Things you need to know.
– And the rally rages on…. ASML the latest to ‘impress’
– Tech stocks on ‘fire’ again….
– Earnings, earnings and more earnings….
– NFLX misses the estimate but delivers on subs.
– Try the Fried Meatballs for the sauce.
So, what looked like maybe, just maybe there would be a pullback in stocks – it didn’t happen…….and while we did see the Dow lose 96 pts it’s 0.25%, the Russell gave up 7 pts or 0.4%, the Transports lost 44 pts or 0.3% – that would not be considered a ‘pull back’. That was nothing…., On the other side we saw the S&P gain 14 pts or 0.3%, the Equal Weight S&P up 3 pts or 0.05% and the Nasdaq added 65 pts or 0.4%. The S&P and Nasdaq closing at another new high – after a wave of earnings and ahead of another wave of earnings that are about to hit us today and tomorrow. ……. earnings that should give us a bit more insight into the state of the US and global economy.
Bonds remain boring……the 2 yr. is now yielding 4.31% while the 10 yr. is yielding 4.09%. The TLT lost 0.8% while the TLH gave back 0.5%. Current 30 yr. rates for a FICO score between 740/760 is 7.15%. 15 yrs. are at 6.57%. You can get 5.5% on a 12-month CD at CIBC while Goldman’s Marcus is paying you 5.35%, So there is still plenty of competition for investor dollars away from stocks…
The eco data showed that both the Philly and Richmond Feds are reporting weakness in their regional economies….and then there were earnings.
Yesterday we heard from UAL, PG, RTX, HAL, and VZ and they all beat and offered ‘upbeat guidance’ and all advanced while 3M, GE, JNJ, LMT, & SYF all beat but offered ‘downbeat guidance’ and they all declined. After the bell – we heard from NFLX and they missed the estimates (negative) BUT reported subscriber growth that topped even the most elevated estimates (positive) and that speaks directly to what the future looks like….….causing the trader types to take that stock up 7% in the post market… Remember – it’s a complex game…..some companies beat and offer upbeat guidance and get rewarded, others beat and offer weaker guidance and they get punished while still others miss and but offer an exciting future and they rally – so you can imagine what happens to a company that misses AND offers downbeat guidance – they get smashed.
Today brings us a range of earnings before the bell representing Medical Devices ABT, Defense Contractors GD, Property & Casualty Insurance PGR, Wireless Telecommunications T, Base Metals FCX, Personal Care KMB. And after the bell – we will here from EV/Car/Tech TSLA, Semi’s LRCX, Computer Hardware/Storage STX, Office REITS SLG, Rail Freight CSX, Casino’s LVS, Wealth Management RJF, & Information Tech Services – ‘Old Big Blue’ IBM.
Next week – is all about the Mag 7….and they will be the ones to watch….Look, channel checks are revealing an uptick in demand across the spectrum – and overnight we found out that ASML (a KEY Dutch Semi manufacturer and a fan favorite) revealed that NEW orders TRIPLED in the 4th qtr. – the demand be driven by their most ‘sophisticated machines’…Now this is important – ASML is the only semi manufacturer that ‘produces the equipment needed to make the most sophisticated semiconductors and demand for their products is a bellwether for the industry…’ The ADR closed last night at $778/sh, and this morning is quoted up 5% at $817/sh…. In the Netherlands (mother country) – the stock is up 6.2%.
Now this follows last week’s TSMC (Taiwan Semi) and SMCI (Super Micro Computer) – both names that I have been screaming about what their guidance is saying about the industry. There is a surge in demand – period! There is a surge in enterprise software, cyber security, and all major AI projects in 2024 and beyond…..and we aren’t seeing ‘cautious’ commentary – quite the opposite and that is the canary in the coal mine for what we are about to hear from the different parts of the tech industry….….We are at the beginning of the AI Revolution…and it is being led by NVDA, MSFT, IBM, ASML, TSLA, APPL, AMZN AMD, CRWD, PANW – my sense is there is no reason for anyone to miss the bus….and market action suggests that they don’t intend to….
The issue will be – Have we already lost control of how will AI be used? We all know both the good and the bad…. – The US election cycle has just begun, and we have already seen how AI is set to disrupt the process – Donny takes NH, Nikki vows to stay in the race – but we all know how this is going to end (unless of course – Fanni or Letticia can derail it) …. ROBO calls made in NH that sounded like Jo Jo urging voters to stay home and not go out to vote – seems benign – but it is not….and it is only a preview of what we can expect over the next 10 months…I mean – brace yourself – the election disinformation is just beginning…..yesterday it was NH, what will it be tomorrow?
In any event – the market appears to have pushed the whole rate cut pivot story aside for now….as it celebrates earnings season and the expectation of further declines in inflation. Eco data today brings us Mortgage Apps – last week they were up 10.4% – can they be that strong again? We are also getting both Manufacturing and Services PMI’s – Manufacturing is expected to be in contractionary territory at 47.6 while Services remains in expansionary territory at 51.
