Things you need to know.
– PPI is HOTTER too – but it’s not important….
– Reciprocal Tariffs and flipping the table on trade send stocks higher.
– Bonds rally, oil rallies, gold rallies.
– Vlad ‘Z’ & P’ say they are ready to come to the table. Peace in Europe?
– Try the Schiaffoni
It’s comical really – how they try to reconcile the data points to tell their story….It’s amazing really….so look – the January PPI – like the January CPI came in HOTTER than expected….meaning prices are rising…..the PPI m/m came in at +0.3% vs. 0% last month, Ex food and energy of +0.3%, vs. 0.1% last month and the expected +0.2% this month….Y/Y figures were even hotter……coming in at + 3.5% vs. 3.3% and Ex food and energy of +3.6% vs. +3.5% last month and the +3.3% estimate….. so ALL the measures came in hotter…Just like the CPI…..and remember – the 3 month run rate for CPI came in at +4.5%….while the 3 month run rate for PPI is +4.4%…..all figures are well above the targets…so let’s be clear about that….the numbers are rising.
Yet – stocks rallied….and rallied hard…..the Dow up 345 pts or 0.8%, the S&P up 64 pts or 1%, the Nasdaq gained 295 pts or 1.5%, the Russell up 26 pts 1.2%, the Transports ahead by 78 pts 0.5%, the Equal Weighted S&P up 62 pts or 0.85% while the Mag 7 Index added 500 pts or 1.8%.
So here is the logic….that allowed the algo’s to completely poo poo the data…..while both the CPI and PPI were hotter than expected – ‘several of the components’ that feed into the FED’s FAVORED inflation gauge – the PCE – due out next week – were supposedly ‘more favorable’ – so we supposedly saw declines in health-care ‘items’ and airfares……
Yeah – I’d like to know where exactly…..I fly to NYC every two weeks – I have only seen airfares increase over the past 3 months….First you buy the ‘ticket’, but then you need to ‘buy the seat’ or you sit in the back of the plane and then you need to ‘check your bag’ – which got more expensive over the past 3 months up 14% – all of these are independent prices and then you add the taxes to all of that….so, I’d like to see the data – because that is not what I and all the people flying between Florida and NYC are experiencing….which suggests I can’t believe other ‘highly travelled’ routes are any different – but happy to discuss….
I think the quote of the day – goes to Andy Brenner of NatAlliance Securities – (A Wharton graduate)
“While PPI was much higher than expected, with even HIGHER revisions, the real data that goes into the PCE was weaker, and PCE is the one that Jerome Powell and the fed look at. So ‘in reality, the numbers are better!.’
So, let me get this straight – The report was hotter, the revisions were hotter, but in reality, the numbers were better! Everyone gets a trophy!!!
Ok – let’s move on – because I can’t resolve that, but what I can resolve is the fact that all of the tariff mania that so many have been screaming about, that so many have been moaning and complaining about is NOT coming true at all. The tariff threats are a pure negotiating tool (something that I and many others have been saying all along) and THAT IS WHAT IS BETTER. I wonder if Wharton School (and its graduates) is paying attention to how that is going?
Colombia caved, Mexico caved, Canada came to the table, India has suddenly reconsidered and this has only just begun…..all as Donny announces that he is ready to flip the table on global trade agreements – announcing that he is prepared to impose reciprocal tariffs that match the tariffs they impose on us unless they want to renegotiate. (he has given them until April to come to the table). If they come to the table, he won’t impose them, if they don’t then he will. And THAT my friend is why stocks rallied….
Look – the inflation data was not good, you can’t sugar coat it, but if he succeeds in renegotiating trade agreements, if he succeeds in ending the Russia/Ukraine war, – this morning – VLAD ‘Z’ came out and said that he is PREPARED to engage with Trump and Vlad ‘P’ to end the war…..and if DOGE succeeds in identifying gov’t waste and fraud – of which there appears to be plenty of – then the inflation numbers don’t really matter, because prices will come down….Trade will become fairer, Oil supplies will surge as Russia comes back online, the US is opening the spigots and the Saudi’s won’t be left out, supply will rise and prices will come down and that affects the price of everything……..Toss in all the savings from USAID waste, DOE, even the DOD and then maybe claw back the ‘finders fees’ (which are apparently in the millions) paid to elected officials and BOOM! – we all win! (or at least the American public win). And THAT’S why stocks are rallying….
