• WMT & HD beat, investors go crazy for retail.

  • Oil and gold churn, Treasury yields rise.

  • Housing starts decline by 9% - reiterating the trend.

  • Capacity Utilization is pushing inflation.

  • FOMC mins due out at 2 pm.

  • Try the Roasted Tomato Risotto.

Housing starts collapse…down 9.1% vs. the expected -2.1% (recall that the NAHB index came in at 49 on Monday – the lowest it’s been since the GFC – great Financial Crisis).....Building permits were weak at -1.3% while Industrial Production rose more than expected at +0.6% and Capacity Utilization came in at 80.3% more than the expected 80.2%....remember – anything north of 80 is considered inflationary. 

Treasury yields rose but remain inverted and will likely remain that way for the foreseeable future – Do what you want with that information. Oil – which breached support at $89.45 on Monday remains just below the trendline at $86.51.  On Monday I said that if we breached support then it is possible to see oil trade down to $84.50 ish/barrel…. a level last seen in February – before Vlad invaded Ukraine. 

There are conflicting perspectives on why we have seen the weakness – the most common is demand destruction caused by the coming recession as well as a weakening Chinese economy (China being the largest importer of oil).  There is also the idea that the Saudi’s are now ready to ramp up production and that is all adding to the angst…In any event – Year end targets are all over the place…. ranging from $60 to $150+.  The bet now is that we will see $60 before we see $100…. 

Gold holding the line at $1787/oz…. let’s see what happens today after the FOMC mins are released at 2 pm…. Will gold bugs react to what we learn (if we learn anything new).  It’s kind of in a funny place – below trendline support but holding tight – unsure of what’s next. 

Stocks had a mixed reaction by the end of the day…. the Dow advanced by 240 pts, the S&P rose 8 pts, the Nasdaq lost 25 pts, the Russell gave back 1 and the Transports rose 112 pts.

WMT and HD – both killed it…. beating expectations and leaving investors wanting more…. recall – it would have been a disaster if WMT missed the slashed estimates…. the stock gained 5% on the day.   HD also rewarded stockholders by also beating the estimates…. rising by 4%.  Both names are Dow members and that helped the Dow rise by 240 pts. 

The Retail etf – XRT was HOT, HOT, HOT too….…rising 4.2% as well….and think of the other names in the group…. TGT +3.8%, KSS +6.5%, COST +1.2%, DGN +1.1%.  The high-end retailers were up as well – JWN + 7%. M +6%, DDS +3.7% and TPR +3.5%... Now – look at the consumer sector – both Consumer Discretionary – XLY +1% and Consumer Staples – XLP +1% - which is odd…. and that speaks to two things….One – the staples remain a defensive play – it is flat on the year -  while the discretionary sector tells you investors went shopping for bargains on the back of the WMT and HD reports….…..that etf (XLY) is down 16% ytd – rallying higher after being down more than 34% in June….investors see this sector as an opportunity IF they believe that any coming recession will be muted and they believe the worst is over…..…they can pick up what appear to be bargains – But if the coming recession is long and deep – discretionary spending will be the first thing that gets cut and the discretionary sector will come under pressure again.  Just go in with your eyes open.  

Tech, Healthcare, Energy and Real Estate all ended the day lower, while Industrials, Utilities, Financials, Communications and Basic Materials ended the day higher. Nothing dramatic to report. 

This morning we heard from LOW’s, and they beat and reiterated that it expects to see fy earning so $13.10 - $13.60/sh…they also expect to see 2023 expected sales of $97-$99 billion….and the stock is trading higher in the pre-mkt…up 3% or $6.80/sh to $221.   

TGT is due out as well…and remember – like WMT -TGT pre-announced (warned) and lowered estimates….and they MISSED…. how dumb was that?  They had the chance to rewrite the play book – like WMT and they STILL missed…. now that’s laughable… the are taking a big hit in trying to unload all of that unwanted inventory……. Traders take it down, then up and then down again…. currently trading down 1% in the premarket.

