Kenny Polcari
KennyPolcari.com
BOOOOOMMMMMM! The mkt had another rough but interesting day…..yesterday...... S&P futures were originally up – small, but up…. then after the rash of more disappointing macro data hit the tape at 8:30 am – you could feel the air pressure change……
Challenger Job Cuts – soar! US companies announced 75k job CUTS last month – that is up 200% over December and up 42% from one year ago! Init jobless claims higher, continuing claims higher, and then the retailers HIT.....
Kohl’s (KSS) and Ralph Lauren (RL) shocked the mkts with very disappointing earnings and sales figures for December and guidance for the new year…. This is where the concern about the consumer hits you right between the eyeballs....Remember all the chatter last fall - How great the shopping season was going to be, how the consumer was flush with cash, how the tide had turned and retailers were going to be the beneficiaries??? Does any of that ring a bell?
Futures did a complete 180 and fell out bed……the pressure was mounting – the storm clouds were building….….
RL & KSS and every other retailer was for sale – The DMM (Designated Market Maker) in RL struggled to find bids as the sellers poured in……Sell 20k , then 50k, then 100k – buyers were not be found anywhere in line...…as the sellers get anxious – the buyers recoiled even more…..The stock was indicated down $10, then $12 then $15 as brokers worked to gather interest……then at 9:29:55 the bell began to ring – Ding, ding, ding, ding, ding…… and we're OFF......Stocks began to open, the indices began to reflect the concern as the pressure mounted.....volume surges as the action gets under way......
The stock (RL) opened at $103.27 (down $12) and then proceeded to trade down another $15 (to $88) in the mins after as SELLERS (mostly those liquidity providers) came out of the woodwork.....hitting any bid available........The issue now?: The intuitional buyers weren't standing there willing to get run over - so with the guidance of their brokers they moved lower until the selling subsided and the stock found support……The volume exploded in this issue as we traded some 10.8 mil shares vs. the average daily volume of 2.2 mil shares. What had happened? Nothing really – it was just another day in an anxious, nervous, automated, volatile mkt…. where investors are convinced that someone is playing “I got a secret!”.
And then - CNBC runs with the story – The one everyone 'isn’t talking about' BUT should be....…Wink, Wink! The one that Ron Insana forced us to address on Tuesday....
“Negative Rates in the US? Here’s Why It Could Happen”
(http://www.cnbc.com/2016/02/04/negative-rates-in-us-heres-why-it-could-happen.html)
In this expose by Jeff Cox – he makes it very clear that the next move for US interest rates may be down and not up…..and he goes so far to say that down means going to the dark side - Yes folks - get ready for negative rates… and the reasons are many as WE all know - but apparently not to many in DC know - so let me highlight just a few:
Building recession fears in the US, unstable financial mkts, currency devaluations by some ‘emerging mkt’ countries, weakening global macro data, collapsing oil and commodity prices and pressure from other central banks that have already moved towards negative rates.
Jeff points out that while it may seem highly unlikely – “Snow White and the 10 dwarfs’ would have to consider the possibility of going to the dark side “should financial conditions tighten and threats to economic growth increase.”
BankAmerica rates strategist – Mark Cabana echoes that sentiment saying: "While not our baseline scenario, if the U.S. economy were to sufficiently weaken we believe the Fed could consider negative rates as a means to ease policy,"
So I must ask – How could we go from being so strong 6 weeks ago – as indicated by the FED in December, when they raised rates citing 'explosive growth'....which was then echoed by the President in January – to being so weak so quickly? I mean just last week – Vice Chair Stanley Fischer told us that “4 more rates hikes were in the ballpark for 2016” – and Wednesday KC Pres Ester George – backed him up! So what gives? Did he mean that ‘4 more rate DECREASES were in the ballpark for 2016?’ I mean Fischer is 72 yrs old – maybe he was just confused…..I mean we all know that Greenspan (now 90) was most definitely confused/borderline stunata (Sicilian for nuts) during his tenure at the FED – because this whole mess – I mean THIS WHOLE MESS started under his watch….(but that’s a story for another day). So - we must consider the possibility that Cousin Stanley was confused…..
