So was the Thursday sell off just a flash in the pan? Was it another short term bottom? Traders seem to think so - as they went bargain hunting to start the month of May on a high note as they took the Dow back up 183 pts...But were there any real bargains - not so much, just slightly reduced prices, but enough to cause the trader types to jump back in.
Despite Friday's strength, the major averages all ended lower for the week. Nasdaq tumbling by 1.7%, while the Dow and the S&P 500 fell by 0.3% and 0.4% respectively. The macro data last week continued to confirm confusion........the ISM reported that manufacturing activity continues to hold steady...as they reported a read of 51.5 - unchanged from March - but a bit below what analysts had expected. Remember - anything above 50 is a sign of expansion - so if you believe the number- then we are seeing continued growth in the manufacturing sector. The confusion comes from the fact that the committee noted that 15 of the 18 manf industries reported growth in April vs. the 10 in March - so supposedly a broader distribution - yet the overall number was unchanged......someone is not being completely honest here....Math is a funny thing - you can manipulate the numbers anyway you want....
In a separate report the commerce dept showed an unexpected drop in construction spending in March....the report said construction spending fell by 0.6% vs. the expected rise of 0.5%. And the Univ of Mich said what? Sentiment remains robust at 95.9 - and so the mkt - with all the conflicting data continues to trade near record highs.
Earnings this quarter disappointed almost on a daily basis – but investors did not seem to care. Earnings are history – it’s over – it is the forward guidance that is important. European macro data also did not set any records – yet those markets are teasing with multi year highs as well, Asia – macro data mixed and those market are all trading up….so what is the common theme? Come on - you know the answer.......The central banks - and so as long as the central banks are playing such a key role - the markets will never really trade on their own which is why global mkts are teasing with new or all time highs...
Central banks are not going away. The Fed is not in any rush to raise rates – June is off the table and my bet is that September is as well. The ECB is not going anywhere and anytime Chinese or Japanese macro data shows any weakness – the conversation turns to more stimulus and ‘off we go’.
Now do I think that the economic data will improve – sure....will 2015 turn out like 2014 - where we got off to a weak start only to 'kill it' at year end? Yes...and analysts are already talking about the ‘blowout’ 2nd quarter......they note the ‘encouraging’ signs about the labor mkt as initial jobless claims fell to 262k last week – the lowest reading in 15 years as wages supposedly rose by 2.6%. Friday brings us the Non-Farm Payroll report and all expectations are for a ‘significant’ rebound – making the April figure the ‘outlier’ allowing the statisticians to dismiss it causing investors to celebrate. Talk of better days ahead for the second half of the year is all the rage.
Funny how this works - last week we learned that a large number of retailers are getting ready to start to shut down so many stores.....and that means putting people out of work.... So I ask - how much longer can the mkt remain so disconnected from the economic reality? Below is just a short list of the coming closings and it is not encouraging at all......
180 Abercrombie & Fitch, 150 American Eagle, 223 Barnes and Noble's, 265 Body Central, 120 Chico's, 200 Children's Places, 340 Dollar Tree, 31 Fredrick's of Hollywood, 40 JCPenney's, 14 Macy's, 400 Office Depots, 200 Walgreens...and the list goes on.......Yet investors celebrate this news - because these companies are becoming leaner and meaner - agreed, but what about the job losses?
Valuations are now running at 17.4 x the past 12 months earnings...that is 19% higher than the 10 yr average of 14.6 and with 360 companies having reported 1Q earnings - profits are set to show a decline of only 0.4% - a far cry from the -4.6% expectation.... and this is happening in a weak recovery......could it just have been that analysts over estimated the impact of the dollar or the state of the global recovery? Or are we still seeing companies manage their bottom lines via cost cuts vs. real top line growth? Yes, Yes and Yes.
The wild card remains what the Fed will do - and until the data becomes more consistent the lack of clarity will continue.....now don't get me wrong...the Fed has been clear about what will cause them to raise rates - we just have not gotten there yet.....but when we do I think the mkt will celebrate a move.....investors and the mkt both realize that rates need to go up - They know that we can't do this for much longer......a rise in rates will show strength and a return to normalcy - in fact when it does happen, I think the mkt will celebrate - singing "Here comes the Sun"
This morning US futures are up 5 pts...thanks to some decent overnight data out of Europe.....Eurozone Manf PMI's were better than the estimates...52 vs. 51.9, Germany was 52.1 vs. 51.9 and talk of more stimulus out of China. Remember that most of Europe was closed on Friday for May day - so they are also playing catch up.
Greece continues to dominate the int'l talk shows and although they are still far from any agreement - PM Tsipiras is working hard to try and convince his creditors to back off......He has 3 days to go before the ECB next decision on emergency aid....any failure will cause the ECB to discount any Greek collateral by a higher margin......threatening to push that country in further 'financial chaos' prompting the gov't to institute capital controls....countdown to May 6th.....has now begun.....
