• Stocks were all over the place as investors try to decipher all the chatter.

  • More big banks expressing some reservations over valuations.

  • The ECB is not expected to announce an ‘adjustment’ – Don’t say Taper.

  • US futures are down again as the global tone is weaker too.

  • Try the Rigatoni w/ Cherry Tomato Jubilee.

Stocks continued to tumble….I can hear the robot from ‘Lost in Space’ screaming ‘Danger Will Robinson, Danger!’…..this as stocks struggled to hold onto 4500 on the S&P as the sell algo’s pushed lower while the buy algo’s stepped back to see just how anxious the sellers would get….More of the big banks (MS, GS, C)  are expressing concern over the tone of the markets…..and that is causing some of the recent weakness.  .By the end of the day the Dow gave back 69 pts, the S&P off by 6, the Nasdaq gave back 88 pts, the Russell lost 25 pts and the Transports gave back 52 pts.

Talk of Jimmy Bullard’s – FT interview – that I referenced in my note yesterday…. was all the rage…. Jimmy saying that it’s time to move….and I agree with him…. Using the weak NFP report from Friday is nothing but baloney…. all it does is allow the FED to ‘kick the can down the road’ again…. for what?  It is time to get on with it…. Period.

In fact – in my inaugural appearance with Neil Cavuto on ‘Cavuto: Coast to Coast’ that is exactly what we discussed – you can find it here:

In addition, investors across the country and the world are now re-assessing guess what????  VALUATIONS – Many citing the rising risk of an economic slowdown created by the delta variant along with the realization that the party – hosted by the FED and every other central bank around the world - is about to come to an end.  Look, central banks around the world are all starting to discuss and implement plans to take away the cookie jar, to stop serving up the Kool Aid.

Now do not misunderstand what I am saying…No one is just taking it away – the way a parent does with a teenager’s phone…. but rather taking it away in very measured steps, with a plan so that we don’t find ourselves dealing with a ‘teenage temper tantrum’ where they make your life hell for days on end….  Now that doesn’t mean that ‘they’ won’t throw a tantrum, they will, but guess what – no matter when it happens – someone is going to throw a temper tantrum…. it’s time to move on…. let the chips fall where they may….

Yesterday’s economic data revealed that there are now 10.9 million jobs available - which by the way is 900k MORE jobs available than the estimate – taking available jobs to a new high – this as so many Americans say that they ‘can’t find work’ or that they can’t find work that pays them equal to or greater than what the gov’t is paying them to be on unemployment and enhanced benefits.  This even as so many are offering one time signing bonuses and higher wages….  And to that I’d have to say – come on – 10.9 million jobs and they are all ‘low paying’? 

Think about that for one minute.  Now you might say that there is a skills gap with some of those jobs, and that is true, but all of them?  Doesn’t make sense – but in any event it is what it is.  And the Fed’s Beige Book – which details anecdotal information about the 12 Federal Reserve regions across the country revealed that the US economy has slowed a bit over the summer as the rising rates of infection caused some consumers to pull back.  Small businesses in some parts of the country are still struggling as local gov’ts impose very strict measures – while small businesses in other parts of the country are doing fine.  Big business is booming….as the most recent earnings season showed us - recall that more than 90% of earnings reports for the S&P 500 beat on all lines – top and bottom, margins up, profits up, dividends up. 

But the 2nd qtr. was also expected to be the ‘best qtr.’ in 2021….so stocks priced to perfection will see sellers as growth rates and estimates come down for the 3rd and 4th qtr.

The recent weakness in the markets is all about the angst now over what the FED (and other central banks) will or won’t do….and that will define valuations going forward – it always does and what is funny is that so many people appear to be surprised by the weakness caused by this angst…. As if they didn’t know this was going to be an issue at some point.  And if the FED kicks the can down the road again in September – then the problem will only get worse as the $120 billion in monthly support payments will only cause valuations to become even more stretched….so stop the madness and let’s consider reality.

Markets in Europe this morning are all lower….all down between 0.5% and 1.2% ……as the ECB (European Central Bank) is expected to announce their latest guidance this morning…and the talk is all over the place….some think that there will be no change while others are suggesting that Christine Lagarde is about to announce some small ‘adjustments’ to current policy as inflation across the Eurozone surges to a 10 yr. high….…..now DO NOT call it a taper – because that creates anxiety….let’s just call it – trimming around the edges, (just like you do when you go to the barber and tell him – just ‘clean it up’).