In the end – the broad mkt fell 15 pts to 1900, then rallied 27 pts to 1927 only to fail again and then rally again into the close to end the day at 1915 or up 2.92. Oil also had a bit of nutty day…..trading in a 5% range – initially +3% then falling 1.7% by days’ end. And all of this makes sense – remember – the mkt has suffered some real damage of late – trading well below any support levels as it thrashes around trying to build a base amid deteriorating macro reports...... Add in all the global geo-political issues and you can see why the mkt is struggling.
The Fed is trying desperately to stay calm and hold the mkt steady…..and to do this – they MUST keep crude oil prices from moving lower so how do they do that? Well given the relationship between oil prices and the US dollar, the Fed has been very actively JAWBONING (see yesterday's note) the dollar lower by floating the idea of negative US interest rates. By doing so – they manage to create some demand for gold – which has rallied nicely – since the December lows. The China Yuan devaluation and the threat of more to come coupled with the Japanese move to the dark side – (negative rates) – saw Gold react beautifully as many investors embrace it as the safest haven of all.
As of yesterday – it has now managed to pierce all 3 resistance levels – the 50, 100 and 200 day moving averages – which now sets it up for a run….Look for it to test the October highs of $1185/oz and if we blow thru that - then a run to $1250 is clearly a possibility.
Back to the FED – Who is kidding who? Rates are not going any higher at all….not now, not in March and not in the summer….at most – the FED will return us to a zero rate policy – because in the end – negative rates suggest desperation, no matter how you slice it. You CAN'T possibly argue that negative rates are just another ‘tool in the toolbox' ....They are the nuclear option....not a place I want to be.
Overnight Asian mkts were essentially lower.....no significant news to report - other than more speculation about what China has up their sleeve and what the FED has up her sleeve.....Japan -1.23%, Hong Kong +0.55%, China -0.63% and ASX -0.08%.
European mkts are all higher - breathing what feels like is a sigh of relief.....German factory orders the only notable report....and they weren't good....falling by 0.7% vs. the estimate of -0.5%....FTSE +0.48%, CAC 40 + -0.48%, DAX -0.06%, EUROSTOXX +0.38%, SPAIN +1.28% AND ITALY +0.64%.
US futures are now UP 2 pts....as the clock ticks on the 8:30 bombshell......What will the gov't tell us today about Non Farm Payrolls and the jobs created? Will it 'blow the doors off the bus?' Expectations are for +200k jobs, but in reality – the range is +150/+220. Anything less than 150k will only add to the angst of a slowing economy – remember what Challenger Gray and Christmas told us yesterday morning…..We announced lay OFFS of 75k people last month – so an NFP that ‘blows the doors off the bus’ would hardly be believable at all….
(but hey - has no one ever MASSAGED the numbers?) I can't wait.....but watch the action in the moments before the official release.....as it is entirely possible that someone has the edge......
After the bell last night we heard once again from KC Fed President Mester (Hawk)....but it appears that her comments are being discounted as the focus turns to Janet Yellen's - Humphrey Hawkins Testimony next week.
For this you need: Chicken parts – on the bone - thighs and breasts; skin on; Olive oil, Garlic – Fresh rosemary, Fresh sage, Fresh thyme, Bay Leaves, onion, Olives – green and/or black, Kosher salt & fresh ground pepper, Balsamic vinegar.
Pre heat oven to 400 degrees.
Soak & clean the chicken. Pat dry on paper towels.
Peel garlic and place in the pan - Add rosemary, thyme, sage & bay leaves and 2 cut up large onions, mix it up - season with S&P and spread it around the pan.
Next - season the chicken pieces with S&P and arrange in a roasting pan. Drizzle with olive oil, massaging each piece.
Roast the chicken in the middle of a 400 degree oven for about 45 minutes. Check the pan every 15 minutes or so and remove any excess liquid with a turkey baster. The object is for the chicken to roast, not braise. - Save the juice on the side in case someone wants some with their meal.
After 45 minutes, brush the chicken with good quality balsamic vinegar, add the olives, turn the heat up to 450 degrees, and roast for 15 minutes more.
You can serve this with roasted vegetables, roasted potatoes or rice. Always include a tossed green salad.
