Things you need to know –

–         Eco data causes some angst.

–         Listen to what JJ & Roger say…. More FED heads to speak today.

–         Bond yields rise…. Keep your eyes on 5%.

–         Gold surging higher…It’s not always about rates!

–         Try the Pork Chops Benevento Style

 Aprils Fools!    Say it ain’s so…. So, what happened to the early morning euphoria from yesterday’s pre-mkt?  Strong eco data sends stocks & bond prices lower – Wait! That’s not what was supposed to happen!

Remember – futures were up in the pre-mkt …JJ’s cautious speech on Friday – did little to sway early morning  investors – as the algo’s and the markets continued to think that the rate cut narrative IS the story, no matter what the eco data suggests…….but that changed yesterday morning after we got the latest eco data…..both S&P and ISM PMI’s (Purchasing Managers Index) – while the S&P was expected to remain in expansionary territory (which it did) the ISM PMI was expected to be in contractionary territory (which it didn’t ‘do) – suggesting that the economy remains ‘robust’ (think NOT weak) and then we got hit with the ‘Prices Paid’ (think input prices) data point and guess what that suggested?  Come on – give it the ol’ college try?  The Prices Paid report was expected to be 53, but did manage to surprise the algo’s – coming in at 55.8 – a level not seen since the August 2022 reading of 60- after it hit a mind numbing high of 87 back in April 2022 – as inflation spun out of control….and then we got the ISM Manufacturing report and that too showed an unexpected increase – again suggesting that the economy remains ‘robust’….so when you take all of that surprising info – then it gives the ‘rate cut’ guys a reason to rethink their position…. Think higher input prices, stronger manufacturing data, and stronger PMI” s and you have a recipe for a ‘FED ON HOLD’.  I sound like a broken record, but it is what it is…

And that does not mean I think the party is over – oh no, I’m just saying that the market and the algo’s are very sensitive to the eco data that disrupts their story…and so we saw stocks decline…. Again – nothing dramatic, but it does signal some level of underlying angst – remember the outperformance in the first quarter – surprised so many…..….…..….By the end of the day – the Dow lost 240 pts or 0.6%, the S&P gave back 10 pts or 0.2%, the Nasdaq managed to buck the trend (in the end) did gain 17 pts or 0.1%, the Russell lost 22 pts or 1%, the Transports gave up 180 pts or 1.1%  while the Equal Weight S&P lost 42 pts or 0.6.

Bonds took a hit, the TLT and TLH (bond etf’s) fell by 2.2% and 1.9% respectively – The 10 yr. is now yielding 4.35% and the 2 yr. is yielding 4.7%…..as the stronger eco data reminded us that maybe the street should start to listen to what the FED Chair keeps saying (think go slow, no need to make a rash decision….) and btw – did you see how they sent out former Vice Chair – Roger Ferguson yesterday morning (after Friday’s PCE data)?  Roger (a very controlled, methodical, ‘grandfather like’ figure – who doesn’t get hysterical) told us to ‘not be surprised if we don’t see ANY rate cuts this year” – now – while he puts the odds of that happening as low – he is prepping the algo’s, traders and investors to consider that option as a real reality vs. just a passing thought.  Keep your eyes on 5%…. That’s the level to watch.

Just sayin’…..Listen to what these ‘key’ figures keep saying….and btw – listen to what the other FED heads keep saying….NONE of them are banging the drum for multiple rate cuts at all….while some may ‘hint’ at a cut or two – NONE of them are telling you to put your money on ‘black vs. red’ – but they aren’t telling you to put your money on ‘red vs. black’ either….JJ is the only one that keeps repeating the same story….and it is simple to understand…. The economy is not in or near a recession, timing is key, and we can hold rates here for longer than the mkt expects…. Period the end….

Now today we are gonna get four more FED heads to speak – NY’s Johnny Williams, San Fran’s Mary Daly (non-event), Cleveland’s Loretta Mester and board governor Mishy Bowman….  What will they say?  Will they support JJ and Roger or will the toss a firecracker into the ring just to cause chaos?  The clock ticks….

Eco data today includes the JOLTS (Job Openings and Labor Turnover) report, Construction Spending which is expected to be -0.3%, Durable Good Orders of +1.4% and Capital Goods Ordered and Capital Goods Shipped…..These are all data points that speak to the ongoing strength of the economy – so keep your eyes peeled.  Stronger results underscores JJ’s narrative to hold steady….…but do not discount the idea that the algo’s will find a way to create a negative narrative that supports the rate cut story….which is why I tell you (as a long term investor) to eliminate the noise, put your long term plan in place and then run with it, keep your ‘mad money’ on the side to play with if that makes you happy…..The mad money is the money you want to use to trade the noise, the long term money is the money you want to use to take advantage of chaos the noise creates!

Oil moved UP yesterday 0.7% yesterday and is up 2% this morning at $85.45….all this on both the stronger US eco data and stronger Chinese manufacturing data – that suggests a strong US economy and a ‘rebounding Chinese economy’ as well as the news that OPEC+ is extending their production cuts thru June along with the ongoing unrest in the Mid-East…. Are you really expecting oil to decline?  OPEC, IEA and the EIA are all suggesting strong energy demand thru 2025, I think demand will remain stronger for longer – energy demand is NOT going away…get over it….for now oil remains solidly in the $80/$90 range….and investors agree – the XLE is up 13.5% ytd….Do you think investors (large asset managers) would be buying the energy ETF if they expected demand to decline? (XOM + 17%, SU + 20%, CVX + 7%, HAL + 10%, SLB + 6%).  Oil and Gas Exploration – XOP + 13% – is that because demand is in decline?  Names in that sector include:  PBF MRO, VLO, APA, COP, MPC, CNX, PR….

