CVX announces massive buyback and divy increase

Earnings mixed, Eco data more robust and stocks go up.

CVX pre-announces a massive buyback and divvy increase – Sending Joey into a tailspin.

Oil – surges up and thru $80 and is now ready to challenge resistance at $86 – Gold calls for $100/barrel by summer.

PCE out today…. Oh boy.

Try the Pasta Frittata – Yum!

Stocks ended the day higher - The Dow gaining 205 pts, the S&P up 44, the Nasdaq added 200 pts, the Russell up 12 and the Transports added  less than 1 pt. It is earnings, weakening macro data  and the idea that the FED can manage a soft landing in the middle of all of this…that continues to fuel the advance.

The news was all over the tape.

INTC down, V up, KLA down, BA flat, MA down, MSFT up, IBM down,  GDP up, Personal Consumption down, Retail Inventories up, Initial Jobless claims down, New Home Sales up and once again we are hearing all about the cryptos – Bitcoin now up more than  40% since the start of the year….…and then in a blockbuster announcement – CVX -due to report earnings today (they beat! -go figure)  pre-announced that they authorized a massive stock buyback - $75 billion to be exact – while also declaring a quarterly dividend of $1.51 – up 9 cts or 6% leaving its divvy yield at 3.2% (not bad),,,,….after they hinted of ‘record earnings’ causing Joey to stamp his feet and blame corporate greed for the results…. CVX closed up 2.3%  at $187.79 and this morning is quoted up another 1% at $188.80.  Oh boy – prepare yourself for the uprising from Lizzy and Bernie as well.

All the action caused 10 of the 11 S&P sectors to rise…The groups that worked last year are struggling this year……Consumer Staples – XLP was the loser – falling 0.3% leaving it down 2% for the year, while Utilities did gain 0.2%, it is also down 2.3% ytd and Healthcare – yes that gained 0.25% but is down 1.5% ytd.  Investors are finding opportunity in other areas of the markets and remember – Consumer Staples, Utes and Healthcare are not ‘sexy’ right….…..and again- it appears as if the biggest losers in 2022 are this year’s winners….Consumer Discretionary – XLY rose 2%, - now up 11.6% ytd, Tech – XLK rose 1.6% , up 9.4%, Communications – XLC added 1.5% taking that group up a whopping 14.5% ytd,. Real Estate – XLRE up 0.5% is up 8.3% ytd, ….and while Energy did rise by 3.1% yesterday – it is ONLY up 6.5% ytd….Semi’s – SOXX gained 1.7% leaving it up 17.7% ytd,  Artificial Intel – BOTZ added just 1% but is up 14.2% ytd, Soler Energy – TAN up 9% ytd……The value trade – SPYV is up 6.3% ytd while the growth trade – SPYG is up 5.5% and the list goes on….in the end – the market and stocks seem to be ‘ok’ with the current environment. 

Earnings while mixed at best – with just 66% of reports beating on both the top and bottom lines - do not appear to be forcing investors to run away….at all…..Yes, names that miss and offer weaker forward guidance are getting punished, while companies that announce all kinds of cost cuts – think layoffs – are rewarded.  And speaking of job cuts – that phenomenon is now spreading across more sectors…..as the reality of an economic slowdown takes hold….and let’s be honest – the fact that so many companies have announced layoffs makes it much easier for the others to jump on that wagon – the headlines offering enough cover for companies that want to do some housecleaning…….Google just the latest to announce that their job cuts included the 27 masseuses that are on staff……I mean you can’t make this up!

And it will be another big earnings day….and it includes AXP, CL, CVX, ROP,. HCA, and CHTR. 

Eco data includes Personal Income and Personal Spending but the real data point today is the PCE deflator – the FED favored inflation guide and as you know by now – it is expected to trend lower….and that is good, the real question though is what is trending lower vs. what is still trending higher…because that is an issue….Who cares if used cars are declining in price, or TV are lower or even in housing prices are down – you don’t buy those things on a daily basis – so it is less important than  what people care about and that is the stuff that they need – food, clothing, utilities, cost of medicines, cost of education, cost of child care, cost of dining out, cost of travel…..and what you’ll find is that the cost of all THOSE sectors of the economy are not falling in value the way the ‘top line’ reports suggest and that is the issue…..the cost to live day to day….But  - let’s see what happens.