This is the final week for earnings reports - None today nor is there any real eco data to worry about...Mkts will be listening to Chicago Fed Pres Evans at 12:25 pm and San Fran's Fed Pres Williams at 3:10 pm - both of these men are considered 'doves' so look for the slow and steady approach to any rate rise....
I would look for the mkt to remain range bound - as it teases with resistance at 2115 ish early on.....With no negative data out - the path of least resistance is up......but will there be enough strength to push us up and thru to new highs right now? Not so much.....
On a side note - I will be attending the 'Best Buddies New York Fundraiser' on Wednesday May 20th at NY's Carnegie Hall - Tickets are now on sale and can be had by clicking on this link:
www.bestbuddiesnewyork.org
(Best Buddies is a global volunteer movement to create opportunities for one to one friendships, integrated employment and leadership development for people with intellectual and developmental disabilities)
For this you need:
1 lb of spaghetti, 6 or 8 Sweet Sausages, Broccoli crowns - chopped, 6 cloves of garlic - crushed and chopped, 2 lg Vidalia onions - diced, olive oil, chicken stock, s&p and fresh grated parmegiana cheese.
Heat the grill
Bring a large pot of salted water to a rolling boil.
Select a large/deep frying pan and heat up some olive oil. Toss in the crushed/chopped garlic and sauté. Now add the onions and sauté another 5 - 8 mins. Stir - do not burn. Once the onions are soft - add in the chopped broccoli crowns and mix well Season with s&p and add in about 1/2 cup of chicken stock. Turn heat to med and allow to cook. Stirring frequently.
Now turn heat down to med low and go outside and grill the sausages. you want to sear them on all sides - as you roll the sausages over the grate. No need to cook all the way thru - as they will finish cooking on the stove.
Once they are seared - remove and bring into he house. Slice the sausage in half - lengthwise and then slice each half into bite size pieces and add to the broccoli and onions. Mix well. Taste and season if necessary.
Add the rigatoni - cook until aldente - about 8 mins or so...taste it to make sure. Now reserve a mugful of the pasta water then strain. Add the pasta directly to the large frying/sauté pan with the sausage and broccoli. Mix well. Now toss in a handful or two of the cheese and mix well again.
Serve immediately in warmed bowls - A nice chilled summer rose works perfectly with this. A red may be too heavy.
Buon Appetito.
Despite Friday's strength, the major averages all ended lower for the week. Nasdaq tumbling by 1.7%, while the Dow and the S&P 500 fell by 0.3% and 0.4% respectively. The macro data last week continued to confirm confusion........the ISM reported that manufacturing activity continues to hold steady...as they reported a read of 51.5 - unchanged from March - but a bit below what analysts had expected. Remember - anything above 50 is a sign of expansion - so if you believe the number- then we are seeing continued growth in the manufacturing sector. The confusion comes from the fact that the committee noted that 15 of the 18 manf industries reported growth in April vs. the 10 in March - so supposedly a broader distribution - yet the overall number was unchanged......someone is not being completely honest here....Math is a funny thing - you can manipulate the numbers anyway you want....
In a separate report the commerce dept showed an unexpected drop in construction spending in March....the report said construction spending fell by 0.6% vs. the expected rise of 0.5%. And the Univ of Mich said what? Sentiment remains robust at 95.9 - and so the mkt - with all the conflicting data continues to trade near record highs.
Earnings this quarter disappointed almost on a daily basis – but investors did not seem to care. Earnings are history – it’s over – it is the forward guidance that is important. European macro data also did not set any records – yet those markets are teasing with multi year highs as well, Asia – macro data mixed and those market are all trading up….so what is the common theme? Come on - you know the answer.......The central banks - and so as long as the central banks are playing such a key role - the markets will never really trade on their own which is why global mkts are teasing with new or all time highs...
Central banks are not going away. The Fed is not in any rush to raise rates – June is off the table and my bet is that September is as well. The ECB is not going anywhere and anytime Chinese or Japanese macro data shows any weakness – the conversation turns to more stimulus and ‘off we go’.
Now do I think that the economic data will improve – sure....will 2015 turn out like 2014 - where we got off to a weak start only to 'kill it' at year end? Yes...and analysts are already talking about the ‘blowout’ 2nd quarter......they note the ‘encouraging’ signs about the labor mkt as initial jobless claims fell to 262k last week – the lowest reading in 15 years as wages supposedly rose by 2.6%. Friday brings us the Non-Farm Payroll report and all expectations are for a ‘significant’ rebound – making the April figure the ‘outlier’ allowing the statisticians to dismiss it causing investors to celebrate. Talk of better days ahead for the second half of the year is all the rage.
