Markets brace for volatility as Congress races against clock on big bill

• The clock ticks as we wait for the vote on the bill.

• Stocks under pressure, Gold up, Bonds down, Oil up.

• Tensions building in the Mid-East as Israel considers taking out Iranian Nuclear sites.

• Try the Spaghetti all Poveriello.

**I am joining Stuart Varney at 9 am this morning on Fox Business – join us, won’t you? **

Tick Tock, Tick Tock, you can hear the clock tick – as we move thru the week – awaiting the BIG vote on the BIG Bill – and that will be the next catalyst for markets….even more so than any eco data as we move into the long Memorial Day Holiday weekend. The word is that our elected officials pulled an ‘all nighter’ as they try to iron out the details (as if we are supposed to be impressed) …. Speaker Mikey Johnson says that no one is going home until this gets done. Oh boy…..this is going to be interesting…. No one wants to be in DC over the long weekend.

While the clock ticks, stocks took a breather – which is not a surprise – considering the explosive move - $8.6 trillion in added value off the recent lows last week…. - At the end of the day we saw the Dow lose 114 pts, the S&P down 23 pts, the Nasdaq lost 72 pts, the Russell added 1 pts, the Transports gave back 155 pts, the Equal Weighed S&P lost 23 while the Mag 7 gave back 160 pts.

Bonds continue to come under pressure as investors focus on the ongoing deficit spending – and that sent the TLT down 0.7% and the TLH down 0.5% - leaving both those bond ETF’s negative on the year – down 2.1% and down 0.9% respectively. The 10-yr yield closed at 4.49% last night, but this morning it is up 4 bps at 4.45%, the 2-yr yield closed at 3.97% and this morning it is up 2 bps at 3.99% while the 30-yr yield closed at 4.97% but as you guessed is up 5 bps at 5.02% this morning. All this tell us is that investors are demanding higher yields on the money they lend to the gov’t and at some point those higher yields will present a problem for stocks – the question is – what is that yield? Now today also brings a 20 yr $16 billion bond auction and the outlook is ‘cautious’ – last night the 20 yr yield closed at 4.99% and this morning it appears to yielding 5.04% - which means that yields must rise (prices must fall) to create the demand….Let’ see how it goes later today.

Now this morning – CNN is reporting that Israel is making preparations to potentially strike Iranian nuclear facilities. The report cites multiple U.S. officials who indicate that Israel’s preparations include moving air munitions and completing air exercises, suggesting a possible imminent strike. One source suggests that the likelihood of a strike has increased significantly since the US negotiations do not include a total removal of their uranium stockpile.

This headline is causing both gold and oil to surge….

Gold rose by $60 or 1.8% yesterday….and is up another $30 or 0.9% this morning…. trading back at $3,342…..The jump – in my opinion – is all about the geo-political uncertainty. It appears that we are in the $3220/$3510 trading range for now…. The ongoing uncertainty only gives investors a reason to buy into the ‘safety trade’.

In addition – I think the markets (stocks, bonds and gold) are taking into consideration the latest comments by JPM CEO Jamie Dimon – which are very cautious….At JPMorgan’s investor day yesterday, Dimon reiterated his concerns about persistent inflationary pressures and the potential for stagflation in the U.S. economy, saying that the risk of stagflation—characterized by stagnant economic growth, high unemployment, and persistent inflation—is higher than many anticipate. He went onto criticize (what he thinks is) market complacency, noting that despite a temporary reduction in U.S.-China tariffs, inflationary risks persist due to factors like ongoing deficits and geopolitical issues. He expressed skepticism about central banks' ability to manage these challenges, saying,

“You all think [central banks] can manage all this. I don’t.” (Ok then…)

Now considering Dimon is one of the most loved bank CEO’s – Investors do give his commentary some weight…..I would say, he isn’t saying anything really new – His concerns are and have been well known – but again – comments like that, from a CEO like him, at a time like this only add to the level of angst – and we know what happens when the level of angst builds….Some investors, traders and algo’s tend to ‘shoot first and ask questions later’….But remember what Uncle Warren says – ‘be greedy when others are fearful’ – which only means don’t be afraid to buy ‘at the right price’!

Overnight – oil which has been kissing trendline resistance ($63.10) for a week now – pierced it and traded up to $64.20 on worries over more geo-political uncertainty – created by the pushback from Iran concerning a nuclear deal….….Recall, that the Ayatollah said that Iran will never stop enriching uranium, no matter what! And we all know that that is not really an option for the rest of the world….And so we will continue to put sanctions on their oil – and that will take supply off the market and that is sending prices higher….Now recall, if they make a deal (highly unlikely) then sanctions come off and more supply hits the markets and prices will fall…..

At 7 am – oil has retreated below the trendline and is trading at $62.80 – let’s see how it trades and closes today….a close above $63.10 will put it in a new trading range….$63/$66 – a close below will keep in the $60/$63 range.

US Futures are all lower…..Dow futures down 430 pts, S&P’s down 46 pts, Nasdaq down 180 pts and the Russell is down 23 pts. Again – remember what I have been saying – the volatility is not over by any stretch…. the VIX is up 5.5% this morning – bumping its head on the trendline…. a push thru will see the VIX spike higher, and stocks will come under pressure. The S&P closed at 5940 last night…. trendline support is down at 5770 or 2.8% lower from here….. a level I think needs to be tested…. but remember – we did create a gap in the chart at 5690 – so if we fail to hold at 5770 – then I suspect we will trade down to fill that gap. And if tensions in the mid-east heat up – and gold and oil trade up, expect stocks to trade off.

In the next two days – we will get the VOTE by House, the Manufacturing and Services PMI’s, Existing Home Sales, and the Kansas City Fed Manufacturing Survey. Friday brings us New Home Sales, Kansas City Fed Services, and building permits and then it is the long Memorial Day weekend.

European markets are all lower…. UK inflation printed HIGHER than the expected +3.5% and that isn’t helping the mood – then add in the mid-east tension and you get lower stock prices. The Group – (Eurozone) all down between 0.25%-0.7%.

Spaghetti all Poveriello – Poor man’s pasta!

This is a simple dish and represents difficult times (hmmmm)…. You don’t need much to make this dish and you will not find this in any restaurant…

5 eggs, ½ lb. of spaghetti, butter, s&p, fresh grated Pecorino cheese and a ladle of the pasta water (tears of the Gods)..

Start by bringing a pot of salted water to a rolling boil – drop in the pasta and cook until al dente – 8 mins…..

While that is happening – grab a sauté pan – add in a dollop of butter and melt. Now crack 4 eggs and fry them – do not flip them. Leave them sunny side up. Season with s&p.

When the pasta is done – add it directly into the sauté pan – on top of the eggs – add in a ladle of the ‘tears’ .

Turn off the heat and add 2 handfuls of the Pecorino Romano Cheese. Stir to mix well – making sure you break the eggs to create a creamy, cheesy consistency.

When serving – you can top if off with another fried ‘sunny side up’ egg on top.

Simple…. The whole thing might cost you $4…..Try it, you won’t be disappointed. It’s like carbonara without bacon! LOL.