Things you need to know.
– Ok, so now we know…. the door is OPEN, rates will rise (again)
– META Wow’s the street – Cult members take it up 8%
– 81% of reported companies BEAT – of course it’s a lower bar – but who cares?
– 50 more companies are reporting today.
– Dollar weaker, gold and oil higher.
– Try the Perciatelli with lemon/butter and Toasted Sesame Seeds
“It’s certainly possible that we would raise (in September) if the data warranted and it’s also possible that we would hold (rates) steady (in September). JJ Powel 7/26/23.
Is there anything else to say? Not so much…. After the FED raised rates for the 11th time since they started raising them back in the winter of 2022. The terminal rate is now at 5.25%-5.5% and the economy remains strong, the job market remains strong, wage pressures remain strong and risk appetite is ‘off the charts’….….and ultimately – that is an issue for the FED….because what they want to see is all of that weakening….and since it is not (yet) – JJ left open the possibility of another, if not more, rate hikes… The sense is that 5.5%-5.75% is the sweet spot, while others are still pointing at 5.75%-6% as the final level…. Well, we’ll have plenty of time to figure it out – there is a lot of eco data due out over the next 8 weeks – ahead of the next official FED meeting on Sept 19th/20th. So, don’t stress – there will be plenty to consider….
Now – what did stocks do? Well, the Dow rose 82 pts or 0.2%, the Russell rose 14 pts or 0.7% and the Dow Transports gained 441 pts or a whopping 2.75% – Transports led by ODFL +6.4%, (better earnings, better cost controls and a $3 bil buyback plan), UNP +10.4%, FDX + 3.2%, R +7.4% , these 4 names adding 380 points or 86% of the gain yesterday. Now the S&P gave up 1 pt (which is nothing) and the Nasdaq lost 17 pts or 0.1% on what many viewed as a boring day…. this after we heard from both MSFT and GOOG and awaited word from META – which came after the bell – and guess what? Marky managed to wow them again…
2nd qtr. sales smashed the estimates, forward guidance was ‘rosy’ and advertisers are moving to the new ‘Reels’ platform (competing directly with TikTok) ……META closed up 1.4% during the day yesterday – is up 148% ytd and after that report – META cult members are taking it up another 8% in the pre-mkt this morning…..Remember – Marky Mark started the year by telling us that it would be the ‘year of efficiency’ – becoming a stronger tech company and slashing costs – and that seems to be working out…..they slashed thousands of jobs and are investing heavily in AI and virtual reality….blah, blah, blah…..Remember – META sold off 9% in the past week – ahead of the announcement – so the move this morning just retakes those losses…but you can’t argue – it is still up 148% ytd…no so bad.
152 S&P companies have reported and like I have been saying – many of them (81%) have beaten on the top and bottom lines and offered up better forward guidance in addition to raising divvy’s and increasing stock buyback plans, but don’t forget – the bar was LOW this qtr., which is why so many have beaten – the usual beat rate is typically 72% – 75%.….and those beats span the sectors….so it is NOT just one sector (any longer) that is carrying the markets higher…the rally which started out in AI and mega-tech, has now broadened out to Energy, Healthcare, Financials, Mid-caps, Small-caps, Value and Growth….
The best performer yesterday was Communications…XLC + 1.5% (GOOG +6%) and expect it to be an outperformer again today after the META news…. META is 25% of that ETF with GOOG another 22% – so 47% of the performance is tied to two stocks…. Capisce? And at 6 am – META is trading up 8% and GOOG up another 1% in the pre-mkt. Industrials – XLI was the next best performer, up 0.7%, followed by Financials – XLF +0.6%. We saw weakness in Tech – XLK -1.3% and Basic Materials – XLB -0.3%.
Away from the top 11 sectors – Retail -XRT rose 1.5%. Airlines – JETS + 1.2%, Disruptive Tech – ARKK +2.1%, Aerospace and Defense – ITA +1.5%, Semis – SOXX lost 1.4%, and the list goes on….
Eco data today includes the 1st release of 2nd qtr. GDP – expected to be 1.8%, Durable Goods of +1.3%, Capital Goods Ordered and Shipped of -0.1% and +0.2% respectively. Pending Home Sales of -0.5% and finally the Kansas City FED Survey at -10. In addition, we’ll get the weekly Initial Jobless Claims of 235k and Cont. Claims of 1.750 million.
