Things you need to know.
– Stocks churn and end the day higher – Futures this morning suggest a churn lower.
– Is the FED now sending ‘smoke signals’ via Nicky T? A Goldman exclusive will cement that message.
– Apple, Dis, Charter, and ARM all front and center…
– UAW is in heated contract negotiations as the automakers push back on their demands.
– Try the Spinach/Edamame Pesto
Yesterday when futures were up in the pre-market – I told you that while they were higher, it felt like nothing else than a ‘dead cat bounce’ – there wasn’t any real conviction, it was just more of a ‘bounce’….and so it was…..by the end of the day – the Dow gained 87 pts or 0.25%, the S&P rose 30 pts or 0.7%, the Nasdaq added 156 pts or 1.15%, the Russell up 4 pts or 0.2% while the Transports added 78 pts or 0.5%. The move up happening as we prepare ourselves for the KEY data this week…. That will not only give us a clue into what is happening with inflation, but it will also help to shape investor views on what the FED will do next.
The WSJ’s ‘horse whisperer’ Nick Timaroas is beginning to suggest that the FED is done….and that rates will remain here but remain here for even longer than what the current expectations are…. On Sunday – Nick ran with this article in the WSJ.com
“An Important Shift in Fed Officials’ Rate Stance is Under Way – Central bank is likely to pause rate increases in September and then take a harder look at whether more are needed.”
In this article he goes onto say that the FED would have rather raised rates too much rather than too little – as they considered how to address persistently high inflation…. but apparently – that seems to be changing…. Risks appear to be more balanced now….and the risk of raising them too much could cause a downturn that is unnecessary or worse yet – could cause another new financial calamity. Now – while it is currently expected that the FED will pause in September while leaving a November hike on the table – even that hike is now already being discussed by insiders at the FED as ‘not cast in stone’. He describes it this way when JJ gave his speech at Jackson Hole, he said that they ‘could vs. the more muscular would’ raise rates and apparently that change in terminology suggests that there is no hard and fast decision.
On the opposite side of that argument are the ones that want an ‘insurance policy’ on killing inflation and that means they want to raise rates again – at the risk of causing a slight downturn if it means that they succeeded in bringing inflation back to 2%. The argument is that if they pause and then rise again – it will be MORE disruptive to financial markets as investors will have to recognize that inflation did not go away and that interest rates did not reach their peak.
Now remember – the FED reaches out to Nick when they want to test a ‘theory’….he floats it and then they watch the reaction….the confirmation will be when Goldman comes out with the same story….because when that happens Nick floated it, the reaction was not a disaster so then Goldman follows up with a ‘Goldman Excluthen that means JJ has made up his mind…sive’….LOL….it’s comical really…but it is what it is.
Just to be clear – I am not buying the ‘FED is done story’…. We lived this story in 1979.and it wasn’t pretty, just sayin’……and for those of you that weren’t alive then – Just ask you favorite baby boomer what it was like….
Now we know that both the CPI and PPI are expected to be UP on the top line – both m/m and y/y, while it is expected to be DOWN when you take out food and energy….which is curious because it is food and energy that create the most angst in a family that is struggling, living from pay check to pay check just barely able to stay afloat. Yet it seems that the current administration is unaware of the difficulties that higher prices have caused Americans across the country as they celebrate increasing prices that are just increasing at a declining rate. Let’s not misunderstand – prices are still going up…. just at a slower pace. And the way the market reacted yesterday just suggests to me that it is still unsure what to believe…My guess is that it is waiting until we get the REAL number and not the estimate.
Ok – now onto a couple of individual issues….
Today is the Apple ‘event of the holiday shopping season’ taking center stage at 10 am PST (1 pm EST, 6 pm in the UK, 7 pm across the Eurozone and 1 am in Beijing) and that is expected to be a barn burner – as it is every year….and this year is no different….We’ll get to see the newest iPhone 15, the newest apple watch, and all of the other gadgets that Timmy has up his sleeve…. Expect to see the move to USB-C chargers – which means you can throw all of your ‘lightning chargers’ away….but that by no means is the star of the show….it most likely will be the latest Dynamic Island that doubles as the front facing camera and a notification area….that can apparently tell you almost anything you want about whoever you want, whenever you want….It is also expected to have the A15 processor, the 48 megapixel camera, and the A17 chip and a host of other upgrades that would take me hours to enumerate. In the end – just go with it, It’s Apple! The stock gained 0.7% on the day.
