The Fed is waiting for something to come out of DC

I am going on vacation so today's note will be the last note until the week of Aug 7th.  It has been my pleasure to entertain, educate and feed you.  See you when I return...

Ok...here is the classic - Peter, Paul & Mary 1970's hit....who remembers it? 

"All my bags are packed and I'm ready to go, I'm standin' here outside your door, I hate to wake you up to say goodbye, But the dawn is breaking; it's early morning, The taxi's waiting, he's blowing his horn.  I'm ready I'm so lonesome I could die. So kiss me and smile for me,  Tell me that you'll wait for me, Hold me like you'll never let me go, 'Cause I'm leaving on a jet plane, I don't know when I'll be back again, Oh babe I hate to go..."

 

And that jet plane was made by Boeing (BA)....and yesterday - BA stunned every analyst on the street... reporting earnings of $2.55/sh vs. the expected $2.29 sh.....then they raised guidance and generated twice the amount of free cash flow than what the street analysts were expecting.....which then allowed them to increase their stock buyback program (to $10 bil this year) while returning ALL of its free cash flow to shareholders (think buybacks and dividends)  and PRE-PAY pension commitments that are due over the next 4 yrs!  That's right - they are PRE-PAYING not playing catch up......and this caused investors to go wild hitting the BUY button on their computers sending the stock up 10% to end the day at $233.45 share - adding 144 pts to the DOW .....making it the largest component of the Dow - knocking our friends at GS off the mantle....And this my friends was by far the most exciting earnings report I have seen in years......but it does come with a cost........thousands of job cuts and more 'efficient' factories......think robotics and cutting edge technology.....

Everything else after that was no big deal...yes we got more good reports, better than expected etc...but none stunned the mkts like the BA report.......Now the broader mkt did move a bit higher early on, and like I said - it ran right into the highs at 2480 and stalled.....sellers defending that position......as they awaited the FED news.....

As expected - the FED held steady on rates and continued to tell us that the balance sheet is about to shrink relatively soon.......but shrink is vague.....shrink by how much?  How fast?  Oh....all questions that do not have any answers just yet...... Remember, a pause in raising rates is a bullish sign from the Fed and while they intend on working the balance sheet side of the equation - they will NOT pull the rug out......so even a small attempt IS an attempt - so she has not told a lie......she is just not committing to anything specific......and this will only extend the run.....as we've seen......

My sense is that the Fed is waiting for something to come out of DC - some reform or fiscal stimulus before she engineers any kind of correction by raising rates again or committing  to anything really specific in terms of the balance sheet - And Why you ask??    So the Dems can point to the WH policy as the mkt drops.... So think Obamacare Repeal / Replace, or a debt ceiling argument, or massive Tax Reform legislation or  Infrastructure Spending......etc.... It seems to me that the Fed is staying the course - holding rates steady and artificially low until DC actually does something that can be construed as a GOP induced recession/correction.... (Think conspiracy theory....) ...but in fact - the correction will be born by exactly the opposite.....the lack of reform or fiscal stimulus will be the catalyst for a mkt correction...throw in rising rates and BOOM......

Now yesterday - Wharton's Jeremy Siegel took to the airwaves screaming about another 10% surge in the mkts after we get that massive tax reform that he sees before the ball drops in Times Square.......Well - considering that congress can't come together on health care - I think it is a heavy lift to think that they can take 75k pages of a complex federal tax code and reform it in just 4 months.....I say 4 months because congress is on vacation starting next week!  Nothing gets done in August.......Who is kidding who? 

And Sean Spicer has been seen all over Manhattan - coming in and out of the ABC, CBS, FOX and NBC studios as the media outlets wage a war over trying to secure Sean as the next 'big thing' in the mainstream media.......Oh boy....just wait until Melissa McCarthy gets a hold of this on SNL......

US futures are up another 3 pts - which would put us right at the highs of 2480 as the sun rises.....Where I think we will still hit resistance.......

By now you heard that FB also blew it out of the water after the bell last night....traders initially sold the stock off  $5 pts in the mins after,  before they realized that they should have been hitting the BUY button and not the SELL button.....seconds later - they took the stock up $10 pts.  This morning  it is trading  at $172.50 in the pre-mkt...

Eco data today includes Initial Jobless Claims of 240k, Cont Claims of 1.96 mil, Durable Goods of 3.7%, Cap Goods Orders Non Defense Ex Air of +0.3% and Cap Goods Shipped Non Defense Ex Air of +0.3%.  Retail Inventories and the Kansas City Fed Manf Report - exp of 11. 

Earnings before the bell include MCK, COP, CLEG, MGM, TPX, JCI, BMY, after the bell look for AMZN, INTC, WDC, EXPE, & SBUX

 

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Simple Steamed Lobster w Drawn Butter 

Going to the beach so it's time for lobster.....this one is the simplest of all lobster dishes....just steamed/boiled with drawn butter outside at the picnic table with the ocean just behind you.....

For you this you need a 1 1/2 lb lobster per person, plenty of butter and corn on the cob.

Choose a large pot that will not crowd the lobsters.....Bring the pot of salted water to a rolling boil - drop the lobsters in the water headfirst - once the water starts to boil again count 8 mins for the first pound and then about 2 mins for every pound after.....In the meantime - melt the butter and place in bowls to be shared.  Once the lobsters are done - remove and present on a large platter and allow your guests to help themselves. Have the nut crackers on the table to help crack open the claws to get the meat out.  Separate the tail from the body and remove the fins...using your thumb - push the tail meat out and enjoy.....

  
Buon Appetito.