Buon Appetito.
Challenger Job Cuts – soar! US companies announced 75k job CUTS last month – that is up 200% over December and up 42% from one year ago! Init jobless claims higher, continuing claims higher, and then the retailers HIT.....
Kohl’s (KSS) and Ralph Lauren (RL) shocked the mkts with very disappointing earnings and sales figures for December and guidance for the new year…. This is where the concern about the consumer hits you right between the eyeballs....Remember all the chatter last fall - How great the shopping season was going to be, how the consumer was flush with cash, how the tide had turned and retailers were going to be the beneficiaries??? Does any of that ring a bell?
Futures did a complete 180 and fell out bed……the pressure was mounting – the storm clouds were building….….
RL & KSS and every other retailer was for sale – The DMM (Designated Market Maker) in RL struggled to find bids as the sellers poured in……Sell 20k , then 50k, then 100k – buyers were not be found anywhere in line...…as the sellers get anxious – the buyers recoiled even more…..The stock was indicated down $10, then $12 then $15 as brokers worked to gather interest……then at 9:29:55 the bell began to ring – Ding, ding, ding, ding, ding…… and we're OFF......Stocks began to open, the indices began to reflect the concern as the pressure mounted.....volume surges as the action gets under way......
The stock (RL) opened at $103.27 (down $12) and then proceeded to trade down another $15 (to $88) in the mins after as SELLERS (mostly those liquidity providers) came out of the woodwork.....hitting any bid available........The issue now?: The intuitional buyers weren't standing there willing to get run over - so with the guidance of their brokers they moved lower until the selling subsided and the stock found support……The volume exploded in this issue as we traded some 10.8 mil shares vs. the average daily volume of 2.2 mil shares. What had happened? Nothing really – it was just another day in an anxious, nervous, automated, volatile mkt…. where investors are convinced that someone is playing “I got a secret!”.
And then - CNBC runs with the story – The one everyone 'isn’t talking about' BUT should be....…Wink, Wink! The one that Ron Insana forced us to address on Tuesday....
“Negative Rates in the US? Here’s Why It Could Happen”
(http://www.cnbc.com/2016/02/04/negative-rates-in-us-heres-why-it-could-happen.html)
In this expose by Jeff Cox – he makes it very clear that the next move for US interest rates may be down and not up…..and he goes so far to say that down means going to the dark side - Yes folks - get ready for negative rates… and the reasons are many as WE all know - but apparently not to many in DC know - so let me highlight just a few:
Building recession fears in the US, unstable financial mkts, currency devaluations by some ‘emerging mkt’ countries, weakening global macro data, collapsing oil and commodity prices and pressure from other central banks that have already moved towards negative rates.
Jeff points out that while it may seem highly unlikely – “Snow White and the 10 dwarfs’ would have to consider the possibility of going to the dark side “should financial conditions tighten and threats to economic growth increase.”
BankAmerica rates strategist – Mark Cabana echoes that sentiment saying: "While not our baseline scenario, if the U.S. economy were to sufficiently weaken we believe the Fed could consider negative rates as a means to ease policy,"
So I must ask – How could we go from being so strong 6 weeks ago – as indicated by the FED in December, when they raised rates citing 'explosive growth'....which was then echoed by the President in January – to being so weak so quickly? I mean just last week – Vice Chair Stanley Fischer told us that “4 more rates hikes were in the ballpark for 2016” – and Wednesday KC Pres Ester George – backed him up! So what gives? Did he mean that ‘4 more rate DECREASES were in the ballpark for 2016?’ I mean Fischer is 72 yrs old – maybe he was just confused…..I mean we all know that Greenspan (now 90) was most definitely confused/borderline stunata (Sicilian for nuts) during his tenure at the FED – because this whole mess – I mean THIS WHOLE MESS started under his watch….(but that’s a story for another day). So - we must consider the possibility that Cousin Stanley was confused…..
In the end – the broad mkt fell 15 pts to 1900, then rallied 27 pts to 1927 only to fail again and then rally again into the close to end the day at 1915 or up 2.92. Oil also had a bit of nutty day…..trading in a 5% range – initially +3% then falling 1.7% by days’ end. And all of this makes sense – remember – the mkt has suffered some real damage of late – trading well below any support levels as it thrashes around trying to build a base amid deteriorating macro reports...... Add in all the global geo-political issues and you can see why the mkt is struggling.
