Things you need to know
- Dow theory continued to play out
- Global bond markets sell off sending yields higher
- UK currency markets in turmoil
- VIX surges above 30…. suggesting more volatility
- OPEC Watching the oil markets – ready to intervene
- Try the Chicken Thighs – delish
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MWCB (Market Wide Circuit Breaker) levels (Again). Just for your information
Level 1 – the S&P loses 255.85 pts – 7% to halt trading for 15 mins
Level 2 – the S&P loses 475.15 pts – 13% to trigger the 2nd halt – 15 min.
Level 3 – the S&P loses 731.00 pts – 20% to trigger a trading halt for the balance of the day
And stocks continued to collapse….as Dow theory suggested on Friday when the industrials breached the June lows confirming what the transports were telling us, they moved lower based on what the bond market has been telling us and they moved lower based on what we were telling us! Central bankers – have again been slow to respond – that is until recently- when suddenly the risk that ‘we’ all have been seeing was fully recognized and appreciated by them…..forcing them to change their narrative that ‘they had this under control and that they could navigate a soft landing’ and start to tell us the truth that ‘they need to be vigilant and aggressive to tame inflation – so therefore they are going to push rates up and bring the economy to its knees’ narrative….
Sunday – on ‘Face the Nation’ – Atlanta Fed President Raffi Bostic told us that he was confident that the FED would ultimately succeed but there would be pain along the way……Yesterday we heard from ECB President Christine Lagarde and then Cleveland Fed Pres Loretta Mester who said that
‘Inflation is unacceptably high, and uncertainties make monetary policy decisions not trivial… Uncertainty will cause policymakers to act more aggressively because aggressive action can prevent the worst-case scenarios from actually coming about…’
We also heard from newly appointed Boston Fed President Susan Collins who continued with the hawkish commentary acknowledging the challenge to control stubbornly high inflation…. Then our friends at Goldman Sachs took equities to ‘underweight’ (that is a downgrade) through the end of the year saying that rising bond yields and the rising risk of a ‘recession’ are real and have further to go! The RISK of a recession? Is that what they said? Now that is comical…. Because it is not about the risk of one – we are IN one…Wake up! On a side note – my gut tells me that as Goldy is flashing all kinds of sell signals – they are out there buying up what you are selling…. it is just 40 years of experience – nothing more.
Recurring macro data points that confirm the state of the global economy and the pace of inflation seem to be a daily occurrence and they are not bullish. 3rd Qtr. earnings ‘pre-announcements’ – otherwise known as ‘estimate revisions’ are now happening (as I expected) and they are not good, which should not be a surprise because we were told that during the 2nd Qtr. reporting season during the summer. Volatility which somehow has remained muted for months has started to lift its head…Up 40% since last week and 70% since mid-August – closing at 32.26 last night….
Global bond markets are all under pressure……2 yr treasuries are yielding 4.28%, the 5’s – 4.12% and the 10’s are at 3.85%….Bonds in Europe and Asia also under assault as the prospect of higher rates takes its toll….in fact – Japan announced an ‘unscheduled’ bond buying operation as yields rose and tested their upper limit ‘tolerance’ band. 30 yr. mortgages yesterday were quoted at 6.79% for CONFORMING FHA loans and 7.554% for jumbo loans….as the dollar continued to climb – just think what that is about to do to the housing market?
Expect to start hearing about how the dollar’s strength is going to impact earnings for the big multinationals – but let me be clear – THAT is not a new phenomenon…..so if you are an investor – you should already understand that….the issue will be how come the analysts and the CFO’s didn’t understand that? Take a look at the chart – the dollar index has been rising all year (in fact since June of 2021) ….it is up 18% since January of this year and likely going higher as the FED gets more aggressive. So, estimates will HAVE to come down to reflect that….My suggestion is that any company that needs to revise – should do it sooner rather than later…..get out in front and don’t wait until you announce….because if you do – it will look like you didn’t have a clue about what was going on. Yes, you will get punished but my guess is that you will get punished more if you wait until you announce…. That is just my gut…. you do what you want.
