CPI cools, Joey says we have zero inflation

• CPI cools – Joey tells us that we have 0 inflation.

• Stocks smash thru the 4200-century mark like a hot knife thru butta.

• Talk of a FED pivot is all the rage on REDDIT.

• Evans and Kashkari say – ‘Not so fast Big Boy’.

• Oil rallies on demand guidance - $100.80 is resistance.

• Try the Stuffed Chicken Breast.

Well! It was RISK ON! And the NASDAQ is in a new BULL market!  Now you say – WHAT??? The Nasdaq is down 18% on the year….and you would be correct…. but a bull market has to start somewhere and here it is.

The ‘tried and true definition’, the one that we’ve been using since the introduction of time -  is that a bull market is a 20% move off the lows – the June 16th low was 10,565 ……a 20% move would mean that the Nasdaq would have to trade at 12,678 – on Tuesday it closed at 12,494 and yesterday – after the CPI report  – the algo’s went hyperbolic and the Nasdaq blew right thru 12,678 to open at 12,793 only to close at 12,854 and that my friends represents a 21.5% move off the low!   Don’t you just love math! 

Then Joey – took to the airwaves and proudly told the nation that the economy had 0% inflation last month, 0. (To which my good friend Norm would say – when you put 0 on top of 0 you get an 8, but no inflation for you!) You see – it’s all about the definition….and the one YOU choose to use, the one that fits YOUR narrative. (Does recession strike a chord with anyone?).

So, the NVDA, MU, INTC, and any of the other 450 companies that gave cautious forward guidance warning of rising prices and a coming slow down  are also all incorrect…..……yesterday’s CPI changed the whole story (apparently)….the report showed that core CPI m/m rose by 0%, Ex food and energy of +0.3%.....Y/y it rose by 8.5% (exp 8.7%) and Ex food and energy it rose by 5.9% (exp of 6.1%).   Real hourly earnings y/y rose by 3% and weekly earnings y/y rose by 3.6%.  Ok – here’s the deal – energy came down – Great…but wages, housing and food continue to advance…and those prices are much stickier….and for anyone who says food will respond with energy – how come food is still up while energy has been in decline for 6 weeks now?    There is a small itty bitty disconnect somewhere- but let’s go with yesterday’s narrative……In the end – CPI is still running at 8.5% - a 40 yr. high…. Period. 

And we haven’t even started spending the $280 billion for the chips bill ($67 billion of which is for Climate) or the $400 billion for the ‘Inflation Reduction Bill’ (aka – Schumer/Manchin Tax and Stagflation Bill) …which hasn’t been fully passed yet but is sure to be so any day now.  – that spending sure to add to inflationary pressures even though we are assured it won’t do anything to exacerbate it.  And think of all of those new IRS agents that are about to be hired….and all of the money they are expected to recoup at the expense of anyone who has a job making between $50,000 - $400,000.  And that is before the $300 billion in new taxes buried within the Schumer/Manchin Tax and Stagflation Bill hits. 

Just for clarification – WH Press Secretary KJP (Karine Jean-Pierre) assured us that the IRS commissioner – Charlie Rettig is drawing a line in the sand – No one making less than $400k will be audited, absolutely not! She said – ‘I know, because he told me!’.  

Portfolio managers and traders – who had gone to cash were now all scrambling to ‘get back in’ for fear of missing out……– buying anything they could get their hands on…..all while the algo’s automatically withdrew inline supply – leaving a void in prices leaving buyers with no choice but pay up…..exactly what they do when the news is negative…they cancel inline demand leaving a void in bids leaving the sellers no choice but to hit lower bids….and so it is….by the end of the day the Dow added 535 pts or 1.6%, the S&P’s up 88 pts or 2.1%, the Nasdaq gained 360 pts or 2.9%, the Russell up 56 pts or 2.9% and the Transports added 450 pts or 3%. 

The idea is that the ‘cooler’ CPI report will now give cover to the FED to change their minds……. Will it now be 50 bps in September or could it be 25 bps! The REDDIT guys telling us that 75 bps is apparently now OFF the table after putting it back ON the table last Friday after the very strong jobs report….It’s exhausting….Look – a lower growth rate in prices (inflation) does not mean that inflation is suddenly gone away…..NOR does it mean that the FED should turn dovish at all….The fact is that inflation is still running at 8.5% so the FED needs to be paying attention.  In my opinion – the FED needs to hike by 75 bps if for no other reason than to show that they are the ones ‘in charge’ vs. letting traders (who love throwing a temper tantrum) drive the bus.  You see, they can hike by 75 bps in September and THEN go 50 or maybe even 25…. but they should take fed funds up faster so that when we crash land, they have room to cut.

Today at 8:30 we’ll get PPI (Producer Price Index) and that is expected to show that prices at the producer level remain elevated by 10.5%.....now that is also a bit cooler than last month – so we hope that those cooler prices make their way thru to CPI next month as well….and then maybe you start to get a trend…in any event though, I don’t think it gives you the ‘all clear’ signal just yet.  Remember – all of those ‘cautious’ forward guidance’s…. remember how the C-suite is trying to manage what THEY said was going to be ‘a challenging time’…. how they are laying off workers or at least slowing down the hiring process.   Analysts have yet to slash and burn 3rd and 4th qtr. estimates……and the fall is typically a ‘challenging time’ for the markets anyway.  So, all I’m saying is – don’t go out and bet the ranch just yet…. keep some powder dry…Capisce?

