• Vice Chair Richie Clarida tries to settle the markets.

  • Economists and Boston Fed Pres Rosengren think its time to start thinking about it.

  • Inflation, Rates & Taper continue to pressure the high growth names.

  • Smart money favors value.

  • Dollar weaker ahead of NFP, Oil higher as inventories plunge.

  • Try the Porcini Rub Rib-Eye – Tagliata style.

On Wednesday – the FED sends out Vice Chair Richie Clarida to try and settle the markets after Tuesday’s drama with Treasury Secretary Janet Yellen’s ‘off the cuff’ remark about inflations and interest rates…In one question posed – Clarida was asked if it was ‘just a slip of the tongue’ or was she trying to ‘send a message’ to both the FED and investors. As you might expect – Richie immediately talked of his enormous respect for Yellen and said that she made it clear that she was not speaking on behalf of the FED and nor was she suggesting that the FED do anything more than what they are doing. So, there you go, they float the balloon, they watch the reaction, they get her to retreat and then they send out the Vice Chair just so that everyone gets back into a comfortable position. Period. Now let us move on.

Stocks started the day on a positive note, much of a reaction to the beating that stocks took on Tuesday…. traders looking for bargains and investors looking to add to position in good names that have gotten unnecessarily punished. And while the day started strong, both the Nasdaq and Russell continued to suffer as the debate rages on – both ended the day lower, falling 51 pts and 6 pts respectively while the Dow ended higher, adding 97 pts to close at a new high! The S&P – was not that lucky….it did add 3 pts but made no grand display of strength.

ADP Employment showed continued job creation (restoration) but did miss the estimate coming in at +742k jobs vs. the estimate of +850k. So, what does this say about what traders/investors are thinking for Friday’s NFP (Non-Farm Payroll) report? Estimates call for 1 mil new jobs to be restored with the whisper number as high as 1.2 mil new jobs and if today’s ADP report is any guide – we could see only 880k new jobs created….so, it is a big hole….my gut tells me that we will see more than 1 million new jobs…created…I do not know, it just feels like that. It is my gut feel.

In addition, we got great reports on US services PMI – and this is important – why? Because the US economy is an economy that runs at about 75% on services….so a strong services PMI supports that robust recovery we have been talking about….and yesterday’s PMIs came in at 64.7 and 62.7 – Markit’s beat their estimate, while ISM once again missed their estimate…but in either case – both numbers are in the 60’s and that is very bullish.

But the move out of growth and into value continues…as investors focus on ‘when’ the FED will change its mind. In a Bloomberg survey – Economists surveyed apparently think that the tapering is due to begin in the fall all while Jay Powell says no. Another FED voice – Boston’s Eric Rosengren thinks that the mortgage market no longer needs as much support – again advancing that very debate on not ‘if’ but ‘when’ will the taper start. And so, it appears as if the ‘crack’ is now visible, it seems to me that more and more ‘public’ voices are now talking about when the monthly bond purchases will begin to slow. Again, in a move to get investors and markets more comfortable with the idea that the end is near, remember what Jay said last week – When they start thinking about even thinking about it, they will let the markets know giving them plenty of time to consider the implications and it seems to me that all of these vocal public voices are doing just that….giving the markets plenty of time to consider it – so the sell off happens before they actually begin the taper, Capisce?

And so, we saw more pressure on the high growth sexy names, the tech disruptors names and the WFH names as many of them come under the knife as current investors cut them out while the new investors are buying them up at significantly reduced prices. NFLX, AMZN, ETSY, TSLA, ROKU, CRWD, DDOG, COIN, ZM and the list goes on and then there was PTON – down 14% yesterday on the news of their treadmill recall which is going to cost them millions….so investors voted with their feet and ran out of the stock…. Giving new buyers the chance to get it a ‘fire sale’ prices! PTON has now lost 53% of its value in 4 months….and likely going lower if the ‘get out of growth’ trade mentality continues as the building inflation, higher rates, taper story blooms. It is a tangled web we weave….

And like I said yesterday and have been saying recently – it feels a bit toppy….and it feels like S&P 4200 will prove to be a tough opponent. Look – the thought of inflation rearing its ugly head, or when the taper will begin or where rates are going is now making all of those ‘stretched valuations’ tougher to justify especially after the strong earnings season we had that failed to provide any further buying power.

