus to remain on Thursday’s CPI report…..which is expected to be hot at 7.3% y/y….the surprise will be if it is ‘weaker’ than the expectation……On the other hand the whisper number is suggesting a report of 7.5% – In any event – it will be what it will be…..and the FED is not expected to change course at all in terms of hikes….….But they could surprise the markets with a February increase if both the CPI and next weeks PPI prove to be stronger than expected. Next week – the y/y estimate for PPI is expected to pierce 10%.
Oil – was again the outperformer – the XLE up 1.3% taking that ETF up 25.7% ytd…. dwarfing the performance of any other industry group in the index. Financials – XLF up 3%, while Real estate – XLRE, Communications – XLC, Tech – XLK and Consumer Discretionary – XLY all down 9%. The Value trade down 1.45 while the Growth trade is down 9.8%. The PS Q (ETF that gets you short the Nasdaq is up 11% ytd, while the SH (ETF that gets you short the S&P) is up 5.6%. Cathie Wood’s ARKK (disruptive tech) is down 26% while The Tuttle Short Disruptive Tech ETF – SARK is up 26%….
This morning – crude oil is trading down 1.6% as it takes a breather. WTI kissed 7 yr. highs due to strong demand, Russia/Ukraine tensions and a weaker dollar. Additionally – the talks reviving the 2015 Iran nuclear deal are also putting oil for today. At 7 am – WTI is trading at $89.80/barrel.
European markets are churning…. between being down 0.2% and UP 0.8%.
Bitcoin is trading at $43.800 while Ethereum is trading at $3,100.
The S&P closed at 4483 – down 17 pts….and remains within the 4445/4550 trading band. The long term trendline – is now at 4445 and remains a KEY level to watch. We have a good shot of testing the January 24th lows…. before this is over and Thursday’s report could be the fuse that lights that fire.
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Boneless Thighs Braised in White Wine/Cream Spinach Orzo
This is a one pot meal and can be made – start to finish in 40 mins.
For this you need: boneless, skinless thighs (cut into bite size pieces), shallots, garlic, butter, Olive oil, white wine, Chicken Stock, Heavy cream (or lite cream), spinach, sundried tomatoes in their oil, fresh grated Romano cheese and s&p.
Begin by seasoning the chicken pieces with s&p. In a large sauté pan – heat up some olive oil – when hot – add the chicken pieces and sauté until browned…. remove and place in a bowl. Next add ½ stick of butter and the diced shallots and garlic. Sauté for 5 mins…. next add 1 cup of orzo pasta…. stir to coat with the butter, shallots and garlic.
Next – add in 1 c of the white wine (pinot grigio) to deglaze the pan – allow to come to a boil and reduce to half. Now add enough chicken stock to cover the orzo and then some. Add 1 cup of the cream and 2 handfuls of the cheese.
Toss in 3 handfuls of fresh spinach and the sliced sundried tomatoes – with just a bit of their oil – this gives the dish a slightly red/orange color. Reduce heat to simmer – still every 3 or 4 mins……taste to adjust for seasoning and to monitor the pasta. If it sucks up all the chicken stock, add a bit more to keep it from drying out. It is done when most of the chicken stock is absorbed by the pasta…
Buon Appetito.
