Things you need to know
- Stocks rallied – think Dead Cat Bounce
- Bond yields kiss 3% and then back off
- NFLX is a disaster – falling 25% post earnings – 35 Street analysts have a ‘buy rating’ on the stock! Oh boy!
- Oil – gaining after yesterday’s decline…. just more of the same
- Try the Shells with Sweet Sausage and Peas
Stocks rallied! In what feels like a bit of a dead cat bounce after being in a bit of an oversold position…. all while bonds continued to come under pressure – sending the yields on 10 yr. treasuries to an intraday high of 2.977% before ending the day yielding 2.93%. At 4 pm the Dow added 500 pts or 1.45%, the S&P up 70 pts or 1.6%, the Nasdaq rallied back 290 pts or 2.1%, the Russell also gained 41 pts or 2% while the Transports added 410 pts or 2.8%.
It was another big earnings day – beats from JNJ, SI, CFG, HAL, LMT and PLD were met with slight misses from the likes of FITB, HAS, but the real story was after the bell….
NFLX got absolutely pummeled after they reported a beat on the bottom line – $3.53 vs. the $2.90 estimate but missed on so many other metrics! So, while the beat looked good – it was the underlying story that set the place ablaze. Password sharing, the war in Ukraine, declining revenues, drop in subscribers (first net loss of subscribers in 10 years) and a very competitive environment all being credited to the sad story….the stock which closed up 3% on the day at $348/sh – fell 25% in the moments after the headlines hit the tape….or $87/share to $256! What is even more comical is that 35 Wall Street analysts have a BUY rating on the stock – even as it had lost 45% of its value since mid-November – when it ticked at $700/sh. And this morning – after yesterday’s beating the stock is now down 60% from that high…. watch what those same analysts do this morning……Its comical when they all issue a ‘sell rating’ AFTER the fact…….
Competitors in the space include DIS, ROKU, AMZN, WBD, PARA, & CMCSA – all stocks that have been under pressure since the fall….
The gains yesterday were broad…. the only sector in the red was Energy – XLE which fell 0.8%…. hardly anything to worry about as that ETF is ringing the cash register up 45% ytd. As you’d expect and as I have pointed out in prior notes…the winners yesterday were the well oversold sectors…that is where the trader types try to make a quick buck…so Consumer Discretionary was up 3% (it was down 12% ytd), Communications up 2% (it was down 15% ytd), Real Estate up 2% (it was down 7% ytd), Tech up 1.9% (it was down 16% ytd), Homebuilders surged by nearly 4% (it was down 30% ytd), Retailers up 3.7% (it was down 16% ytd), Semi-conductors gained 2% (it was down 23% ytd), while ARKK – the tech disruptor rallied by 4% (it was down 40% ytd). Do you see the pattern? The value trade – SPYV up 1.3% putting it into the positive column on the year – and that includes big DIVY payers like BRK, JNJ, PG, XOM, CVX, UNH, KO, VZ – very much the theme for 2022, while the growth trade – SPYG rose 2% – leaving it down 13% on the year.
This morning – the business programs were talking about how both stocks and bonds are down on the year…. which does not make a lot of sense (to them) – some asking – where is the money going?
Well, let us be clear – the money is just being re-allocated, it is not going away! It is moving out of those weak sectors noted above and being put to work in sectors that are expected to benefit in the months ahead as we enter a more inflationary environment forcing the FED to raise rates. So sectors like Energy +45%, Financials -3%, Utilities +6%, Consumer Staples +3% – but individual names up more – JNJ +8%, KO +11%, WMT +11%, K +8%, Healthcare -1%, Metals & Miners +45%, Coal and Fertilizer stocks – names like BTU +200%, CRK + 115%, MOS +100%, CF +56% and the list goes on…..So, don’t let anyone tell you that money is coming OUT of the market – it is not…it is just being reallocated. And remember – the tone is nervous – so buyers are not pressured to buy in names that are weak and expected to remain weak for now (but will turn at some point), in this case – patience is a virtue and dollar cost averaging is a good way to play it for the long term IF you like the underlying story and the stock (sector) is just out of favor (temporarily)….if the underlying story is weak – then get the hell out of the way!
