Things you need to know.
– Second Qtr Ends on a mixed note – S&P and Nasdaq kissing new highs
– PCE data comes in as expected – no surprises.
– Bonds gain on rate cut expectations, Oil steady and gold steady.
– More eco data this week – Friday is KEY.
– Try the Salmon in Lemon Dill Sauce.
So, it’s over, the 2nd qtr. is now in the history books…and while the S&P and Nasdaq ended the qtr. kissing new highs – up 14.5% and 18.1% respectively – the Dow Industrials and Transports along with the Russell are not really celebrating. At the end of the qtr. – the Dow was ahead by 3.8%, the Transports down 3% while the Russell was barely positive at +1%.
On Friday specifically we saw the Dow lose 45 pts or 0.1%, the S&P gave up 23 pts or 0.4%, the Nasdaq lost 126 pts or 0.7%, while the Russell rose 10 pts or 0.4%, the Transports added 150 pts or 1% while the Equal Weighted S&P added 5 pts or less than 0.1%.
You can argue that the moves were driven by a range of factors – end of qtr. portfolio management (window dressing), the Russell Rebalance and the eco data that was reported on Friday morning. Personal Income up 0.5% vs. the +0.4%, Personal Spending a bit weaker at +0.2% vs. the expected +0.3%. The one that everyone was waiting for was the May PCE report and that came in inline – not hotter not cooler – which some found to be a disappointment. We learned that m/m PCE came in at 0%, while CORE PCE m/m came in at +0.1%. Y/y – on both top line and CORE PCE came in at +2.6%. So, there were no surprises, and thus no real reaction.
Bonds did gain on these reports arguing that since they were not worse than the expectation then that is a positive and that means that the FED has the leeway to cut rates…the 2 yr. ended the week yielding 4.77% and the 10 yr. yielding 4.43%.
The dollar edged just a bit lower on the falling rate narrative – this morning it is trading at 105.69 down from the recent high of 106.12.
Oil remains in the $80/$85 trading range. This morning it is up 60 cts at $82.16. Oil barometers are now reporting that asset managers have boosted their long positions in oil – as they expect the commodity to rise over the coming summer months as demand surges and supplies come into balance. Remember – the Saudi’s continue to hold production at lower levels to try and get prices higher. Calls for $90 oil are now common. We are now well above all 3 trendlines and have the April high of $85 as the next target.
Gold is trading at $2345 – again it remains in the broader range of $2300/$2400 that we have been discussing.
Of the 11 S&P sectors – this is how they ended the qtr.
Tech up 28%, Communications + 26%, Financials + 9.25%, Energy + 9%, Utilities + 7.5%, Consumer Staples + 7.5%, Industrials +6.9%, Healthcare + 6.9%, Consumer Discretionary + 5.2%, Materials + 3.1% while Real Estate remains in negative territory at -4.1%.
If we move further down the line – we see that Semis are up 28%, Homebuilders + 5.6%, Retail + 3.6%, Airlines + 3.3%, The Growth trade is +28% while the Value trade is up 4.5%. Oil and Gas Exploration +6.25%, Aerospace and Defense + 3.3%.
And then there was the DEBATE! And again – recall what I always say – politics do not price stocks in the long term, but they can cause chaos in the short term. By all accounts the debate was a disaster…. When JoJo and Donny took the stage there were no pleasantries, the two did not even acknowledge each other, (childish but reflects the division in the country) – the questions started immediately, and JoJo was the first to respond – and then the Dems hit the panic button…. When it was Donny’s turn he spoke in broad generalities – saying a lot but saying nothing at the same time –.……In my opinion – both failed to WOW the electorate, and by all accounts – the CNN debate was a failure……What happened next IS now the headline….Is JoJo capable of being president for the next 6 months never mind the next 4 yrs.? No need to rehash it – we know what our eyes saw, and our ears heard.
The NYTimes (of all newspapers) and just one of the many – running with 4 articles on Friday morning calling for him to step aside sending the leadership into meltdown mode. On Sunday – Nancy Pelosi appeared on CNN and when asked about JoJo’s performance – she immediately turned and made it about Donny, telling the world that it was Donny who is suffering from mental deficiencies NOT JoJo and then Georgia Senator Warnock appeared on Meet the Press to repeat THAT same narrative while also making sure to remind voters that Donny is a convicted criminal (which has only proven to be a benefit for him) – so I guess that is new Democratic position…..all Donny does is lie – so that makes him mentally deficient and unsuitable to hold office. The Dems asking – Why would the country want to elect a ‘mentally deficient’ candidate? (Now THAT’S funny!) Even Chucky Todd – a Democratic strongman is even asking what the Dems are thinking, asking out loud on Meet The Press – Is JoJo telling us the truth about his own health?
And then in the Eurozone – the French took to the polls on Sunday and what did we learn? Marine Le Pen’s far right party taking the win in the first round of elections- pushing Manny (Macron) a bit further to the edge. – yet that is not causing investors across the Eurozone to panic…. markets across the zone are all up by better than 1% and France is currently up 115 pts or 1.5%.
Eco data today includes S&P US manufacturing PMI’s – expectation is for it to come in at 51.7 – (Expansionary mode), Construction spending of +0.2%, ISM Manufacturing PMI of 49.1 (Contractionary mode), ISM New Orders of 49.0 while ISM Employment is expected to come in at 50. Later in the week we will get Services PMI” s expected to be in expansionary mode, Factory orders, Durable Goods Orders. On Wednesday – we will get the latest FOMC mins. Thursday is a holiday (mkts closed) and then on Friday we get the June NFP report – which is the most important report this week.
US futures are up this morning. Dow futures +50, S&P’s +4, Nasdaq +45 and the Russell is +3. We are now fully in summer mode – expect Mondays and Fridays to be lower volume days while most of the action gets crammed into Tuesday, Wednesday and Thursday.
Remember – having a plan is key for a long-term investor… Staying focused is KEY…. Give me a call to discuss.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Salmon in a Lemon Dill Sauce
Here is a great Salmon Filet dish. It is easy to make, and you can eat it either right out of the oven or serve it room temp at a Sunday brunch –
For this you need: 1 and a half cup of mayo, half a cup prepared mustard-not yellow preferably a brown mustard, 1 tsp lemon juice, 2 tsps. prepared horseradish, 2 cloves garlic, quarter cup Fresh dill—must be fresh, S&P to taste, 2-pound salmon fillet.
Start by seasoning the filet with s&p. Set aside.
In a bowl combine the mayo, mustard, lemon, horseradish, garlic, salt and pepper to taste and dill. Spread the dill/mayo sauce on the flesh side of the fish. Bake skin side down in a 350 oven for around 15 minutes or so – or until it reaches your desired wellness.
Buon Appetito.