Gold traded as high as $2286 before settling at $2257 on the idea that the rate cut narrative came under pressure…but there are other reasons to own gold….and that is why we continue to see prices rise….this morning Gold is up $25 pts at $2280 – even as the ‘rate cut story’ remains cloudy……Remember – Gold is the ultimate safety play when investors get anxious….and if they aren’t sure what to do – owning gold is always an option…Gold is Gold – who is kidding who?  Gold is up 14% off the February low – and this is even as the FED has NOT cut rates and stocks are kissing new highs (both reasons to NOT own gold), but gold is gold – Period.  My sense is that it feels a bit toppy, but a lot of things ‘feel a bit toppy’……We are only $20 away from testing $2300….something it feels like it wants to do and if it does then I think it hits some resistance..….If we see it pull back – I think it finds support at $2150/2175 ish.

US future at 7 am are down – the argument today is that ‘investors are pricing in the possibility of just 1 or NO rate cuts….…Dow down 145 pts, the S*P’s down 14, the Nasdaq down 65 and the Russell is down 9.  Again, I think the market is ready to pull back a bit…not crash, just breathe and that might mean we could see a 5% – 10% pullback ahead of earnings and ahead of Tax Day……remember, some of the selling pressure over the next two weeks can be attributed to investors having to pay TAXES….others might just be raising cash ahead of earnings season..  Earnings as noted are set to begin next week….and expectations are high for both reports and forward guidance….everyone listening for MORE AI references….So, sit tight….because any sense that earnings are about to disappoint WILL be a reason for the algo’s to go into overdrive and hit the SELL button.  My friend Sammy Stovall of CFRA research – agrees with me – he thinks we could see the market hit an air pocket and decline some 5% – 8% – just because it’s stretched, not because he sees a disaster – something I have been saying for weeks now. He also thinks that Gold is hitting new highs because of increased tension in the mid-east and uncertainty over what’s next, and an improving Chinese economy – and while we could see it back off, he also thinks we could see gold trade at high as $2600!  Love that!

European markets are mixed….UK up 0.3% while Spain is down 0.3%. Lots of eco data – Eurozone Manufacturing, German inflation and UK home prices all due out this morning….

The S&P closed at 5243 – down 11 pts….I suspect we will see some churn lower rather than churn higher… TSLA is due to announce quarterly delivery numbers in just a few hours….the stock is quoted DOWN $3 at $172.25/$172.50….that’s down 1.5% on top of the 30% decline we have seen this year……and a weak number will not help the tone….and I’m not sure a stronger number will either….So sit tight.

I remain cautious as the new qtr. begins….an April pullback is not uncommon at all…. keep your eyes on the long game…. remain focused, stick to the plan, call me to discuss.  Always happy to help you create a long-term wealth plan that will provide for you and generations to come.

Take good care.

kpolcari@slatestone.com

Sources:  Bloomberg, CNBC, Reuters, Wall Street Journal

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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, which may not necessarily align with our firm’s standpoint.

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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.

Pork Chops – Benevento Style

So, Benevento is a city in the region of Campania in the Southeastern region of Italy. Benevento is 50 km northeast of Naples. and sits atop a hill with a beautiful view of the valley below and is at the cross section of the Sabato and Calore Irpino rivers.  It borders Molise and Puglia and is fairly mountainous, providing some unbelievable photo opportunities.  It is also a region of that country where so many Italian Americans can trace their heritage – It is off the beaten path but well worth the visit if you happen to be in the area.

Fennel is the key ingredient in this dish, and it grows like wildfire in Campania and so you will find so much of their cooking to reflect that.

For this you will need:

1 in thick pork chops, s&p, flour, olive oil, fennel seeds (about 1 tblsp), garlic, dry white wine, water and a beef bouillon cube.

Preheat the oven to 300 degrees.

Season the chops with s&p and then dredge in flour.

Now in a large sauté pan and one that can go in the oven – heat up the olive oil – when hot – add the chops browning on both side – maybe like 1 min per side.   Next – remove the pan from the heat and sprinkle the fennel seeds on one side of each chop then turn and repeat. – now place the chops and the pan in the oven for about 12-15 mins.

When done – remove the pan from the oven and place the chops on a large serving platter.  Cover with foil to keep warm.

Now place the sauté pan back on the stove over med heat – add 2 crushed garlic cloves and cook until just brown.  Now add in 1/2 cup of the white wine and 1/2 cup of water- being sure to deglaze the pan and scrape up any of the browned bits on the bottom.  Now crumble the bouillon cube into the pan and stir – until the sauce has reduced by 1/2.  Remove the garlic and spoon the sauce over the chops and serve immediately.

Enjoy this with steamed green beans and a large cold mixed green salad with red onion, tomatoes.  Dress with s&p, oregano, fresh lemon juice and olive oil.  Toss and serve. 

Buon Appetito.