The S&P closed at 2783.02 – So today’s circuit breakers are:
Level 1. 194.81 pts (7%) or 2588.21
Level 2. 361.80 pts (13% total) or 2421.22
Level 3. 556.64 pts (20% total) or 2226.38
Trump says that the US is NOT FOR SALE…and he blocks the $117 bil hostile bid by Broadcom (AVGO $262.84) to take out Qualcom (QCOM $62.81) – noting national security risks and ‘concerns over the intensifying arms race between the US and China over advanced technologies’ CFIUS (Committee on Foreign Investment in the US) noted that Broadcom would cut R&D at QCOM – weakening US intelligence and development of the latest 5G technology - handing the lesser known but much bigger Chinese behemoth Huawei Technologies a win…. And so, it is…. Tech was on fire yesterday…. sending the Nasdaq index (+28 pts) to another new high as the both the Dow (-157 pts) and the S&P (-3.55 pts) struggled to remain in positive territory….
Now yesterday’s note suggested that we would ‘kiss and pierce’ resistance on the S&P at 2800…. BUT if we failed then look for the mkt to test support at 2741 before the 3rd attempt to break thru. Remember – this will be the 2nd time that we test 2800 since the break back in early February – so we may have to test it 3 times before we succeed – and it looks like that is exactly what happened. At 9:50 am investors/traders took the S&P to 2796….and then gave up…. there wasn’t enough momentum to yesterday to take us up and thru….and with little eco data to act as a catalyst – the mkt appeared to want to digest last week’s push higher.
Talk of who will replace Gary Cohn on the NEC (National Economic Council) was the focus for the day……. My dear friend – Larry Kudlow has now risen to the top of the list and if asked – has said that he would serve without question….and in the end – Larry would be a spectacular choice.... For those of you who are not aware of who Larry is – He is a conservative American economist, an author, an analyst, a TV (CNBC) personality and a syndicated radio talk show host (The Kudlow Report) who can be heard around the country on Saturday mornings…A show that I have had the pleasure of being on as Larry discusses and dissects all aspects of the US and global economy with his guests. We can only hope that Trump taps him as the US will be well served having Larry in that position.
The action yesterday was not driven by any specific catalyst at all…… in fact – the action was more of consolidation vs. a statement about any ONE thing. It felt more like some profit taking in the big industrial names (DOW) stocks after their big run in the last week. More talk of countries all coming to the table to talk trade tariffs ahead of its supposed implementation in the coming weeks…. causing some of the short-term volatility as the media reports the tone and sense of what everyone is saying….
Eco data today includes CPI – exp of +0.2% m/m and 2.2% y/y. Ex food and energy of +0.2% m/m and +1.8% y/y. If this is true – then the inflation conversation continues to get pushed aside as the Fed will be under NO pressure to change course…. If we see the EX food and energy y/y reading breach 2% - then the conversation turns on its head as every analyst will try to figure out how that happened. There is NO expectation for the reading to pierce 2% - but remember – the mkt trades on expectations and if the CPI EX food and energy y/y does surprise then expect the VIX to rise and the broader mkt to pull back again. If the surprise is on the downside (meaning less than 1.8%) then you could see the mkt rally hard again as that result would ignite another conversation about what Jay Powell will do now….and if the reading is on target then the focus will once again turn to the chatter of the day……more Larry Kudlow, more China, more tariff talk.
Overnight – Asian mkts were mixed ahead of today’s CPI data and Trump’s move on the AVGO/QCOM deal. Chinese steel producers under pressure as the realization that US tariffs will hit them hard. A research note from the energy research firm Wood Mackenzie reveals that
“…steel products from South Korea, Japan, Vietnam, Thailand, South Africa, UAE and Argentina are most at risk of displacement for the US market. These countries are the least likely to be exempted from tariffs and their steel exports have the highest displacement potential.”
In addition – Japanese PPI missed the expectation (lower inflation pressures) hurting the Yen but helping stocks in that country. Japan + 0.66%, Hong Kong + 0.02%, China – 0.88% and ASX – 0.36%.
European mkts are all a bit higher this morning in early light volume trading. The UK’s office of ‘Budget Responsibility’ is due to release their economic and fiscal outlook later this morning and the finance minister – Phillip Hammond – is expected to say that the UK economy is on solid footing. FTSE flat, CAC 40 + 0.46%, DAX +0.17%, EUROSTOXX +0.31%, SPAIN +0.73% and ITALY + 0.37%
US Futures are up 6 pts in early trading…. there is once again that ‘RISK ON’ feel to the mkts this morning. There are NO FED speakers today (good thing) and the one real eco report – CPI due out at 8:30 am. As noted – any upside surprise will cause the VIX to rise and the broader mkt to come under pressure – something that does not appear to be in the cards. We remain in the 2743/2800 trading range and if today’s data is in line then I suspect that we continue to churn in here until we get more clarity on tariffs and Trump’s selection for the NEC Chair. Again though, if we attempt to challenge 2800 on the S&P and succeed – that opens the door for a swift move higher as the algo’s will all kick in trying to beat each other out in the race to the January highs.
Oil – is flat at $61.34 but feels like it wants to move lower on the relentless increase in US shale production. The EIA (Energy Information Admin) continues to say that the US will continue to produce at record levels – with March output already producing 6.82 million barrels per day (bpd) which is pushing total US shale production to more than 10 million bpd. The IEA (International Energy Agency) is now predicting that the US will produce 11 million bpd this year…. So where is oil going? I mean really? Is demand that strong that oil will go to $70 barrel anytime soon? Not likely…. Oil now remains just below resistance at $62.51 and most likely will test support at $59.50 first.
The VIX index (fear index) is down 0.09 at 15. 09……and is now below short-term support at 16.59…. if the eco data is in line – I would expect the VIX to fall and test support intermediate support at 13.51.
The dollar index – DXY – is up 0.13 cts at 90.02….as it awaits today’s CPI data. The dollar is also benefitting from a decline in currency volatility which is causing investors to add to positions in the dollar as it attempts to break thru resistance at 90.17…a move up and thru that will cause the greenback to rally towards the next resistance level of 91. 93..
Gold if off by $2 at $1,318 and remains solidly in between support and resistance of $1,307 and $1,331/oz. And with all this good news – don’t be surprised to see gold test lower first.
Take Good Care
Sea Scallops, Dried Porcini Powder, Butter, s&p,
For The Bruschetta:
Ripe, Plum Tomatoes, Garlic, Peeled And Sliced, Olive Oil, s&p
Make the bruschetta and let it sit. Dice the tomatoes and place in a bowl.
Add the sliced garlic - maybe 2 cloves, olive oil and then season with s&p. Mix well and set aside
Rinse and pat the scallops dry with a paper towel. Now - sprinkle the scallops with the dried porcini powder on both sides.
In a heavy frying pan - heat the butter - add a drop of oil until it sizzles - do not let it burn!
Add the scallops - maybe 4 at a time - if you add to many - they will cool the pan and not sear properly. Sear on med high heat for about 3 minutes on each side. The scallops will have a light, crisp outer crust. - Remove and place on a plate - (Cover with tin foil to keep warm) and repeat the process until finished - placing 4 scallops on each plate.
Once you sear them all finish by spooning a bit of the bruschetta over the scallops and serve immediately. Serve with your favorite white wine. A simple - yet elegant dish.
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