Donny Ends Waivers, Oil Surges, Next Move is OPEC's, Earnings Onslaught

What You Need to Know Today

• Donny ends waivers for countries buying Iranian oil

• Oil prices surge as more supply is taken OFF the mkt

• Expect increased tension in the Mid-East – Defense Stocks on the move

• More than 50 Companies to report before the bell rings

It was a quiet day yesterday as so many mkt centers were closed for the Easter Monday holiday……Stocks in the US had a mixed day, but nothing dramatic either way…the Dow ended the day slightly lower down 48 pts, while the S&P added 3 pts the Nasdaq tacked on 17 pts and the Russell 2000 gave up 11 pts.  As you can expect – volumes remained very light as investors got to digest the news that Donny ended all waivers for countries still buying Iranian oil – essentially – he demanded that anyone with a waiver stop buying Iranian oil as of May 1st or face the ‘wrath of Donny’…..effectively boxing Iran into a corner as more countries cease to buy oil from this mid-east nation.

Just to put it in perspective – Iran was the world’s 4th largest producer (at their height that added about 3 mil/bpd)  but has been systematically neutered as sanctions against this country have been re-imposed…and now that Donny has ended all waivers – the situation is going to come to a head and oil prices will surge…..UNLESS someone else ramps it up and pumps more oil to fill the void…..Analysts around the world chatting it up and in a note to clients – Barclays suggests that this ‘surprise announcement will lead to a significant tightening of oil markets’.   But here is the question – Was it a surprise announcement?  The world knew that the 6 month waivers were just that – 6 MONTH WAIVERS…..so it wasn’t so much a surprise, but the decision carry out and end the waivers now only exacerbates the supply disruption caused by OPEC/Russian voluntary production cuts,  Venezuelan unrest and now the increasing conflict in Libya……  Mikey (Pompeo) Secretary of State tried to calm the mkts by saying that Saudi Arabia and the UAE (United Arab Emirates) would come to the rescue and increase production – while the Saudi’s said – “Not so fast big boy….”

As a result OIL was the story of the day…..Energy names surged…and the S&P Energy ETF – XLE surged by 2.1% - causing it to kiss it’s long term resistance at $68.55 as oil now appears to be the ‘story of the week’.  Names like XOM, CVX, SLB, MRO, APC,  COP, & HES all advanced….and WTI crude traded as high as $65.95/barrel before backing off a bit.  And now it is summer time in the northern hemisphere and the driving season is kicking off – while it is winter in the southern hemisphere as heating bills will surge.  And the ‘weak demand’ that some analysts have been screaming about is anything but weak and with these latest developments to supply disruption – the oil story has changed…..  It goes right back to Econ 101 – Supply and Demand – and while there is plenty of supply in the ground (it exists) the narrative is about ‘available supply’ not total supply.  And while we could increase available supply it makes more sense to increase available supply if the world is willing to pay more for it….Capisce?    

What the Saudi’s did say is that they will help to alleviate any disruption when oil prices ‘find’ an equilibrium and at that point – they will open the spigots to keep oil from going higher….…..and now the question is – What exactly is that ‘equilibrium’?  Is it $70/barrel, is it $80/barrel?  Or is it $100/barrel….Oh boy….it is a tangled web we weave…..Now look – OPEC (led by the Saudi’s)  is due to meet in JUNE….to discuss this issue and if they decide to end their voluntary production cuts then maybe we could see oil back off in the latter part of the year….but that meeting is still more than 6 weeks away and oil prices could skyrocket between now and then as speculation grows over what the move will be.  Remember – ‘Payback’s a bitch’ (as the saying goes) and OPEC now sees their opportunity…..Let the world squirm a bit as demand for oil is not going away (just yet) – Let the world pay higher prices for oil…..And while Donny will take to Twitter to try and negotiate increased production by OPEC  - don’t be so sure that this will succeed.   And on a side note – If Donny or the Saudi’s  thinks that ending the waivers is going to bring the Iranians back to the negotiating table – I’d say ‘Good luck with that’.  This move is sure to cause more hardship on Iran and her citizens – not good, and this unrest will only serve to cause the ‘Anti-America’ movement to gain ground….while potentially causing increased tension in the region…..

So Defense stocks are sure to benefit!   Take a look at the XAR – S&P Defense ETF – it is coming off a base built in March and appears to want to challenge the February high.