Do not expect them to make any announcement about a change to their PEPP program (Pandemic Emergency Purchase Program) or their APP (Asset Purchase Program) until some time in December…and this is exactly what she has been saying all along…. the ECB will not make any major revisions to policy until the FED acts.  So, it will be interesting to see how she defines ‘cleaning up around the edges. 

The algo’s appear to be on the side of an ‘adjustment’ as the weakness continues for a 3rd day…. but an adjustment does not mean any increase in interest rates at all…. She will reiterate that the two events are mutually exclusive the same way Jay Powell tells us the same thing.

US futures are lower again this morning as investors continue to consider weakness across the globe and current valuations here at home – while we await the ECB news…….  Will the ECB news be a guideline for the FED to announce any ‘trimming around the edges’ as well without suggesting that it is the beginning of a tapering at the September meeting?   At 6 am – Dow futures are down 75 pts, the S&P off 10, the Nasdaq down 25 pts and the Russell off 10. 

The 10 yr. treasury ended the day yielding 1.329% down just a hair - the dollar fell by 11 cts, Oil was up 1.5% while Gold fell by 0.5%. The VIX lost 1% as the broader market essentially churned in place…. the S&P off 6 pts is not anything to write home about.   But this morning with the weaker global tone and weakness in US futures – the VIX is up 5% in pre-mkt trading – suggesting that there is some fear as the sun rises over the Atlantic.

Biden is expected to announce his choice to lead the FED for another term…. Jay is in the lead, he has Yellen’s support and the support of most of the Congress, yet there are some ‘on the fringe’ that are demanding change – because the FED is not ‘woke’ enough…… Not sure where ‘wokeness’ comes into central bank policy at all, but they are raising that issue.  The smart money says that Jay is firmly in place.

Bitcoin has found some stability at the $46k level while Ethereum is happy at $3,400. 

The S&P ended the day at 4514 after testing as low as 4493 and as high as 4521…. the weakness this morning suggests that we will test 4500 again and, in my opinion, will most likely fail to hold that sending stocks lower.   The 50 dma is at 4417 which is about 2% lower from here….and if we test that – it would represent a 3% move off the most recent high…. enough for ‘buy the dippers’ but not enough for what I’m looking for.  I’m still hoping for a ‘shake the branches’ type of move 7% - 10%.  (Recall that MS is suggesting as much as a 15% pullback this fall).    

Rigatoni/Cherry tomato tubilee sauce

So, I made this the other night and posted to my twitter account (@kennypolcari) and I was asked to post the recipe…so here it is.

You need:  1 lb of Rigatoni, Cherry tomatoes, olive oil, butter, garlic, shallots, large Spanish onion, White wine – (I use Pinot Grigio Santa Margherita), s&p, oregano, and lite cream and of course – fresh grated parmigiana cheese and fresh shredded parmigiana cheese.

Bring a pot of salted water to a rolling boil – return to simmer until you need it.

You start by sautéing the 2 sliced garlic cloves, 1 sliced shallot, and the sliced onion.  Sauté for about 8 – 10 mins until the onion is soft and translucent.

Now add the whole cherry tomatoes – season with s&p and some oregano – keep heat to medium hi – stay close and stir – as the tomatoes cook – they will start to pop.  Sauté for about 15 mins/20 mins. Now add in about 1 c of the white wine and deglaze the pan – allowing the alcohol to steam off a bit….do not let it all evaporate. 

Remove from the heat and allow to cool for 5 min.  Now put the tomato mixture in the food processor – puree until smooth. – 30 seconds/1 min or so. 

Return the pureed tomato sauce to the pot – add in 1 cup of lite cream and simmer.

Place the pasta – in this case I would use either Rigatoni or maybe a Penne Rigate. (On Monday I used Gemelli – but we used that in yesterday’s recipe.!).

Boil the pasta for 8 mins or so – until aldente.

Add two ladles of pasta water to the sauce and mix. Strain the pasta and return to the pot.  Add two dollops of butter to the pasta and mix until the butter is melted and coated the pasta.

Now add a ladle of the sauce and a handful of the fresh grated cheese.  Mix well.  You will need to add another ladle of the sauce now.  Serve immediately - top with some more sauce and dust with some fresh shredded pargmegiana.

A chilled glass of the white wine finishes this nicely.

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