**I am away on business for the next 3 days…so next note will be on Monday – June 26th**
The mkt did NOT waffle yesterday at all……The Dow +144, S&P + 20, Nasdaq +87 and Russell all surged higher – led by Tech, Bio-Tech, and Banks – no matter that the geo-political tensions worsen……. in a game of ‘Cat and Mouse’…….
(Cat and Mouse means a ‘constant pursuit, a near capture and then repeated escapes…..The ‘cat’ never able to catch the ‘mouse’ – implying the game never ends.)
There was nothing yesterday at all…no Eco data reports at home or abroad that would have proved to be the catalyst for such a move – yet there was plenty of turmoil around the globe – More terrorism in London, a US F18 Super Hornet takes down a Syrian Jet over the skies of Syria causing the Russians to warn us to back off, the continued fight in the Mid-East pitting the Saudi’s, the Egyptians, The UAE & Bahrain against Qatar and the Saudi navy intercepting an attempt by the Iranians to attach an offshore oilfield in the Arabian gulf. These events all pushed to the back burner as ‘Donny and Jared’ (sounds like Sonny and Cher) entertained an ‘A’ list of technology CEO’s at the WH as the discussion turned to how to modernize, stabilize, secure and create efficiency in the US gov’t.
Oh boy – just think about what those contracts will look like – talk about gov’t waste! These tech firms will CLEAN UP – and that is exactly the reason that the names the mkt hated last week – have become the darlings (once again) of this week…. Tech stocks posting their biggest one day gain of the year – leaving it the best performing group of the day! Remember – after this group took a beating last week – the sense is that investors were buying these stocks ‘at a discount’ and BOOM! Off to the races.
The turmoil abroad led global central banks to come to the rescue as they try to compensate for the increasing set of risks that are building......and here at home – those risks include an economy that is barely growing – this was made clear by the NY FED – when they released their estimate of 2nd Qtr GDP of just 1.5% - this is a number that keeps declining with each subsequent release……(that’s an issue – just fyi – does that mean then that the FED will not or cannot continue down the path of higher rates? Is that why investor mood has seemingly changed?)
Billy Dudley – NY FED Pres….came out a bit more dovish yesterday....saying that the FED will continue down this road of ‘gradually increasing’ rates….he also as expected spoke optimistically about the US economy and the path of inflation – this sent the yields on the 10 yr treasury higher as investors sold bonds and piled back into technology…..Now Billy emphasized that the FED would be ‘gradual’ in their attempt to normalize – none of this cowboy style, take no prisoners approach….and this sent the message (to some) that maybe, just maybe – we have seen the last of any rate increase in 2017….Gradual can mean so much.....
Toss in the fact that the French citizens overwhelmingly gave ‘Manny’ his much-needed majority in Parliament giving investors something to cheer about! The victory for him secures his mandate to implement policies and drive growth in the Eurozone’s second largest economy…. Vince Juvyns – Global Strategist for JPMorgan had this say:
“There is a new political wind blowing through Europe. Macron can now more or less freely implement his program, he won’t have to compromise as much as he did when he was the economy minister.”
Ok – that is all well and good – but I do not think that the mkt can continue to ignore the warning signs of a weakening economy, rising interest rates, a flattening the yield curve, plunging commodity prices. Are the bond and commodity mkts flashing a warning signal? And while they have been flashing that signal - NO ONE seems to be that concerned about it. Investors - keep piling on.......Take a look at the Commodity Index - CRY - it is down 12% since the beginning of the year...- it has broken all supports and is back at prices last seen in April 2016.... Further weakness in commodity prices is not a sign of strength at all....
Earnings start in a couple of weeks and the 2nd Qtr are projected to grow at 6.5% - 50% less than the 1st Qtr – and the latest GDP figure as noted is not going to 'blow the doors off the bus' anytime soon....so as we move into the summer - take care to watch for signs....and while no one wants to be the first to run for the exits - once they do - the results could prove to be volatile...and while the central bank can pump up the weighted companies in the indexes – in Tech think GOOG. AAPL, AMZN, FB and MSFT – in the banks think GS, JPM - to create the illusion of ‘excitement’ – notice how the others continue to struggle.
This morning - we see that Pauly Ryan and Stevie Mnuchin are confident that we will get MASSIVE TAX REFORM THIS YEAR....I say - CHALLENGE. It's not that I don't want it - I just do not see how we can get MASSIVE tax reform in 6 months - when Congress is on 'summer break' for the next 3 months....NOT HAPPENING.....
No real eco reports today that will move the mkts - the conversation will focus on Ryan's speech at 10 am and the two FED speakers we have today...Boston's Rosengren at 8:15 am, and Dallas's Kaplan at 3 pm. Will they echo the comments of NY's Dudley yesterday?
Futures are flat this morning as yesterday's move to all time highs is being digested by investors and traders. Overseas mkts all enjoy another up day on the back of yesterday's US action.
OIL is DOWN 86 cts barrel at $43.34 - We have now broken $44 barrel and this could put us on the path of a 3 handle for oil in the next couple of sessions.....Just sayin......
Take good care - Have a great week.
Take Good Care
This morning I am featuring a recipe that came to me from a dedicated MT reader – It is a NY Times recent feature and is delicious…and in her words “We could not stop eating this!”
For this you need: Salt, ¼ cup extra virgin olive oil, ½ cup bread crumbs, ideally made from stale bread, 1 onion, chopped, Freshly ground black pepper, 1 pound long pasta, like perciatelli, 1 teaspoon grated lemon zest, 2 tablespoons drained capers, 2 cans sardines packed in extra virgin olive oil (about 1/2 pound), ½ cup chopped fresh parsley, plus more for garnish
Bring a pot of water to a boil and salt it. Put half the oil (2 tablespoons) in a medium skillet over medium heat. When it’s hot, add the bread crumbs and cook, stirring frequently, until golden and fragrant, less than 5 minutes, and then remove. Add the remaining oil and the onion to the pan, sprinkle with salt and pepper, and cook, stirring occasionally, until softened, about 5 minutes.
Meanwhile, add the pasta to the boiling water and cook until just tender; drain, reserving some of the cooking liquid. Turn the heat under the onions to medium-high and add the lemon zest, capers and sardines; cook, stirring occasionally, until just heated through, about 2 minutes.
Add the pasta to the sardine mixture and toss well to combine. Add the parsley, most of the bread crumbs and some reserved water, if necessary, to moisten. Taste and adjust seasoning, garnishing with more parsley and bread crumbs.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O’Neil Securities, Incorporated or its affiliates.