Global Mkts Continue to Make New Highs

Stocks closed at new highs (again) on Friday – and with Nasdaq having broken out of its 15 yr slog – all eyes are focused on technology and they have not been disappointed….the latest in the mix were Microsoft – which traded up +10% and Amazon up 14% after both posted strong 1Q earnings reports….adding more fuel to the Nasdaq fire……

Now what is interesting is that analysts and strategists had prepared us for a 1Q profit decline of some 4.6% for the S&P….but as of Friday – 40% of the S&P 500 companies have reported - and profits are running at a negative 2.6% rate vs. the 4.6% decline were we prepared for – so this is GOOD news as it is LESS negative than the overall consensus….…..……..I guess that the stronger dollar story was, well, just a story….and lower energy prices? Well - energy related expenses were not as high as expected – giving a welcomed boost to the bottom line……For example - Google reported a ‘revenue hit’ due to the stronger dollar (55% of their revenues are outside of the US) and still managed to trade up $18 (or 3.3%) as the reduced expense side (energy is just but one expense) of the equation boosted the bottom line…. And the world turns….

But energy now has made a turnaround…..Brent crude trading above $65/barrel and WTI teasing with $57/barrel – a far cry from the $30/barrel that some street analysts had warned about. It appears that the collapse in oil prices during the 1Q has finally created a supply response. Shale oil production is now in decline, rigs continue to be taken off line and the summer driving season has begun. Demand around the world does not appear to be in decline and so it looks like the worst is over. The energy sector is now up 11% since the March lows and with calls for oil to settle in around the $60/$65 range – there appears to be a bit more upside.

Either way – trading continues to be somewhat subdued as investors and traders look to reconcile mixed macro data, weaker earnings and caution ahead of this week's Fed announcement. Now the Fed is not expected to announce any increase in rates in June – but will surely keep the August door open – although my suspicion is that that door will get shut sometime over the summer.

On Friday – the commerce dept tells us that durable goods surged by 4% - well ahead of the expected 0.5% rate…....The report itself confusing- first it tell us that durable goods orders for 'non-military' aircraft jumped by 31% - yet Boeing (maker of aircraft and more) tells us that their orders (for non-military aircraft) fell by 45% - (another disconnect that gets ignored) ....so - if you take out airplanes, – then durable goods actually fell by 0.2% - adding another negative economic data point to the mix…..yet the mkt goes higher......

The S&P has once again managed to eke out just enough of a gain last week to rise above its 3 month sideways trading channel – but doing so in what some consider overbought territory and amid a tightening, rising bearish triangle pattern. A look at the rising triangle pattern reveals how the upper resistance line and the lower support lines are converging. This is called a bearish triangle because of the many times a pattern of trading like this keeps testing higher only to fail ending in an intermediate correction where prices break down below the bottom triangle support line. For now this breakout carries some technical risk of a pullback and I don’t expect this attempt at new highs to hold up in light of 'recession like' economic data that we have been getting......but as long as the FED remains accommodative any pullback will be muted - the issue is - when the FED pulls the trigger will the economy really be able to handle it?

In Europe – Over the weekend - Greece failed (again) to deliver any real economic reforms and that country remains on the edge…Eurogroup chair Jeroen Dijsselbloem has made it very clear that Greece will NOT receive any more aid money and the weekend meeting in Riga (Latvia) failed to resolve any differences leaving Finance Minster Yanis (Varoufakis) completely isolated. The Eurozone authorities are now looking at PM Alexis Tsipiras to come to the table and negotiate in good faith……

News Flash - The Greek gov’t has to find a way to pay some 1 bil Euro in pensions and subsidies this week on top of the 880 mil Euro payment due to the IMF in just 2 weeks – if they do not make this payment – then they face default – so the clock ticks…

Either way – global mkts do not seem to be overly concerned - as so many of them – China, Australia, FTSE, Germany, US are making or setting new highs.
US futures are up small +2 pts as it teases with yet another new high…..Today should be anothe quiet day ahead of the rest of the week that is packed with data......I would look for the S&P to retest last weeks highs of 2125 ish...and fail....

This week we will get 1Q GDP – expectations run the gamut....the Bloomberg official estimate is for 1% growth - yet we know that the Atlanta Fed has cut their estimate to +0.2% while many of the investment banks range from 0.3% - 2%. A surprise to the upside will then re-ignite the rate conversation......(yawn), Personal Income exp of 0.2% and Spending exp of 0.5%, the Richmond Fed Manufacturing activity exp of -2 and the Fed NON-announcement as factors that will drive trading sentiment. On the earnings front look for Apple, Ford, Pfizer, Exxon, Visa and Merck to light up the airwaves.

Asian mkts were mixed…as noted China, Hong Kong and Australia made new 7 yr highs, (more talk of gov't sponsored stimulus), Japan backed off as Fitch cut that country's debt rating - causing the investors heartburn....in addition investors digest some recent earnings data and awaited news on Canon and Fanuc after the close. Japan -0.18%, Hong Kong +1.3%, China + 3% and ASX +0.83% - note that these mkts are up anywhere from 10% - 40% YTD)

In Europe mkts were higher and have since backed off a bit over the rising tensions surrounding Greece and news that Deutsche bank has announced a 'complete overhaul' of its banking operations saying that they would ‘deleverage their corporate banking and securities division’ and cut costs by $3.5 bil Euros. (WHICH IN ITSELF WILL COST 3.7 BIL EUROS TO ACHIEVE).

European Finance ministers are gearing up for a conference call between the Eurogroup and Greece later today as they continue down to the wire to get Tsipiras to recognize the danger he is putting his country in. - A default is now running at a 50% and although Greece is just a small part of the EZ economy - no one knows what the final implications will be upon a forced exit......FTSE flat, CAC 40 -0.1%, DAX +0.48%, EUROSTOXX +0.07%, SPAIN -0.16%, and ITALY -0.16%.

Italian Style Sweet and Sour Chicken Thighs

You could always use breasts but the dark meat is always better.

This is not a difficult dish to make and once you simmer it – you have time to take a shower, set the table, break open the wine and enjoy the night.

You need: olive oil, s&p, diced onion, chopped carrots, chopped celery, plenty of sliced garlic cloves, ¼ cup sugar, 1 cup Chianti, ½ cup red wine vinegar, ½ cup orange juice with pulp, *sliced almonds – optional.
Season the chicken pieces with s&p – set aside. In a heavy frying pan – heat up some olive oil, - now brown the chicken on all sides. Remove and place on a platter.

Now add the garlic, carrots, celery, and onion – sauté for 10 mins on med heat….Now add the sugar, wine, vinegar, orange juice, and almonds….bring to a boil - add back the chicken – skin side up. Place a lid off center and turn heat to simmer. Cook for about 30 mins. (This is where you run up and take a shower, get into something comfortable and kick back....)

Now remove chicken and place on a platter, - turn heat up to high and stir until it is nice and thick…not long…maybe like 4 mins max…..taste – adjust seasoning with s&p. Spoon the sauce over the chicken pieces and serve.

This dish works well with a green veggie – like French cut green beans or broccoli. Make a large mixed green salad with tomatoes, red onion and cucumbers. Dress in a balsamic Vinegar and Olive oil dressing. Keep it simple – as the chicken and marinade carry the dish.

Buon Appetito.