Things You Need to Know
- Stocks continue to advance – in what feels like a sugar rush.
- CPI – benign, PPI? We are about to find out.
- Every sector higher – Homebuilders and Airlines Surge.
- More FED names rise to the top.
- Trump offers Davey some advice – Stick to spinning records!
- Try the Pan Roasted Sea Bass.
Rate cut, rate cut, rate cut! That’s what this is all about as stocks march forward.
Yesterday’s CPI came in benign – as expected – no hints of anything to worry about – But there are those that pointed out that there ‘underlying inflation accelerated to the strongest since the start of the year’ – y/y CPI Ex food and energy came in at +3.1% which was stronger than the 3% estimate. Thursday’s Today’s PPI is expected to do the same – come in slightly higher yet benign….And if it does, it will be hard to see how JJ can go one more meeting and say nothing….and it’s getting harder to see how he can’t consider 50 bps vs. 25 bps….To be clear – the Fed Funds Futures are pricing in a 96% chance of a 25 bps cut….but there are plenty of analysts whispering for a 50 bps cut….…
I mean even Treasury Secretary Scotty Bessent is laying the groundwork telling Maria Bartiromo on Fox Business that.
“I think the real thing now to think about is should we get a 50-bps rate cut in September.”
He thinks that because – had we gotten the ‘correct’ labor market information (think that latest downward revisions), then JJ and the team would have had the real job numbers at the time and that would have allowed him to cut by 25 bps twice already….at the June meeting and then again at the July meeting, so a 50 bps cut would not be out of the question. Recall how JJ found it necessary to cut by 50 bps just 5 weeks ahead of the election – when the labor market was NOT collapsing……At the time – he was being ‘proactive’…Ok – I guess it’s time to be ‘proactive’ again…..
Look, with inflation NOT spinning out of control – like it did in 2020-2022 – the risk is really to the labor market and if JJ is doing his job – he should tolerate a 3% inflation level to focus on – what some are saying – is a weakening labor market. And BTW – how many times had we said that 3% was going to become the new 2%?
In any event – It was green across the screen…. all of the major indexes went up more than 1% – with the Russell and Transports up 3% beating out the Mag 7 at +1.7%. The move in equites continues to be fueled by the idea of a rate cut along with massive excitement over all things AI.
The Dow added 483 pts, the S&P up 72, the Nasdaq added 296, the Russell added 66, the Transports surged by 453, the Equal Weight S&P added 100 while the Mag 7 tacked on 350 pts.
Now, I will say that this is not a typical August (at all)…while we usually see markets churn in August – this year we have seen it do nothing other than push higher….for the month – the S&P is up 3.75%…..The Nasdaq up 5.76% leaving both of those indexes up 9.6% and 12.3% respectively.
Of the 11 Sectors – It was Communications that took the lead up 1.9%, Tech +1.55%, Basic Materials + 1.3%, Financials +1.25%, Industrials +1.05%, Consumer Discretionary +1.05%, Healthcare +0.7%, Utilities +0.4%, Consumer Staples + 0.3% with Real Estate up 0.2%.
Down the chain – Home builders exploded higher rising 3.6%, Retailers +2.7%, Airlines +7.2%, Disruptive Tech + 2%, Semi’s +3.2%, Cybersecurity + 2%, the Value Trade + 1% while the Growth Trade added 1.15%. The triple levered S&P long gained 3.2%, Aerospace and Defense UP 1.6%.
Clearly, all of the contra trades lost value – falling more than 1% across the board.
Bonds lost ground – the TLT and TLH down 0.5% and that sent yields a bit higher. The 10 yr is yielding 4.28%, while the 30 yr is yielding 4.87%. – this morning though, bonds are trading up and that is sending yields back down – so we continue to churn.
Oil moves lower….WTI is down 50 cts at $62.64 – breaking down below the June low and below all 3 trendlines… – this leaves $62 ish as the next area of support…..The move lower in oil is a direct result of the ‘cooling’ rhetoric surrounding geo-politics around the world – think Friday’s summit between Trump and Vlad in Alaska at the joint military base – Elmendorf-Richardson in Anchorage.
Gold ended the day essentially flat yesterday – down $5 to end the day at $3,399…this morning it is up $17 at $3416. Remember – Gold is down $126 from the August high…it tested intermediate trendline support at $3,366 and held and is now churning as well, as we await the next move by the FED and the economy. For now – Gold should remain in the $3,366/$3500 trading range.
On the lighter side – while Trump continues to criticize JJ – he also drew Goldman into the conversation – after Goldman economist Jan Hatzius told us in a research report that ‘consumers will pay for price increases stemming from higher tariffs’ – Trump retorted that.
‘Tariffs have not caused inflation or any other problem for America, other than massive amounts of CASH pouring into our Treasury’s coffers!”
