Things you need to know
- Eco data weak – but it was expected
- Lonnie ignites a fire in Technology – sending Nasdaq up 2%.
- JPM warns of massive losses out of the Russian crisis – Who is next?
- Oil – rallies 4% and is higher again today
- Try the Chicken Scampi
Factory orders were weak – coming in at -0.5%, durable goods also weak – falling 2.1%, Lonnie Musk announces that he now owns a 9.2% stake (that’s 73.5 million shares with a market value of $2.9 billion) in Twitter – up 27% on the news – making him its largest shareholder and Howard Schulz cancels the Starbuck buyback – causing that to fall 3% on that news – to plow more money into his people and his stores…as threats of unionization begin to ring true…..and JPM warns of billion dollar losses (ahead of earnings) in Russia as the chaos continues…leaving investors to wonder who is next…..C? GS? MS? BLK?
The bond market remains upside down – with the 2’s, 5’s, 10’s and 30’s all mixed up. The 2 yr. yielding 2.41%, the 10 yr. yielding 2.39% while the 5’s are at 2.57% and the 30’s are yielding 2.47%. But again – no one appears to be paying attention to what the inversion means even as the media hammers it home……..because the 10’s and 30’s are not yet inverted…..Convenient how the comparison changes depending on the message you are trying to send….find the pair that is NOT inverted and then focus on that one to try and redirect the conversation….…..In the end – investors/traders and algo’s took stocks higher yet again….even as it become clear that the next 3 moves by the FED is up 50 bps each….taking us to 1% before Memorial Day weekend and then 2% before labor day weekend.
Oil – which fell last week from $114/barrel to $99.50 after the US and the Int’l Energy Agency announced the release of ‘untold barrels’ of oil to help ease the supply shortage being created by the Russian/Ukrainian war – advanced by 4.5% to end the day at $103/barrel. Again, suggesting that the decline in prices was just a flash in the pan – a reaction to what was nothing more than a public relations stunt – because demand for oil is strong and prices are going higher and while the temporary increase in supply is good, it is only a band aid for a much bigger problem. Remember – Goldman has a $130 price tag on it by year end while RBC tell us that $200/barrel is possible …. which will surely be revised before spring turns to summer and the driving season begins.
And for those that think there won’t be a driving season – think again….try to find an Airbnb anywhere along the coast from Maine to Kiawah during the summer months….IF you find one – expect to pay UP for the stay…..and all that suggests is that people are planning on going on vacation…they need to get out, they need to breathe and they are going to drive their cars to get there and that means they need to ‘fill up the tank’.
The chatter all day was what is it that Lonnie Musk wants with Twitter? What are his plans? Is he really just a ‘passive investor’ or is he going to start to tighten the screws on the cancel culture as he publicly questions Twitter’s commitment to ‘free speech’? Will he become an activist investor that will force change at one of the most popular social media sites or will he just sit back and watch? The smart money says watch out…. Lonnie is not the shy and retiring type – if he is going to spend billions of dollars to buy a 9.2% stake in the company – you better believe he has something up his sleeve.
In what is now being discussed as his intention ‘hidden in plain sight’ was his March 25th tweet. In it he asked a question and took a poll –
“Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle? He then went onto say that the ‘consequences of this poll WILL BE important. Please vote carefully”.
70.4% of respondents voted NO. In the end – it is a slippery slope…who gets to decide what free speech is, how it is monitored, what content is considered ‘ok’ vs what is offensive? It is a tangled web we weave.
And on top of that – news that Tesla will deliver a record number of cars even in the face of the supply shortage sent that stock surging as well – up 5.6% to end the day at $1145/share. He managed the supply issue perfectly for now– and that only makes him that much more of an enigma…. because the competitors could not.
By the end of the day – the Dow added 105 pts or 0.3%, the S&P up 36 pts or 0.8%, the Nasdaq up 270 pts or 1.9%, the Russell up 5 pts or 0.2% while the transports had another down day – losing 10 pts or 0.07%.
As you can imagine –it was the most beaten-up sectors that were the winners yesterday…… Tech was up 2% – leaving it down 7% ytd and Consumer Discretionary rose by 2.25% leaving it down 7% ytd as well. Communications up 2.8% but is still down 8.5% ytd. Retail – XRT – another sector that has gotten beaten up this year rose by 2.6% leaving it down 14% ytd, Housing – XHB down 24% ytd also found buyers – rising 1% on the day….and guess who else had a good day? Cathie Woods – her ARKK fund – Innovation technology – rose 4.3% but remains down 25% ytd….