Even Chicago Fed President Chucky Evans agrees – telling us that the ‘central bank will probably continue raising rates into next year to bring down unacceptably high inflation’ and Minneapolis’s Neely Kashkari – is now playing for the other team – going from Top Dove to Top Hawk saying that ‘we are far from victory…. he see’s SHARP rate hikes ahead”!   Let’s see what San Fran’s Mary Daly has to say later today…. let’s see which side of the fence she is on now.

And as you would expect – everything was UP yesterday – except those contra ETF’s which were down…. SPXS – 6%, SARK – 7.7%, DOG -1.6%, SH – 2% and PSQ -2.7%.

Industrials – XLI, Tech- XLK, Financials – XLF, Consumer Discretionary – XLY, Communications – XLC, Basic Materials – XLB were all up better than 2%, Healthcare – XLV and Real Estate – XLRE were up 1.5% while Utilities – XLU, Energy – XLE and Consumer Staples – XLP were up less than 1%.  Airlines – JETS +2.3% Disruptive Tech – ARKK +7%, SPXL +6%, Metals and Miners – XME +6%, Cyber Security – CIBR + 4.5%, AI – BOTZ + 4.5%, the Semi-conductors – were up 4.5%, Coal stocks up 4% and the list goes on.   

Treasuries are still upside down….no change there and the tried-and-true definition says that a recession is coming…. (If not already here…).

Oil ended the day up $1.30/barrel or +1.41% to trade at $91.90.  Yesterday’s news helping to push prices up and refiners now say that they are expecting strong energy consumption for the second half of the year.  Demand for gas remains robust.  Next stop $100.80 which is resistance. 
Next up – the dollar - it lost ground yesterday – falling over 1% as the idea that inflation is under control sending the dollar lower– breaking right thru trendline support at $105.55 and that set the algos ablaze.  (Think a more dovish fed). 

On the other hand, though the falling dollar sent the commodities complex higher – the BCOM (Bloomberg commodity index) rose by 1.7% or $2 to end the day at $120.71 now up 9% off of the July low. 

Gold had a wild day – trading up to $1825/oz in the morning only to end the day at $1808.  This morning gold is off a bit but sitting right on the trendline….at $1806…. If it’s gonna go higher it needs to hold on tight to this trendline. Should it fail (which I don’t think it will) we will test the $1775 level to see if there is any real support.     

US Futures are up this morning…. Dow futures +120 pts, the S&P’s +10, the Nasdaq +20 and the Russell is +6.  DIS posted better than expected results after the bell and made history by posting strong than expected subscriber numbers! Traders took DIS up 8% in the after-hours session and this morning it is quoted $121/$122 up $10 from last nights close. 

Today is all about the PPI report….to get a sense of what is happening at the producer level.  Now the latest moves suggest that the FED will pivot next month…..and that is still unclear…..It would be a mistake in my opinion – For those of us who remember  – they prematurely pivoted back in 1981 when they thought inflation was cooling only to have to pivot again and take rates higher when inflation did NOT cool – and that was not good – the country went deeper into recession as the FED pushed rates to 21%. (Inflation was 13.9%).

European markets are slightly weaker – almost flat as investors there digest the news and wait for more today. There is no macro-economic news to drive markets, so they continue to focus on earnings.     

The S&P rallied up and thru the 4200-century mark closing at 4,210 – right at the highs.  We remain in the 4115 / 4335 trading range…. smack in the middle of both trendlines…. Wait for the PPI and listen to what Mary Daly has to say.  Let see if she supports Chucky and Neely or if she tells us something different.  Remember – stick to the plan – keep you eye on the ball.    

Stuffed chicken breast

Stuffed chicken is so versatile - as you can stuff it and roll it with anything you like, and it always comes out great.  Today - try this one.

For this you will need:  8 Thin sliced Chicken Cutlets, 2 Cups Sautéed Spinach, Grated Pecorino Romano or Parmegiana Cheese, Thinly Sliced Pancetta, S & P, Olive Oil, Garlic, Peeled & sliced, Chicken Broth, Dry White Wine, Butter & Flour.

Sauté your fresh spinach in a bit of garlic and olive oil – seasoned lightly with s&p.

Lay the pounded cutlets out flat on wax paper and lightly season with salt and pepper.  Next divide the spinach amongst the eight cutlets, careful not to overstuff - leaving a little space along the sides. Now sprinkle a tblspn of the cheese on top of the spinach on each of the cutlets.

Starting at one end, tightly roll the cutlets – now wrap the pancetta around the chicken pinch it tight a toothpick. If it is a big cutlet, you may need two pieces of Pancetta.  (You can also choose to use cooking string to tie it up – but the toothpicks are easier.).

Now - In a large, heavy bottom skillet, add some olive oil over med high heat and add the sliced garlic.  Sauté for about 3 mins – now add the chicken and brown on all sides, about 5 – 8 minutes.

Next - Add equal parts of chicken broth and wine and bring to a boil.  (Usually, a cup of each will do for 8 cutlets).
Reduce the heat to a simmer, partly cover the skillet and cook for 15 minutes.
Now remove the chicken and bring the remaining wine mixture to a boil.

Season with s&p, - - now add dollop of butter and maybe a tsp of flour and allow to thicken just a bit. When thickened – add the chicken back to the sauce and coat well.  To serve - Place the chicken on a platter and pour the sauce on top.  Make sure to have a mixed green salad to accompany.  If you want – you can add a side of garlic and herb flavored rice.  No need for a veggie – it’s in the cutlet.