He went onto say that David should get himself a new economist or better yet – just focus on being a DJ rather than running a financial institution. (The DJ comment is directed at Solomon’s ‘side gig’ as a DJ out on Long Island!)
Just to be clear – as of August 6th – the US has taken in $128.4 billion from tariffs – a 130% increase over 2024. According to projection for year end – tariff revenue could reach $300 billion……and none of it has caused inflation to spin out of control as evidenced by all of the recent inflationary data.
Eco data today is all about the PPI – inflation at the producer level and while the estimates call for a slight increase m/m and y/y – at this point – producers do not appear to be passing all of these costs along, but remember – the PPI precedes the CPI – so a stronger PPI this month won’t be reflected in the CPI until next month….so if producers do pass them along – it will show up next month…..
On the FED front – the field is getting bigger – besides Chrissy Waller, Kevin Warsh and Kevin Hasset – other names being bandied about are Michelle Bowman, Philly Jefferson, Lorie Logan and even Former Fed President – Jimmy Bullard. All of these candidates reflect a mix of current Fed insiders and former officials, with varying degrees of alignment with Trump’s push for lower interest rates. And so, just when you thought you had a handle on it, you don’t. While the process is ongoing – many expect an announcement in the fall. I guess the question is – Who really wants that job?
US futures are up again…. Dow up 126 pts, the S&P up 12, the Nasdaq up 62 and the Russell up 13. This as the bets all line up on one side of the boat – The VIX is once again flashing complete complacency – falling below the lowest levels seen in recent months. This morning it is down 22 cts at 14.51, well below all 3 trendlines and well below any level that suggests worry….
RSIs on the S&P and Nasdaq continue to hover at the ‘overbot’ line (70)– and that suggests caution – not panic, just caution. The RSI on the Mag 7 is well into ‘overbot’ territory at 72.0179. What you need to understand is that the RSI on the Equal Weight S&P and the SMIDS are well below the ‘overbot’ line and that suggests that there are plenty of opportunities in sectors separate from just the Mag 7. Sectors to consider – Financials, Basic Materials, Industrials, Healthcare and small and mid-caps.
European markets are all higher as well. Up to about 0.8% across the board.
You’re already invested — so you’re participating. It’s mid-August. Sit back, enjoy the last weeks of summer. Remember: August movies are often exaggerated in either direction (right now, it’s up). And if you’ve got cash to put to work, no need to rush — keep it in your government money market fund earning ~4% until the picture clears.
The S&P closed at 6445 – up 72 pts and now making yet another new 2025 high…..As the excitement continues – it is beginning to feel like a blow off – FOMO top… (Fear of Missing Out). All that means is proceed with caution…Remember – you are invested, so you are participating….Just be careful how you allocate new money into the markets….Look at those underperforming sectors to add to you outperforming sectors…to help you balance out your portfolio.
I remain in the camp that we are toppy – which only means I am more cautious on where I allocate. Doing nothing is a decision – remember – you don’t have to do something all the time…. Let your portfolio do the work…. You are not 100% in cash – are you? I still expect that 6200 is KEY support – should the market back off….……. It needs to test and HOLD if it tests and FAILS – then the move to 6000 will be swift.
Want to talk about strategy? Let’s review your plan. Call me for a complimentary, no-obligation portfolio analysis: 561-931-0190.
Take good care,
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.
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Pan Roasted Sea Bass
You will need: 1 lb. of Sea Bass, olive oil, butter, onion, Marsala Wine, Fresh wild mushrooms, Chicken stock, s&p, and chopped parsley for color.
Prepare by chopping the onion, slicing the mushrooms and chopping the parsley. Have all other ingredients out on the counter to ease the process of creating this dish….
Preheat the oven to 450 degrees – this is important – you want the oven ready and waiting…
In a sauté pan – heat the olive oil and the chopped onion – cook until soft and translucent. Turn the heat to high to make the pan really hot – then remove the pan from heat and deglaze with 1/4 cup or so of Marsala Wine – you can use White wine if you prefer – but you will get a different flavor – just fyi. (I say remove the pan from the heat because – if you use Marsala – the flame can easily ignite the wine and singe your face. – reg white wine – no worries) When the wine has cooked off add the sliced mushrooms and about a tblsp of butter. Reduce heat to med and cook until tender…
Now add the chicken stock – maybe 1/2 cup or so….and s&p… let it cook down…. just so it thickens a bit….
In another sauté pan heat up a bit more olive oil…season the filet with s&p and add to the pan skin side down for about 5 mins…you want the skin to be crispy……flip and cook for about 1 min – transfer to a baking dish and put in the pre-heated oven and roast for another 4 / 5 mins.
Warm the serving dishes and place a bed of the onion/mushroom mixture on the plate and then top with the pan roasted filet. Adorn with a bit of chopped parsley. You can serve this dish with herb/garlic wild rice and sautéed green beans. Complement with a cold bottle of Pinot Grigio – Santa Margherita.
Buon Appetito!