Many will use today’s weaker (better) PCE report to demand that the FED stop raising rates…they will say that the FED has done enough and that they need to pause now….something that JJ and the others do not seem to agree with…and don’t forget – the more the market climbs the more the FED will dig its heels in….remember – Joey said that if stock and bond prices continue to rise – it would make his job more difficult – suggesting ongoing rising rates so anyone who thinks they are going to pivot anytime soon, better think again.  

And we will get that information in just 5 days….when the FED comes out of hiding and announces the next policy move…which is 25 bps…..that won’t be the headline….the headline will be what next?  What will March bring, what will May bring?  Remember – 5% - 5.25% is the neutral target range – right now we are at 4.25% - 4.5%. – so do the math.

Oil continues to go UP and UP and UP…this morning it is up $1.30 at $82.30/barrel…and that is sure to send prices at the pump higher (there goes that cost of living argument again).  We are now solidly in the $80/$90 trading range….and this morning our friends at Goldy reiterate that they see oil prices heading to $100 barrel by late summer….citing what else?  The China re-opening…

Gold is holding steady at $1950/oz.

US futures are mixed at 7 am….Dow futures up 20, S&P’s down 6, Nasdaq down 40 and the Russell down 4.  The shocking INTC report causing all kinds of analysis about the leadership, while better eco reports suggest that the Fed  must continue to stay the course and raise rates.

European markets are a bit higher…markets across the region up by only about 0.1%.  Investors now awaiting commentary from the ECB next Thursday.

Treasury prices  are churning in line….as investors opt for stability and optionality during this continued volatile time.  The curve remains inverted.

The S&P closed the day at 4060 – up 45 points.  It appears as if we have broken up and out of the trendline resistance….and may be making a run for the November/December high of 4100.   Futures this morning suggest more churn….as we await the FED meeting next Wednesday and the ECB on Thursday.

Remember  ECB President Christine Lagarde sees higher rates for longer….(sound eerily familiar?  So, we need to be patient and wait for both announcements next week – the FED and the ECB…..I do not expect the narrative to change at all.

Remember, you are a long term investor – build it and stick to the plan….trying to pick tops and bottoms is NOT what you do….it’s about building that strong foundation….dollar cost averaging into it and reinvesting all the divy’s (unless of course you need the divy’s as income…if not -put them back to work).   Don’t’ be afraid to buy your names on weakness (as long as the weakness is not a fundamental shift in the sector or the name). 

Pasta frittata with sweet sausage, broccolini and onions

Frittatas are great dishes – you can have them for breakfast, lunch or dinner and never go wrong.  Simple to make – they are a comfort food that reminds me of my grandmother’s house.

For this you need:  ¼ lb. of spaghetti, butter, Sweet sausage out of the casing, broccoli – trimmed and chopped, big yellow onion, s&p, Eggs, heavy cream and freshly grated parmigiana.

Bring a pot of salted water to a boil and cook ¼ lb. of the pasta Do not overcook – because it will continue to cook in the oven.  Cook for 8 mins MAX.  (I would cook for 6).

Preheat your oven to 425 degrees.

Now melt some butter in a large oven proof sauté pan.  Add the onions and sauté until soft and translucent – maybe 8 – 10 mins…. now remove and place in a bowl.  Heat the pan up again and add the sausage….brown nicely – once cooked – remove that and place in a bowl.  Now heat up the pan again and sauté the chopped broccolini for 5 mins or so….Now add back the onions and the sausage and mix well. – Season with s&p.  When the pasta is done – drain and add the pasta to the pan and mix well.  Now spread the mixture around the pan - - do not make it lumpy.

In a separate bowl – whisk 6 – 8 eggs together and add in about ½ c of heavy cream and a handful or two of the cheese.  Season with pepper (I wouldn’t use salt here because the cheese is salty and you have already used the salt in the prior step.  

Pour the egg mixture into the sauté pan  - using a rubber spatula – mix it up a bit to make sure the egg is incorporated.  Now place the sauté pan into the oven on the middle rack and bake for 10 -15 mins….the top of the frittata should be firm and golden. Remove from the oven and let cool a bit.  Using your rubber spatula – check carefully that the frittata is not stuck to your pan…..go around the edges carefully and loosen it.  Now place a large plate on top of the sauté pan and then flip the pan to reveal the frittata. How beautiful is that?