TJX is due out before the open.

Eco data today is all about the consumer and retail sales…. Advanced retail sales m/m are expected to be +0.1%, while Retail Sales ex autos and gas is expected to be up by 0.4%.... and then at 2 pm – we will get the latest FED mins…. lots of speculation about what they will reveal…. Will they show a FED on the edge of a pivot?  Will they show a FED committed to hiking rates aggressively to tame inflation?  Or will the mins leave it vague…. using language that can interpreted in a number of ways…Will we see evidence of QT?  Clearly, the recent market action is expecting a pivot off of 75 bps to something different – think 50 bps.  That would suggest a softening of thought….and would explain the recent double-digit rally in stocks…. This is where I say – be careful…. the messages remain mixed at best.

Look – I suspect that the minutes will have a hawkish tone and I also suspect that we will find out that there was a lot of conversation about a 100 bps increase for July – which ended up being 75 bps….I also expect the tone to remain elevated as ‘inflation is their focus’ and we heard that from 5 different FED mouthpieces in the past 2 weeks.  But – let’s see…. Tomorrow – we will hear from Ester George (Kansas City) and Neely Kashkari (Minneapolis)….

This morning US futures are down…. Dow down 150 pts, S&P’s down 30, Nasdaq off by 110 and the Russell down 14 pts.  No specific reason other than today’s economic data and FED mins.  A pullback in the market would not be out of line after the 16% rise in the S&P and the 18% rise in the Nasdaq over the past 4 weeks…. all as investors expect the Fed to pivot…. Which I do not. 

In Europe – stocks are down…..the energy crisis across the zone is getting worse – Nat gas futures jumped by 5% and inflation in the UK jumped to 10.1%....up from the expected increase of 9.8%....so inflation is NOT coming under control in the UK nor in Europe as a whole…..so expect rates to continue to move higher at the next BoE and ECB meetings. At 7 am – European stocks are off between 0.5% - 0.75%.

The S&P ended the day at 4305 up 8 pts and piercing the next century mark.  We traded as high as 4325 – just 10 pts shy of overhead resistance…. futures action suggest that we will back off a bit and digest….and wait for the FED mins….  I think this rally is a bit long in the tooth, but that doesn’t mean it can’t go higher…..In any event – I think we are in for more chop in the weeks ahead…September and October tend to be volatile months and the final two weeks of August tend to be lower volumes causing exaggerated moves in both directions. We remain in the 4115 / 4335 trading range.

Roasted cherry tomato risotto

For this you need:  3 cups Arborio Rice, 1 stick of butter, olive oil. 1 Shallot and 1 sweet onion (chopped), 3 cloves of garlic (chopped), fresh basil – minced, s&p, ½ cup white wine (Pinot Grigio works well), 10 cups of Chicken Broth (hot) and fresh grated parmigiana cheese (as much as you want) ….

Preheat oven to 350 degrees.

Clean and halve the cherry tomatoes.  Toss with olive oil, garlic, basil, salt and pepper. Spread over a baking sheet lined with parchment paper.
Roast for 25 minutes.

While that is happening take a large heavy bottom pot and melt the butter with a splash of olive oil over medium heat.

When butter is melted, add the chopped shallots and onions. Sauté for 2-4 minutes until translucent.

Next add the rice and stir to coat thoroughly with your butter, oil, onions and shallots and then continue to sauté for another minute or so.

Add your white wine and stir until it is completely absorbed.

Next, we begin the process that makes risotto creamy. Add a ladle of your hot chicken broth and stir constantly until it is absorbed. Repeat until you have used most, if not all, of your broth; and when your rice is tender but not mushy.  You DON’T need to use all of the broth if the rice is tender.  You don’t want mushy rice.

At this time, remove from heat, add the parmesan cheese, fold in your tomatoes (which probably came out of the oven 5 minutes or so ago) and serve immediately.

General Disclosures

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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