The Fed is trying desperately to stay calm and hold the mkt steady…..and to do this – they MUST keep crude oil prices from moving lower so how do they do that? Well given the relationship between oil prices and the US dollar, the Fed has been very actively JAWBONING (see yesterday's note) the dollar lower by floating the idea of negative US interest rates. By doing so – they manage to create some demand for gold – which has rallied nicely – since the December lows. The China Yuan devaluation and the threat of more to come coupled with the Japanese move to the dark side – (negative rates) – saw Gold react beautifully as many investors embrace it as the safest haven of all.
As of yesterday – it has now managed to pierce all 3 resistance levels – the 50, 100 and 200 day moving averages – which now sets it up for a run….Look for it to test the October highs of $1185/oz and if we blow thru that - then a run to $1250 is clearly a possibility.
Back to the FED – Who is kidding who? Rates are not going any higher at all….not now, not in March and not in the summer….at most – the FED will return us to a zero rate policy – because in the end – negative rates suggest desperation, no matter how you slice it. You CAN'T possibly argue that negative rates are just another ‘tool in the toolbox' ....They are the nuclear option....not a place I want to be.
Overnight Asian mkts were essentially lower.....no significant news to report - other than more speculation about what China has up their sleeve and what the FED has up her sleeve.....Japan -1.23%, Hong Kong +0.55%, China -0.63% and ASX -0.08%.
European mkts are all higher - breathing what feels like is a sigh of relief.....German factory orders the only notable report....and they weren't good....falling by 0.7% vs. the estimate of -0.5%....FTSE +0.48%, CAC 40 + -0.48%, DAX -0.06%, EUROSTOXX +0.38%, SPAIN +1.28% AND ITALY +0.64%.
US futures are now UP 2 pts....as the clock ticks on the 8:30 bombshell......What will the gov't tell us today about Non Farm Payrolls and the jobs created? Will it 'blow the doors off the bus?' Expectations are for +200k jobs, but in reality – the range is +150/+220. Anything less than 150k will only add to the angst of a slowing economy – remember what Challenger Gray and Christmas told us yesterday morning…..We announced lay OFFS of 75k people last month – so an NFP that ‘blows the doors off the bus’ would hardly be believable at all….
(but hey - has no one ever MASSAGED the numbers?) I can't wait.....but watch the action in the moments before the official release.....as it is entirely possible that someone has the edge......
After the bell last night we heard once again from KC Fed President Mester (Hawk)....but it appears that her comments are being discounted as the focus turns to Janet Yellen's - Humphrey Hawkins Testimony next week.
Mahogany Chicken
The mahogany color comes from the balsamic vinegar that you use to baste the chicken pieces. It is a great dish and you can make it for this week ends Super Bowl Party. Simple to do and presents beautifully on the platter.For this you need: Chicken parts – on the bone - thighs and breasts; skin on; Olive oil, Garlic – Fresh rosemary, Fresh sage, Fresh thyme, Bay Leaves, onion, Olives – green and/or black, Kosher salt & fresh ground pepper, Balsamic vinegar.
Pre heat oven to 400 degrees.
Soak & clean the chicken. Pat dry on paper towels.
Peel garlic and place in the pan - Add rosemary, thyme, sage & bay leaves and 2 cut up large onions, mix it up - season with S&P and spread it around the pan.
Next - season the chicken pieces with S&P and arrange in a roasting pan. Drizzle with olive oil, massaging each piece.
Roast the chicken in the middle of a 400 degree oven for about 45 minutes. Check the pan every 15 minutes or so and remove any excess liquid with a turkey baster. The object is for the chicken to roast, not braise. - Save the juice on the side in case someone wants some with their meal.
After 45 minutes, brush the chicken with good quality balsamic vinegar, add the olives, turn the heat up to 450 degrees, and roast for 15 minutes more.
You can serve this with roasted vegetables, roasted potatoes or rice. Always include a tossed green salad.
Buon Appetito.
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