Things you need to know.

–        Stocks took back almost all the earlier losses.

–        2Q earnings have not been so bad.

–        The Consumer is saying – “Enough is Enough”.

–        Focus this week on PPI and CPI.

–        Try the Spaghetti with Garden Vegetables.

Here is my appearance with Maria Bartiromo on “Maria Bartiromo’s Wall Street Week” on Fox Business over the weekend.

https://www.foxbusiness.com/video/6360185961112

Stocks rebounded into the end of what was a wild week…. that saw stocks plummet on Monday only to take it ‘almost’ all back by Friday.  Sentiment went from near panic to near jubilation (Jubilation might be a bit exaggerated) – but in any case, – it is what it is….

The Dow rose 51 pts, the S&P added 24 pts, the Nasdaq up 85 pts, the Russell fell by 4 pts, the Trans lost 100 pts or 1.68% and the Equal Weight S&P rose 11 pts.

There has been no shortage of drama – since we began the month…First it is a seasonally weak time of year, then we had the carry trade blow up causing all kinds of calls for an ‘emergency fed meeting’, stocks plummeted, leaving investors more  worried about what the FED will do next.  Then we have the next round of eco data points, the Mid-East and how will the Presidential election play into all of this?  

We are almost thru 2Q earnings and so far, 78% of them beat…. a bit better than the average.  Earnings growth came in at an 11.5% vs. the expected 8.9% going into the season.  The majority of the beats were a result of controlling the expenses (think layoffs, capital allocation etc.) given that only 58% of the companies that have reported beat on the top revenue line.

And that speaks to the consumer….and from ‘our’ perspective – we are saying ‘Enough is Enough!”   Let’s be honest, can we?

 The Biden/Harris years have been a disaster for the consumer…. Good and Services are up 22%, Food +27%, Goods (ex-food and energy) up 16% while services are up 20%. Interest rates up 500% (recall they were zero when they moved into the WH).  Mortgage rates hit a high of 7.5% (although are now retreating to 6.4%)

While we had higher prices jammed down our throats – that is beginning to change…. pricing power that companies HAD appears to be easing….and consumers are pushing back because the consumer is completely strained, savings are depleted, and wage growth is slowing.  Expect to see more data over the next 6 weeks to either confirm or deny the facts…

The FOCUS this week brings us the latest inflation data and it is expected to be a bit better…. Tuesday brings up PPI m/m of +0.2%, Ex food and energy of +0.2% down form 0.4%.  PPI y/y of + 2.3% down from +2.6% and Ex food and energy of + 2.7% down from 3%. 

Wednesday brings us CPI m/m of +0.2% up from -0.1%, Ex food and energy of 0.2% up from 0.1%.  CPI y/y is expected to be up 3% while Ex food and energy is expected to be +3.2% down from +3.3%. 

Later in the week – we will get Retail Sales, Philly Fed Business, Industrial Production, Capacity Util, Housing Starts and Building Permits.

All of the major groups in the S&P advanced…. With Communications out in front + 0.85% and Industrials carrying up the rear at +0.2%.  All the other groups fell in between. 

Bonds rallied – the TLT ETF + 1% while the TLH ETF rallied by 0.9%. Leaving the 2 yr. yielding 4.05% and the 10 yr. yielding 3.94%.  – this after a couple of weak auctions and the sense that the FED was going to be making aggressive rate cuts by year end.  On Monday, many were demanding that the FED cut rates by 150 – 200 bps, while by Friday they pared those bets back to 100 bps.  (Which I think is still aggressive) A Bloomberg survey suggests that the majority of economists surveyed think a September cut of 25 bps is warranted which flies in the face of the big investment bank analysts that are calling for a ‘jumbo cut’. (Defined as a 50 – 75 bps cut.)

The VIX – fear index continued to decline on Friday leaving it sitting atop the 20 lines…. down 68% off the Monday high but still up 60% off the July lows. This morning it is up 34 cts at 20.71.