The rally in stocks became a rally in bonds – the TLT up 1.6% and the TLH up 1.3% – causing yields to decline…. The 10 yr went down 10 bps to end the day at 4.52% while the 2-yr lost 6 bps to end the day yielding 4.29%.
Oil traded down and thru trendline support at $70.62 and bounced…. This morning oil is trading at $71.36 leaving it in the $70.62/$72 trading range. (support and resistance trendlines). We are on the verge of a deal….and that’s good…. let’s see how this plays out…. I suspect that if it happens then we will see the oil markets move lower in celebration……
Gold continues to move up….…this morning it is up $15 at $2958/oz…kissing all-time highs…. Big central bank buying – think China, India, Russia as a way to diversify assets and reduce their dependence on the dollar. In addition – it’s also a Momo trade – (momentum)…..but like I said yesterday – it feels a bit tired to me….it feels a bit stretched…..so while I like gold as part of a portfolio- I am not chasing it….up here….
Eco data today is all about Retail Sales, Industrial Production and Capacity Utilization.
This morning futures are a bit lower as investors and markets digest all of the conflicting signals that are hitting us from all sides…. Dow futures are down 145 pts, S&P’s -11, Nasdaq is down 40 pts, and Russell is flat.
Look – markets will remain active…..the technology that exists today – allows anyone with a computer and a social media account to create havoc…….but as a long term investor – you need to talk to your advisor and create that plan….and then execute on it….. It is important to eliminate the daily noise and focus on the long-term noise.’ Where are we going? What are the policies that will determine long term performance? Which sectors are set to benefit and which may struggle? In the end – build a diversified portfolio – allowing yourself to lean in on sectors you like, and think will succeed without overdoing it! Remember who you are and where you are in the life cycle – because that too will drive your decisions.
European markets are mixed…. The UK and Germany are lower while the others are higher…. France and Italy competing for first place – up 0.4%.
The S&P closed at 6115 – up 64 pts leaving stocks kissing all-time highs as well…. but like gold – My sense is that it feels a bit tired here….so I expect the churning to continue….in the 6000/6150 trading range. Now, if we get a settlement in Russia/Ukraine, then I would expect stocks to surge, so no one should be surprised.
Tomorrow is Saturday – Trump has called for the release of ALL the Hamas hostages….by noon. The word is that we will get 3 more….but the situation remains dynamic, Hamas has responded to President Trump’s threats by stating that “the language of threats has no value and further complicates matters,” asserting that adherence to the existing agreement is the only way to resolve the situation. As of now, the situation remains tense, with the ceasefire’s future hinging on the actions taken by both parties in the coming days. Don’t be surprised if Trump turns up the temperature if Hamas continues to delay – which could affect stock prices around the world on Monday.
Stick to the plan, as a long-term investor – do not overreact to any specific headline that will cause you to make a short-term erroneous decision. You are invested so you are participating…. use weakness as an opportunity in good names.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/
to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
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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Schiaffoni with Zucchini, Pancetta & Taleggio Cream
For this you need: 1 lb. of Schiaffoni pasta (you can use Rigatoni), 2 zucchini – thin sliced, pancetta, olive oil, taleggio cheese, cherry tomatoes, garlic & s&p.
Bring a pot of salt water to boil.
In a large sauté pan – brown the pancetta – then remove – leaving the fat behind. Now turn the heat to high and toss in the sliced zucchini in batches so that it gets crispy and not soggy. Repeat until you have sauteed all the zucchinis. *Add olive oil If you need to.
Now, add half the zucchini to the food processor, toss in a handful of cherry tomatoes, and cut up taleggio cheese. (a semi-soft, washed-rind cheese from Italy, known for its pungent aroma and mild, creamy flavor. It has been made for centuries, dating back to Roman times, and is named after the Val Taleggio region in Lombardy).
Add olive oil and s&p -and blend to a nice creamy consistency.
Cook the pasta – leaving it a bit aldente. Now, add the cooked pasta to the sauté pan with the rest of the zucchini – add in the creamy taleggio sauce and the pancetta. Toss and serve. Love it!
Buon Appetito