Do you see the pattern? All of the money went into the most beaten-up sectors as Lonnie Musk lit the fuse and created all kinds of excitement for traders……– no matter that the yield curve remains inverted, and the FED is about to get very aggressive…. but do not think that this is long term money just yet…it is trading money…. when the mood turns sour – these will also be the sectors that take it on the chin. The sectors that lost yesterday did not get slammed at all – which tells you that the long-term money is sitting tight – not reacting to the excitement created by Lonnie.
US futures were lower overnight but have once again turned higher in the early morning…. (4 am). Dow futures are up 50 pts, S&Ps are up 5 pts, the Nasdaq is higher by 26 pts and the Russell is up 4 pts. In addition to the yield curve inversion – the geo-political crisis continues to weigh in on the markets as the fighting continues and shows no signs of abating. Ukraine warning of more atrocities across the country while the West declares Putin a war criminal – which at this point will only serve to embolden him.
The bond market continues to send conflicting signals while the VIX (fear index) is suggesting calmer waters after falling 50% in March – leaving it below all 3 trendlines trading at levels last seen before the war started.
Economic data today includes S&P US Services PMI exp of 58.9 and the ISM Services PMI of 58.5 – Remember the US economy is a 75% service economy – so these reports are very important……a weakening services number is not good… 50 is the neutral line – anything north of that is expansionary – so at 58.9 and 58.5 – we have nothing to worry about….so sit tight…and let us see…. A weaker than expected number will play into a slowing economy…. Capisce?
European markets are being described as ‘tepid’ at 10 am (European time) ….as they monitor the crisis in Eastern Europe and consider additional sanctions on Moscow. European bonds also continue to come under pressure sending yields higher amid worries about inflation and the ECB response. At 4 am – markets across the region are trading anywhere between -0.25% and +0.5%.
Bitcoin is trading at $46k and Ethereum is at $3,500.
The S&P closed at 4582 last night…. up 36 pts…. We are now comfortably above the trendline at 4540…. And will look to challenge the March 29th high of 4605. The near term trading range is now 4540/4605….but the broader is 4420/4800….Now the short term trendline that created a death cross 2 weeks ago is starting to turn UP and when it crosses up and thru the long term line – that is considered a Golden Cross and suggests better days ahead…..If we continue to trade up here – the golden cross will happen in the next two weeks…just after Tax time and right before the FED announcement. Tomorrow’s FOMC minutes will reveal or should reveal the FED’s intention…. the pace of tightening and the pace of any balance sheet reduction…Over the next two months – the market has a lot of information that needs to be priced in….and the bias is higher yields inverted curves…and all that means is speed bumps ahead.
The question now is- Can the FED engineer a soft landing? Because if they can convince the markets they can – then expect stocks to continue to push higher but if it looks like we are about to crash land – then watch out…. But I suppose the FED can always change course if they have to…and slash rates again to try and cushion the blow.
Stay the course……. Assess your risk and where you are in the life cycle and then invest appropriately. Talk to your advisor.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Chicken Scampi
This is an easy dish to make, and you can serve it over linguine or just eat it with a large mixed salad. It is the perfect alternative to the more traditional shrimp scampi for anyone that does not like shrimp.
For this you need: 1 1/2 lb. skinless, boneless chicken cutlets cut into bite size pieces, s&p, dried oregano, butter, Olive oil, thinly sliced garlic, flour, dry white wine, red pepper flakes (optional), 1 tbsp. freshly squeezed lemon juice, finely chopped parsley leaves, 1/4 tsp. grated lemon zest and 1 lb. of linguine (if you choose to serve it over pasta) and grated Parmegiana or Romano cheese.
Bring a pot of salted water to a rolling boil
Rinse and pat the chicken dry – season with s&p and oregano- toss in the flour and set aside.
In a large non-stick skillet – add butter, splash of olive oil and the garlic – sauté around for a couple of mins. Now raise the heat to high and add in the chicken pieces. Cook the chicken for about 8 – 10 mins. When cooked – remove from pan and set aside.
Add the pasta to the pot and cook for 8 mins.
Next – add the wine and lemon juice to the skillet – bring to a boil then turn to simmer. Here is where you would add the red pepper if you were using it – it should begin to thicken a bit – no more than 4 mins. or so. Add in one more tablespoon of butter – let It melt. Add the lemon zest and parsley… scrape the bottom of the pan to get any bits. Turn off the heat and add back the chicken. Stir well to coat.
At this point you can serve it over the linguine. Do not forget the garlic bread.
Buon Appetito.