Thursday brings the first go around of the 4th qtr. GDP and that is expected to come in at 2% – down significantly from the 3rd qtr. pace of 4.9%. Friday brings us the all-important PCE deflator – the FED’s favored inflation gauge….m/m is expected to tick up to 0.2% while y/y is expected to remain unchanged at 2.6%. The core deflator (ex-food and energy) is expected to be +0.2% and 3% respectively.
Oil remains locked in a very tight range – $73.80/$75.40 – thrashing back and forth depending on the headline. Yesterday we learned that the API reported a decrease in inventory supply, North Dakota (3rd largest crude producing state in the Union) is producing crude at a rate of 300k barrels/day (this vs. the usual 700k bpd) as a result of the severe winter storm sweeping across the country. OPEC+ production cuts are being met with non-OPEC increases in supply, Libya restarted production at their biggest oil field and two months of missile attacks in the RED Sea continues to cause chaos in the shipping industry and that is fueling fears of higher prices and a broader economic pullback. So, what should oil do? Go up or down? Exactly – and so it remains locked in this trading range.
Gold is also hugging it’s trendline at $2,051…. With the odds falling daily that we will get a cut in March – Gold, oil and other commodities will churn within their current trading ranges…. until there is complete clarity surrounding monetary policy in the next 3 months…. Because after that – the FED should do nothing ahead of the election.
US futures are up (don’t tell me you’re surprised.) Dow futures + 65, S&P’s +22, Nasdaq up 130 and the Russell is up 20. The media will tell you that the excitement being driven by the NFLX results, I say ‘sure, ok’ – leaving me to ask – Are you really buying stocks in your long-term account because NFLX reports an increase in subscribers? The move is being driven by the latest ASML results that BLEW through the estimates and what that means for the technology sector reports that are coming in the days ahead. It is this news (not NFLX) that is causing IBM, AMD, INTC, NVDA, AVGO & QCOM etc.…to all be quoted higher this morning….
Stocks in Europe opened higher and remain higher this morning….…. the Eurostoxx leading the way – up 1.7% while the UK is carrying up the rear…up 0.3%. Eurozone PMIs came in better-than-expected giving investors there a reason to ‘bet’ that the ECB might sound more dovish at next Thursday’s meeting. European tech shares roaring ahead…. Siemens +11%, SAP +7.7% – all this on the back of the ASML news and the push towards more sophisticated AI.
The S&P closed at 4864 – up 15 pts….On Monday I told you that the recent breakout (4800) that we saw on Friday now suggests that the momentum is building and that the path of least resistance is up rather than down… and UP we are going….and this is once again being driven by technology….yeah and the idea that the FED and other global central banks are preparing to cut rates….and you know me – I believe in the first argument but am not buying the second one….I am still in the camp that the FED (nor the ECB or BoE) is suggesting any, never mind multiple rate cuts are imminent – I just don’t see it….but that is not causing me to freeze..….It is causing me to be more focused – and no, I don’t own NFLX and nor am I buying NFLX – increases in subscriber growth just don’t get me ‘hot and bothered’ ……Capisce?
Look – I can’t emphasize it enough….do not be surprised by some event that disrupts the move up….do not be surprised if we suddenly hit a wall….and back off…If you know what you own and why own it and are comfortable with it, then go for it…but if you have a portfolio without a theme or direction – then you risk being at risk when the tone changes…A pullback is nothing to be feared – in fact I keep waiting for one…..but that does not mean you need to pull out….it just means that you need to be even more focused and . Talk to your advisor – better yet, give me a call.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Fried Meatballs
Here are the meatballs for the sauce I gave you on Monday… BTW – I was called out for calling it Sunday Sauce – Italians from the northeast – call it Sunday Gravy…. So, here are the meatballs for the Sunday Gravy.
For this you need: 1 ½ lb. of ground chuck…. (like 80/20). s&p, 1 egg, fresh grated parmegiana cheese, garlic, onion, 2 slices of Italian bread – soaked in whole milk and olive oil.
Begin by soaking the bread in whole milk…. just enough so that it absorbs the milk but is not like soup.
Now put the ground chuck in a bowl. Add 1 egg, 2 garlic cloves – (grated), ½ of a yellow onion – diced small, s&p, splash of olive oil, handful of cheese and the milk-soaked bread. Mix well.
Next – heat up the frying pan – add some olive oil. Make the meatballs…bigger than a golf ball, but not the size of a baseball. Fry them until they are a bit crusty all around.
Remove and place on a plate and repeat until you have fried all the meatballs. (careful not to eat them). Now add the meatballs to the sauce – including the oil from the frying pan.
Let them simmer…. Yum. –
Buon Appetito