Again though, while this feels really uncomfortable for individual names, when you look at the broader indexes we are still well within the ‘normal trading’ ranges…the Dow is now at new highs, while the S&P is off 2%, from its high, the Nasdaq is off 5% and the Russell is off 6%...All of the indexes remain in positive territory for the year with the Dow +12%, the S&P + 11%, the Nasdaq up 5% and the Russell up 13.5%.

Eco data today includes the usual suspects – Initial Jobless Claims of 538k, Continuing Claims of 3.6 mil, Challenger Job Cuts, Mortgage Delinquencies and Mortgage Foreclosures.

US futures are Dow futures are up – Dow futures +36 pts, the S&P’s up 7 pts, the Nasdaq up 42 pts and the Russell is adding 8 pts. Markets will most likely churn until we get tomorrow’s NFP report. Expect more chatter about when to taper as the talking heads try to get everyone more comfortable with it giving investors and markets time to ‘adjust’.

European stocks are all a bit lower…. down just about 0.25% across the board. The BoE (Bank of England) announced their monetary policy decision and as expected there was no change even as the economic recovery is accelerating. Remember – they have been locked down again since December – so the flowers are just beginning to bloom across the region…. At 6 am the FTSE flat, CAC 40 -0.13%, DAX -0.16%, EUROSTOXX -0.33%, SPAIN -0.44% and ITALY +0.06%.

DXY – closed flat last night at 91.31 – rallied a bit over night and has now collapsed – falling to test trendline support at 91.05 as it awaits tomorrow’s NFP report. If it breaks support, it could trade to the most recent lows of 90.50.

Oil retreated a bit, which is not really a surprise after it is spurt higher as well. This morning it is trading at $65.54 -after trading as high as $66 when the EIA (Energy Info Admin) revealed that crude inventories fell by 8 million barrels vs. the expected 2.3 mil barrels. It will be interesting to see if $65 oil holds as we move into summer…. My gut says it will and in fact do not be surprised to see $70 oil.

Bitcoin is trading at $58,000, Ethereum is at $3,500 and Doggy Coin continues to rise…now trading at .61cts.

The S&P closed at 4167 – after testing 4160 as its low yesterday…..Remember – there are plenty of those ‘high growth names’ that are part of the S&P index, so further pressure on those names will hold the overall index back….Sit tight, review your portfolio and adjust if necessary, which means don’t adjust just to adjust….it may just mean add new money to names or sectors that have gotten unnecessarily beaten up. There is room in your portfolio for some of these names and there are lots of choices in the tech space besides FAANG.

Porcini rubbed rib-eye - tagliata style

For this you need: Dried porcini mushrooms, sugar, s&p, garlic, olive oil and balsamic vinegar, boneless rib-eye, arugula, and shaved parmesan cheese and one lemon. Grind 1 oz of dried mushrooms until fine...you can use a mortar and pestle or a food processor.

Next combine the mushroom powder with 2 tbsps. of sugar, 1 tbsp. of s&p, 4 garlic cloves (chopped) and about 1/4 cup of olive oil. Set aside. You can make a container of this rub up to this point and store in the fridge in a sealed jar. When you get ready to use it - take it out of the fridge and let it come to room temp. Mix and then massage it into your meat of choice.

In this case – we are using a boneless rib-eye – again you can use a different cut if you want, but I love the rib-eye.

Season the meat with salt. Now massage the porcini rub into the meat, making sure to coat it well.

Preheat your oven to 350 degrees. In a large cast iron skillet – add about 1 tbsp. of olive oil and heat it up. Add the steak and listen to it sizzle, brown on both sides. Now, place the skillet into the oven and let it cook for about 20 mins – depending on its thickness. If you have an instant read thermometer it should read 135 degrees when inserted in the center. Remove and let stand for 10 mins – tent it to keep it warm.

Now slice the steak at an angle so that you can fan it out on the plate. Lay down some arugula, place the steak on top and then drizzle with a bit more of the olive oil and a squirt of fresh lemon juice. Then top with the shaved cheese.

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Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

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