And what about the Disney/Charter communications deal? Yeah, that got done too so Monday night football is alive and well…. DIS +1% on the day while CHTR jumped by more than 3%
And the ARM IPO – for those of you that haven’t heard – Masayoshi Son – CEO at Softbank is selling 10% of his holdings in this blockbuster AI IPO and as you might expect – it is oversubscribed – some say 15 x’s oversubscribed – meaning that there is 15 x’s the demand for shares vs. shares available…Capisce? The books close tomorrow night and the call is for them to price it at $51 – they could easily price it higher (due to demand), or they could price it at $51 and the watch opens at $100! Which some would consider successful while others might say – the dummy left so much on the table…or did he? He still owns 90% of the firm….so who is laughing now? In the end though, while there is lots of demand – there are lots of concerns as well…and they are all about China. You know how China changes the rules all the time and then makes demands that can break the market…. but – this deal is so big – being billed as the biggest IPO this year – those concerned investors, while concerned are not going to ‘miss it’. This deal is being priced on Wednesday and then the IPO happens on Thursday morning on the NASDAQ stock market……. So, strap in…. recall the FB disaster (at the time the biggest IPO of the year) that happened on the NASDAQ on May 18th, 2012.
And then we got the UAW – remember them? United Auto Workers Union…that are about to go on strike at 11:59 pm on Thursday evening IF the big 3 automakers don’t give them what they want…and, what they want is a 46% increase in wages over 3 yrs., they want better benefits and they want to restore the benefits that they gave up during covid when they compromised to help keep the automakers alive….Right now – it appears that they are on different pages….the automakers agreed to a 10% wage increase – which made (Union Boss) Shaun Fain’s head blow off is shoulders….do I need to say anything else? Overnight – the union dropped their wage increase to 36% over 3 yrs….. but made it very clear that 143k members of the UAW stand ready to walk out when the clock strikes midnight on Friday. (Really 11:59 pm on Thursday).
This morning – US futures are down…. Dow down 50 pts, the S&P down 10, the Nasdaq down 42 while the Russell is down 3. The weakness this morning being credited to the Oracle. Last night they reported slowing sales in their cloud business – it did grow by 30% but that was down from the 54% growth rate last qtr.…and so the trader types sold it off…The stock closed UP 0.39 cts at $126.71 at the bell, but when the results were released – they smashed it…sending it down 9% or $12/sh in the after-market. This morning it is quoted at $114.50/$115. (Down $12).
Eco data today includes nothing…. NFIB Small Business Optimism – which is not a market mover. The focus here remains on tomorrow’s CPI and Thursday’s PPI…US consumers are more concerned about their balance sheets and are becoming more pessimistic about the job market – according to the latest NY FED survey. Like I said yesterday – if the CPI comes in hotter than the +0.6% m/m or +3.6% y/y estimates, then the November hike is not only on the table but is now the preferred action.
European markets are mixed – not sure which way to go…. the UK, Spain, and Italy all up by about 0.4% while France, Germany and the Eurostoxx are all down about 0.2%. Investors there are focused on our eco data, but they are also focused on Thursday’s ECB monetary policy statement that is expected to hike rates by 25 bps. Today the UK got jobless claims – unemployment rose by 0.5%, tomorrow is Industrial Production in the UK and across the whole zone. The BoE is expected to hike this month – but after that? Who knows….
The FED goes into ‘lockdown’ on Saturday the 16th….so expect to hear more this week ahead of that quiet period -as the FED will try to assure markets that they will not be surprised and that rates will remain steady…. But listen to what the analysts and strategists have to say once those data points are released.
Oil is trading UP 75 cts at $88.04/barrel…. (Think further inflationary pressure), Gold is trading at $1941 down $6, while the Dollar index is up 20 cts at 104.77.
The S&P ended the day at 4487 up 30 pts….…and just north of the trendline….and this morning it appears as if we are going to pierce it again on the way lower…. Yesterday I said that I expected that we would test it and then fail…. let’s see what happens today…. We are in this very tight range of 4430/4550. A break out – will take us to 4600 in a flash, while a breakdown will send us to test trendline support at 4350.
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 Capital Advisors.
Spinach/Edamame Pesto
For this you need fresh trimmed and cleaned baby spinach, frozen edamame beans, Fresh Parmegiana, olive oil, garlic, s&p, and toasted pignoli nuts.
In the food processor – add 3 handfuls of spinach, 2 cloves of garlic, olive oil and chop, add more spinach and more oil and chop until you have chopped all the spinach. Next add in a handful of edamame beans (you will have to put them in a pan of boiling water first and let them all rise to the top before they are done – once done – rinse under cold water) and Chop.
Now add in two handfuls of parmigiana cheese and some of the pignoli nuts and chop again. You want a creamy consistency…if you need to add more oil – go for it. Repeat this process until you have enough pesto sauce.
Bring a pot of salted water to a boil. Add the linguine and cook until aldente. Strain – reserving a mugful of water. Add back to pot – add back a bit of the water and stir – so that it remains moist.
Serve in warmed bowls and then top with the pesto and some of the reserved edamame beans. Have more cheese on the table for your guests. Delicious.
Buon Appetito