Oil – recall last week that it busted up and thru the long term trendline at $76.50 which had proven to be a real sticking point.  This morning oil is up 77 cts at $77.62 – and appears ready to kiss the intermediate term trendline at $78.20.  The recent strength in oil can be attributed to a couple of things – First it was oversold and needed a bounce and second the rising risk of conflict in the mid-east.  Oil remains in the $76.50/$78.80 trading range.  Any surprise moves in the Mid-East will sure send Oil up and thru resistance.

Gold is trading up $9 at $2481- this after trading down last week, testing the trendline at $2425.  Gold traders are awaiting this week’s inflation data – further signs of weakening inflation will set gold up to most likely retest the July high of $2537. 

US futures are mixed – Dow – 12, S&P’s up 3, Nasdaq up 30 and the Russell is down 8.  Expect volatility to remain elevated this week as we get more inflation data – It is expected to decline – so two things could happen.  If it is worse than expected – suggesting the FED stands pat, then watch as stocks trade off, but if it is better than expected – then watch as traders demand a more ‘robust’ cut (more than 25 bps).  Recall last week we heard from two FED heads…. Barkin and Schmid – and both reiterated that they are ‘not in a rush’ to cut rates.   

European markets are mixed as well.  France down 0.2% while the FTSE is up 0.4%.  European markets – like the US markets continue to try and shake off the hysteria from last week…. UK inflation is out on Wednesday – many asking if this report will support an add’l rate cut by the BoE.

The S&P closed at 5344 up 25 pts.  Global markets are struggling to create stability as they all prepare for a week full of US eco data that will shape the FED’s next move.  And while there appears to be some relief from last week’s volatility do not dismiss it just yet.  Markets will reman on edge as we move thru the next 3 weeks of August – many participants are on vacation; volumes will remain subdued which only exacerbates any move up or down. 

While I remain long term bullish on stocks, investors are frazzled.  Last Monday’s selloff causing all kinds of internal technical damage to the market needs to be repaired. And that will take time and will surely cause mkts to test lower again to see if the lows hold. Today there is no eco data to speak of, so expect the focus to be on the upcoming PPI and CPI on Tuesday and Wednesday. Remember – we are in a seasonally weak time of year for stocks – patience remains a virtue.

In the end – be confident in your portfolio, become a bit more defensive and that includes sectors like Consumer Staples, Utilities etc., but if tech names get significantly oversold – take advantage.…. make sure you know what you own and in times like this talk to your advisor if you are concerned. Feel free to call me at 212-381-6194.

Take good care.

kpolcari@slatestone.com

Sources:  Bloomberg, CNBC, Reuters, Wall Street Journal

Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. 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 Kenny Polcari or SlateStone Wealth.

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.

While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.

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.

Spaghetti with Garden Vegetables.

It’s summer and you probably have a big, beautiful garden producing some gorgeous vegetables. (If not go to the store!)

This is simple – I made in on Saturday.

You need – 1 lb. of spaghetti, Olive oil, s&p, 2 shallots sliced, 2 garlic cloves sliced, 1 box of cherry tomatoes sliced in half, broccolini cut into bite size pieces & the Asparagus flower, and of course Fresh grated Parmegiana cheese.

Bring a pot of salted water to rolling boil and then turn to med low until you need it – set it on the back burner.

In a large sauté pan that will accommodate the pasta – add 3 turns of the oil, Next add the shallots and garlic – sauté it for 3 – 4 mins. 

Next add the bite size broccolini and the sliced cherry tomatoes and sauté that on med high heat for 10 mins…the tomatoes will produce the juice that become the sauce. 

Now add the asparagus flowers and season with s&p.  Turn heat to med and allow the zucchini to cook.  When you are ready, add the spaghetti to the pot and cook until aldente. 

Strain the pasta – always reserving a mugful of the water.  Place the spaghetti in the pan mix well.  Add on handful of the cheese and mix again. 

Serve immediately – always have more cheese on the table for your guests.

Buon Appetito.