Look- The economy is weakening, inflation remains elevated and central bankers around the world are getting even more aggressive….and that is causing angst for investors and traders while it is causing the algo’s to implode….…..by the end of the day there was more blood on the street…The Dow lost 330 pts or 1.1%, the S&P down 40 pts or 1%, the Nasdaq losing 65 pts or 0.6%, the Russell gave back 24 pts or 1.4% and the Transports lost 130 pts or 1.1%.
We are getting more FED speak today…at 6 am – will be Chicago’s Charlie Evans, at 7 am – JJ Powell will be participating on a panel about digital currencies. Later in the week it will be JJ (again), Governor Bowman and Vice Chair Lael Brainard…. I suspect that the others will be making commentary that support their colleagues…. think – Bullard, Daly, Williams and Khashkari to name just a few.
Again, every sector – except Consumer Staples was under pressure…. while the hedge trades rose….…
Economic data due out today: Durable goods – exp of -0.3%, Conference board confidence survey of 104.5, Richmond Fed Survey of -10, and New Home Sales – they are expected to be down 2.2%….but remember – those are stats from August….I suspect we will start seeing larger declines in housing numbers in the months ahead.
Oil is finding some support this morning after OPEC+ announced that they are monitoring the situation and do not want to see oil prices collapse…. Capisce? What did I say yesterday? What will OPEC+ do now? They will not sit on the sidelines if oil continues to fall….in fact – many are expecting them to intervene –WTI is up $1.50 this morning – trading at $78.20/barrel – levels last seen in the fall of 2021…
Gold is up $12 this morning at $1645/oz after trading as low as $1628/oz.
US futures are up!!! Dow futures are +370 pts, the S&P +54 pts, the Nasdaq is up 185 pts, and the Russell is ahead by 30 pts. There was nothing new -other than the fact that many analysts are saying that we had gotten into an oversold position and that is causing this boomerang reaction…. but do not worry – Goldman has plenty for sale! LOL!
European markets are all up by more than 1.25%…… after also getting beaten up recently. Investors keeping their eyes on the UK bond markets after the beating they took yesterday based on comments by the UK finance minister late Friday.
The S&P lost 38 pts to close the day at 3655…leaving us less than 20 pts away from the June lows – lows that we tested again yesterday when the S&P fell to 3644……just 9 pts away from the June low. This morning – it looks like we are going to get a reprieve as global markets appear to take a breath. ….…. but I still think this is just a ‘bounce’ not the end of the selling….
You know me – I remain cautious about the coming earnings season….and the month of October in general….
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Chicken Thighs w/Carrots, Onions & Potatoes in a Honey/Sweet Chili Sauce
Simple and always good.
You need – 5 thighs bone in & skin on, onion, 2- carrots, garlic, Parsley, Yukon gold potatoes, s&p, butter, honey, sweet chili sauce, soy sauce, Dijon mustard.
Preheat oven to 350 degrees
Start by seasoning the thighs with s&p. Set aside.
Now – slice and cube the potatoes into bite size pieces. Slice the whole carrots into rounds. Dice the onion, Smash, and then chop the garlic (3 large cloves), chop the parsley – set all aside.
In large frying heat up a stick of butter (med hi) and then fry the thighs on both sides until they are nice and golden brown. (Maybe 5 mins per side). Once done – remove and set aside.
In the same pan – add the onions – sauté for 5 mins – next add the cubed potatoes, mix well and sauté, now the carrots – mix and sauté for 5 mins…now the garlic and the parsley. Turn to mix well….
In a separate frying pan – heat up 3 tablespoons of honey, 3 tablespoons of sweet chili sauce and some soy sauce – bring to a boil – mix well then turn off heat. Now add 1 tsp of the mustard. Mix well.
In a large baking dish – place the potatoes/carrot/onion mixture on the bottom. Now place the thighs on top of the veggies. Then pour the honey, chili mix all over the chicken thighs. (yum). Place in the oven for 40 mins.
When done – serve each plate with a thigh and the veggies – making sure to add some of the honey/chili sauce. Delish.
Buon Appetito.