This morning US futures are churning…Dow up 35, S&P’s up 3, Nasdaq down 15 and the Russell up 8.
Treasury prices are up this morning – sending yields a bit lower and that is helping to calm the psyche…..but don’t get lulled into anything….it is a temporary reprieve…..bonds will continue to decline as the FED makes it clear what their next move is…and while the market expects a 50 bps hike in two weeks, Jimmy B – made it clear that 75 or even 100 bps is at least ‘on the table’…now I don’t think that that will happen, UNLESS we start to hear much more about it in the days ahead….pay attention to the talking heads out of the FED as well as the big financial institutions like GS, JPM, MS, BLK, C etc…
Earnings today include ANTM, MTB, NDAQ, PG, ABT, and after the bell – the one to watch will be TSLA, other names include UAL, CCI, THX, CSX, AA AND EFX.
Eco data includes Mortgage Apps and Existing Home Sales which are expected to be down 4.1%. At 2 pm we will also get the Fed’s Beige Book – which details the state of the union across the 12 Federal Reserve regions…. Boston, NY, Philly, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
Oil is up 75 cts at $103/barrel – holding above the $100 trendline after yesterday’s beat down. Concerns over Libya and the ongoing Russian ‘issue’ were the causes of yesterday’s weakness. Today – no one is using those arguments to drive the action. Summer is coming, China hints at reopening and demand is strong. …do not expect oil to decline at all….
European markets are all higher…. Yesterday the IMF (Int’l Monetary Fund) cut global growth projections for both 2022 and 2023 – putting the blame squarely on Vlad and the Russian invasion – saying that it will add to price pressures and significant policy challenges. This follows the move on Monday by the World Bank that also cut the global growth forecast. In any event – its earnings, ECB policy and the war in Eastern Europe that will continue to drive the action. At 7 am – markets across the region are all up about 1%.
The S&P closed the day up 70 pts at 4462…. leaving it between 2 trendlines…4415 and 4496. I would expect the markets to continue to thrash around as 10 yr. treasury’s kiss 3%. One of two thing is going to happen when we do…. either the administration and their talking heads will tell us how great 3% is for the economy and that there is nothing to worry about – hoping to calm markets OR a kiss at 3% will ignite a firestorm of selling as the reality of higher interest rates takes a further toll on the economic recovery. Either way – there is always an opportunity for those that are paying attention.
Bitcoin is trading at $41k this morning while Ethereum is trading at $3100.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Shells w/Sweet Sausage & Peas
This is a real comfort dish. You need – 1 lb. of medium shells, sweet Italian sausage out of the casing, frozen peas, 1 large Spanish onion, garlic, s&p, chicken broth (or white wine), a touch of cream and plenty of fresh grated Parmegiana cheese.
Bring a pot of salted water to a rolling boil on the back burner.
Now – in a large pot – add some olive oil and brown the sausage meat…. once done -remove and add in some chopped garlic and the sliced onion. Sauté until soft – about 8 – 10 mins – then add back the sausage. Toss in the frozen peas – season with s&p and turn the heat to med low. Cover and let cook for 15 mins.
Now add in the chicken broth (or white wine) – just enough to bathe the meat – do not cover it…. if you are using white wine – bring to a boil and let the alcohol burn off, if you are using broth – bring to a boil and then turn the heat down.
Add the pasta shells to the water and cook for 8 mins or so…you want it al dente. Strain – keeping the pasta water (in case you need it). Add the shells to the sausage and peas – mix, add in a touch of cream to give it more body along with a handful of cheese and stir again.
If it needs it – add in about ¼ of a cup of the pasta water to keep moist. Serve immediately in warmed bowls. Have more cheese on the table for your guests. I like this with some toasted garlic bread…Yum.
Cost: No more than $30 to feed a family of 4
Buon Appetito.