Funny how this works - last week we learned that a large number of retailers are getting ready to start to shut down so many stores.....and that means putting people out of work.... So I ask - how much longer can the mkt remain so disconnected from the economic reality? Below is just a short list of the coming closings and it is not encouraging at all......
180 Abercrombie & Fitch, 150 American Eagle, 223 Barnes and Noble's, 265 Body Central, 120 Chico's, 200 Children's Places, 340 Dollar Tree, 31 Fredrick's of Hollywood, 40 JCPenney's, 14 Macy's, 400 Office Depots, 200 Walgreens...and the list goes on.......Yet investors celebrate this news - because these companies are becoming leaner and meaner - agreed, but what about the job losses?
Valuations are now running at 17.4 x the past 12 months earnings...that is 19% higher than the 10 yr average of 14.6 and with 360 companies having reported 1Q earnings - profits are set to show a decline of only 0.4% - a far cry from the -4.6% expectation.... and this is happening in a weak recovery......could it just have been that analysts over estimated the impact of the dollar or the state of the global recovery? Or are we still seeing companies manage their bottom lines via cost cuts vs. real top line growth? Yes, Yes and Yes.
The wild card remains what the Fed will do - and until the data becomes more consistent the lack of clarity will continue.....now don't get me wrong...the Fed has been clear about what will cause them to raise rates - we just have not gotten there yet.....but when we do I think the mkt will celebrate a move.....investors and the mkt both realize that rates need to go up - They know that we can't do this for much longer......a rise in rates will show strength and a return to normalcy - in fact when it does happen, I think the mkt will celebrate - singing "Here comes the Sun"
This morning US futures are up 5 pts...thanks to some decent overnight data out of Europe.....Eurozone Manf PMI's were better than the estimates...52 vs. 51.9, Germany was 52.1 vs. 51.9 and talk of more stimulus out of China. Remember that most of Europe was closed on Friday for May day - so they are also playing catch up.
Greece continues to dominate the int'l talk shows and although they are still far from any agreement - PM Tsipiras is working hard to try and convince his creditors to back off......He has 3 days to go before the ECB next decision on emergency aid....any failure will cause the ECB to discount any Greek collateral by a higher margin......threatening to push that country in further 'financial chaos' prompting the gov't to institute capital controls....countdown to May 6th.....has now begun.....
This is the final week for earnings reports - None today nor is there any real eco data to worry about...Mkts will be listening to Chicago Fed Pres Evans at 12:25 pm and San Fran's Fed Pres Williams at 3:10 pm - both of these men are considered 'doves' so look for the slow and steady approach to any rate rise....
I would look for the mkt to remain range bound - as it teases with resistance at 2115 ish early on.....With no negative data out - the path of least resistance is up......but will there be enough strength to push us up and thru to new highs right now? Not so much.....
On a side note - I will be attending the 'Best Buddies New York Fundraiser' on Wednesday May 20th at NY's Carnegie Hall - Tickets are now on sale and can be had by clicking on this link:
www.bestbuddiesnewyork.org
(Best Buddies is a global volunteer movement to create opportunities for one to one friendships, integrated employment and leadership development for people with intellectual and developmental disabilities)
Rigatoni w/Grilled Sweet Sausage & Broccoli
Made this last night ( I used spaghetti because that is what I had) - you can see the before and after on my Twitter account @kennypolcariFor this you need:
1 lb of spaghetti, 6 or 8 Sweet Sausages, Broccoli crowns - chopped, 6 cloves of garlic - crushed and chopped, 2 lg Vidalia onions - diced, olive oil, chicken stock, s&p and fresh grated parmegiana cheese.
Heat the grill
Bring a large pot of salted water to a rolling boil.
Select a large/deep frying pan and heat up some olive oil. Toss in the crushed/chopped garlic and sauté. Now add the onions and sauté another 5 - 8 mins. Stir - do not burn. Once the onions are soft - add in the chopped broccoli crowns and mix well Season with s&p and add in about 1/2 cup of chicken stock. Turn heat to med and allow to cook. Stirring frequently.
Now turn heat down to med low and go outside and grill the sausages. you want to sear them on all sides - as you roll the sausages over the grate. No need to cook all the way thru - as they will finish cooking on the stove.
Once they are seared - remove and bring into he house. Slice the sausage in half - lengthwise and then slice each half into bite size pieces and add to the broccoli and onions. Mix well. Taste and season if necessary.
Add the rigatoni - cook until aldente - about 8 mins or so...taste it to make sure. Now reserve a mugful of the pasta water then strain. Add the pasta directly to the large frying/sauté pan with the sausage and broccoli. Mix well. Now toss in a handful or two of the cheese and mix well again.
Serve immediately in warmed bowls - A nice chilled summer rose works perfectly with this. A red may be too heavy.
Buon Appetito.
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