Next up – it is a bit week for stocks….more than 130 S&P companies are walking the runway this week – Tech, Industrials and European Banking names are all getting dolled up.  US macro data is also in focus as Friday brings us the first release of 1st qtr GDP and while the dire predictions of sub 1% growth was all the rage back in January – during the gov’t shutdown – the Atlanta FED GDPNow forecast – is calling for a 2.8% report -while the official gov’t estimate is 2.4%.  Either would be considered a win.  Eco data today includes New Home Sales and exp are for -2.7% and if new homes are anything like Existing Home Sales that we saw yesterday – then the mkt will need to brace herself for a weaker than expected number. 

US futures are slightly weaker this morning as the mkt continue to struggle with 2915…..the level that it has been unable to break over the past couple of weeks – when it had every reason to do so….See my CNBC appearance yesterday where I discuss how the mkt needs to catch up with herself and digest the 16% surge ytd. 

With more than 50 names about to report BEFORE the bell rings – it is sure to be a busy morning.  LMT, STT, HAS, PG, CNC, JBLU, TXN, WAT, NUE, ATI, PHM, HOG, VZ, KO, TWTR, SHW to name just a few….This is going to be an important day….as the tone of the earnings and guidance will set the algo’s in motion.  If it holds true to itself – I suspect that we should get about 83% of these companies reporting to ‘beat the estimates’ – anything substantially less than that will set the bears in motion…..Look for the S&P to remain in the 2900/2915 range – a spectacular set of reports could ignite that move up and thru 2915 – but my sense is that there is plenty of supply – but if the tone turns more positive – then expect the algo’s to cancel inline supply – leaving a void which will allow the mkt to surge…But it just doesn’t feel like it today.  Weaker reports (which I don’t think will happen) could see us test lower to the 2875 level…but again – I don’t see that happening today. 

European mkts are all a bit lower as investors across the pond brace themselves for the coming onslaught…Oil, gas and energy names once again in the spotlight as the world awaits the next move.
FTSE +0.31%, CAC 40 – 0.26%, DAX -0.27%, EUROSTOXX -0.29%, SPAIN -0.76% and ITALY -0.40%. 

Only a few seats remain for "The Politics of Investing"   - Thursday April 25th - 5:30 pm - Lynn Financial Auditorium - Boca Raton, FL 

 

Pasta Nonna

Pasta Nonna - this is a great dish that many restaurants define as your "Sicilian Grandmothers favorite".  It is a typical Sicilian dish and yes - my grandmother used to make it too - although we never called in Pasta Nonna - we just called it Rigatoni with Eggplant.   it is comfort food - Simple to make - serve it with your favorite Chianti…

For this you need Garlic, olive oil, Eggplant, Canned Cherry Tomatoes in their juice, s&p, Vidalia onions, and Ricotta Salata. (Ricotta Salata is an unusual cheese. Made from Sheep’s milk – the curds and whey are pressed together and dried before aging – giving this cheese a dense texture with a salty, milky flavor – almost like feta - but drier – It is not a creamy Ricotta cheese at all).

Bring a large pot of salted water to a boil.

In a large frying pan – heat up some olive oil – add in a couple of sliced cloves of garlic and sauté…now add in two med/lg diced Vidalia onions – continue to sauté until soft and translucent – 10 mins….Next add in 4 - 12 oz cans – of cherry tomatoes in juice. Turn heat to med low and let it simmer - next – with the back of a slotted spoon (or with a fork) crush some of the cherry tomatoes so that you get a chunky sauce while keeping some of the tomatoes whole. Season with s&p.

Make a garlic paste – so - in the food processor add 6/8 garlic cloves and some oil – blend well. Add enough oil – you don’t want a dry paste – you need to toss the cubed eggplant in it – so it can’t be dry.

Dice the eggplant – leaving the skin on…cut it in half and then cut each half into 1” strips and then cut across to make cubes…..add to a large bowl and toss with salt and the garlic paste – let sit for 10 mins.

Now in a separate sauté pan – add a bit more oil and heat up. Now add the eggplant and sauté on med hi heat. Season with s&p. Keep tossing the eggplant until it is cooked. Should take maybe 15 mins or so. Make sure to keep stirring – do not burn. When complete – add to the larger fry pan with the tomatoes. If you need to add a bit water – do so now. Taste for seasoning and adjust if necessary.

Now the pasta – use Rigatoni - this is in the family of Penne Pasta. It is slightly larger and "beefier"   – but it screams for a hearty sauce with chunks of meat or veggies etc. In this case we are using “chunks” of sautéed eggplant with Cherry tomatoes. Cook until al dente – maybe 8/10 mins max. Strain the pasta always reserving a mugful of the water – return to the pot – add back ½ the mug of water – stir to re-moisten. Now add directly to the tomatoes and eggplant and allow it to blend for 5 mins or so – keeping the heat on simmer. Serve in warmed bowls with shaved ricotta salata on top.