Earnings – it is a big day…..We will get nearly 50 companies reporting….CBRE, KBR, ABBV, BTU, AEP, BMY, LII, HSY, NYCB, HOG, LAZ, RCL, MCD, LUV, HON, CMCSA, and after the bell – we’ll get results from F, TMUS, and MDLZ. – so, it is a broad showing…sectors representing Real Estate, IT Services, Large Pharma, Energy, Utilities, Commercial & Residential Bldg. Equipment, Packaged Foods, Small/Local Banks, Autos/Motorbikes, Institutional Brokerage, Cruise Lines, Restaurants, Airlines, Diversified Industrials, Cable & Satellite and Cellular. So, today will be an interesting day –lots to discover.
US futures are up…. Dow +58, S&P’s +27, Nasdaq +200 and the Russell up 6 pts….as the earnings party continues…. Expect to hear all kinds of commentary about what JJ really said yesterday, what he meant vs. what investors think he meant….and where the FED is headed…. also expect so many analysts to dissect the latest META results and what it means for Marky Mark and the world. In addition to all of the earnings reports that are gonna hit the tape between now and 10 am.
European markets are all higher…. up anywhere from 0.3% (UK) to 1.4% (Eurostoxx). Investors across the continent await the today’s ECB announcement…. where it is expected they will hike by 25 bps taking their terminal rate to 3.75% with signals to hike again in September. Inflation across the countries in the zone are at varying stages – some more successful than others in controlling it…. The latest EZ data point also suggests that business activity is shrinking faster than expected and that is something that Christine will surely point out.
Treasury yields fell after the announcement…. the 2 yr. is yielding 4.84%, the 10 yr. is yielding 3.86%, the shorter duration bills are still yielding better than 5.4%.
The dollar index falls – after it is assumed that the FED will NOT hike rates any longer…. a position I do not agree with. This morning it is trading at 100.58 – this is down from 101.14 yesterday. Gold shot higher on that move and is trading at $2020 – after trading in the $2011/$2022 range.
Oil continues to trade in the $78/$80 range…. This morning it is trading at $79.55 after trading as high as $79.80 overnight.
The S&P ended the day at 4566. Down 1 pt. Yesterday I said it felt a bit tired and that is what we saw…. the S&P did nothing really…. But this morning – it is getting a charge out of META and the list of S&P companies due to report. Traders and investors are no longer concerned about what the FED will do, they know it and they don’t have to revisit it until the Jackson Hole boondoggle.
The S&P is now 5% above trendline support at 4350….and has not tested support at the trendline since May…and while it feels good, do not get lulled into a sense of ‘never never land’…. because ‘never never land’ does not exist… At some point – investors will recognize it is stretched and that it needs to take a breather…and it will, but that will give the long term investor a gift….You should not be chasing names that are running away….there are plenty of other options and opportunities that will balance out and stabilize your portfolio for the longer term. Patience is a virtue and investing is a ‘long game’…. And while we can’t see what the catalyst is right now, it is out there…. but in the meantime, look for opportunities in the underperformers that just aren’t ‘sexy’ enough but have strong fundamentals. I want someone to shake the branches….
Take good care.
Chief Market Strategist
kpolcari@slatestone.com
“The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kace
Perciatelli w/Lemon Butter and Toasted Sesame Seeds
This is simple yet delicious…. I mean – it takes only 10 mins to make….as long as it takes to boil the pasta.
Bring a pot of salted water to a boil – add the pasta.
In a large sauté pan – slowly melt two sticks of butter on med low heat…..once melted add in fresh squeezed lemon juice – stirring as you add…..now – taste as you go…you do not want it to be all lemon – just enough of a hint so that you know it’s there.
In a separate pan – toast the sesame seeds – do not BURN – just toss and toast – now set aside.
Once the pasta is done – strain (reserve a mugful of water) and add to the butter/lemon sauce. Toss to coat. Now add in 2 handfuls of grated Pecorino Romano cheese and the toasted sesame seeds – toss and serve immediately…. It is a great summer dish – Simple.
Buon Appetito
