Slow Down Big Boy - Not Yet

Once again - the mkt kissed  2400 on the S&P and failed...ending the day at 2398......unable to get to 2nd base......the message -  'slow down big boy - not yet.....'
 
Stocks edged slightly higher yesterday -  The Dow +43, the S&P + 4, Nasdaq +5 and the Russell +3....volumes weakening as we move into the weekend -  despite the cowardly, horrific terrorist attack in Manchester, England, weak US eco data and continued uncertainty over the political landscape and the impasse over eco policies and reforms.
 
Macro data once again completely disconnected with reality as reports of late point to weakening data points vs. strengthening data points.....Yesterday - US eco data showed new single family home sales for April plunged from a 9 1/2 yr high - falling 11% m/m.......and manufacturing in Richmond fell to the lowest level since last September, never mind the marginal PMI numbers and a budget that is almost comical - never mind DOA (Dead on Arrival)......
 
Massive increases in defense spending and of course $1.8 bil (down payment) for a border wall - all at the expense of some safety net programs (Medicaid, food stamps and social security disability benefits) to name just a few.....Democrats led by Chucky Schumer and Nance Pelosi were quick to denounce it and Republicans were very cool to it....Senate Majority leader Mitchy McConnnell reminded us that the President's budget is a 'starting point' for the future discussion - it is not the end point - the Congress will take it into consideration and work from there.....so as expected - investors and the mkts completely ignored it.....I did not talk to anyone yesterday that thinks this proposed budget has any legs at all......
 
Micky Mulvaney - Director of the Office of Management and Budget (OMB) took to the podium to try and 'sell it' - saying that
 
"We're not longer going to measure compassion by the number of programs or the number of people on those programs, but by the number of people we help to get off those programs" -
 
Sounds all good right?  Except - where is the plan to get them off the programs?  Where are the jobs, where are the opportunities?  Is throwing them out on the streets his way of 'getting them off the programs'?  Does that really solve the problem or does it just create a multitude of new ones?  I'm not saying it's easy....but come on....let be realistic...Not Happening.
 
Now financials led the way yesterday...and why?  Well because the mkt is still expecting the FED to raise rates in June - and higher rates are good for the financials.....But I am beginning to wonder about that....Is the FED really about to launch a 3rd rate increase or will they surprise us and sit back to see how this whole thing unfolds.....Look - we're not getting those reforms that were supposed to ignite the economy and cause GDP to catch fire.....while also setting the stage for increased inflation... We are not getting super strong macro data, we are not getting an explosion in job creation,  so what's the rush?   Is she concerned that if she doesn't raise rates then she sends the message that contradicts what she and most of her posse has been saying all along?  .. Is it a better idea to sit back and watch the show?  (Understand that the mkt is placing an 80% chance of a rate hike in June  - so Yes,  I am in the minority here).
 
Oil - continues to also move higher as investors are now betting that OPEC will not only continue with the cuts when they announce their decision tomorrow, but that those cuts will deplete the glut in supply forcing prices higher.  Trump announces that he wants to sell oil out of the Strategic Petroleum Reserves (SPR) to raise some $16 bil dollars to help balance his budget - and if that is the case - that should have been interpreted as negative for prices - Yet the mkt ignored that as well...(drum roll please...)   Because what it really means is that we would be selling 74k barrels a day for 10 yrs.....it's a pimple on your a**.....so it means absolutely nothing.... But what it does mean is that we are no longer worried about being held hostage by OPEC - the oil embargo from 1973 is not happening again......We are now not only a producer, but we are a competing EXPORTER of oil......
 
Next up - the FOMC (Fed Open Mkt Committee) mins will be released today at 2 pm....and this should provide guidance about what the FED has up its sleeve.......Now we have had a number of FED speakers this week and the message has been clear......the tone remains hawkish and the expectation is for at least 2 more hikes this year......Now if you look at the latest PPI (Producer Price Index) numbers then yes - the FED can justify a hike next month....but that is just one measure in a range of measures that should be considered. 
 
Eco data today includes Mortgage Apps, and Existing Home Sales of 5.65 mil or a decrease of 1.1% m/m. 
 
Friday brings us the second revision to 1st qtr GDP and the expectation is for the number to be +0.9% up from +0.7%....but does it really matter?  NO.  GDP is still abysmal considering it has been 10 yrs since the start of the GFC (Great Financial Crisis).   Unless the number goes negative do not expect the mkt to react at all.....
 
Overnight  Moody's downgraded China credit rating.....to A1 from Aa3....whatever that means....and they raised their outlook to stable from NEGATIVE - so I'm confused....What exactly did they do?  Does it mean anything really?  They CUT the rating and RAISED the outlook....typical....keep 'em confused and argue from both sides.....Japan +0.66%, Hong Kong + 0.1%, China flat, and ASX +0.15%.
 
In Europe - mkts are lower - investors there reacting to the China downgrade...Moody's saying that
 
'Beijing will erode its financial strength somewhat in the next few years, hurting Europe...'
 
Not sure what you think - but I don't think so.. China isn't going anywhere....
FTSE +0.31%, CAC 40 - 0.18%, DAX -0.22%, EUROSTOXX -0.23%, SPAIN -0.18% and ITALY -0.46%. 
 
Overnight Gold backs off just a bit.....currently down 4 pts at $1.251/oz.  As it struggled to move UP and thru resistance at $1,253.  which is the convergence of both the 50 and 200 dma averages....and like I said earlier in the week -  If that happens - then look for gold to make a run for the highs of April - ($1,293) and if it fails - then look for gold to remain in the $1,230/$1,250 range.  

US futures are off 1 pt....The FED mins are in the spotlight......as investors/traders try to discern what clues they might find in those mins......Dallas Fed Pres Kaplan and Minn Fed Pres Kashkari both will be speaking later today after the close - so do not expect any mkt reaction.......My sense - is that we are not going anywhere and will remain in the 2380/2400 range.

Take Good Care
KP

Risotto w/Fava Beans and Pancetta 

Risotto is always an easy meal and is good for those who are vegetarians and or need to be gluten free.  This one celebrates the spring with fresh fava beans enhanced with pancetta.  – Truly a great dish.

For this you will need:  Butter, Olive Oil, Finely Chopped Onion, Finely Chopped Pancetta, Arborio Rice, White Wine, 6 Cups Vegetable or Chicken Broth, Fresh Shelled Fava Beans, Chopped Parsley, Grated Pecorino Romano Cheese.

Begin by heating the butter and olive oil in a heavy saucepan.   Add the onions and cook until translucent.  Add the pancetta and sauté for 3 or 4 mins…. Add the rice and stir until it is well coated.  Next add the wine, and stir continually over medium heat until it is absorbed.  Once absorbed add in a ladle of hot broth – stirring constantly until absorbed…Repeat - adding ladles full of hot broth, and stirring continuously.   About 10 minutes into the cooking time, add the fava beans and continue adding broth and cooking. You want the rice to be firm to the bite – but not hard.  Remove from the heat, add another dollop of butter and the pecorino cheese. Serve in warmed bowls and enjoy with your favorite white wine.

 

 
Buon Appetito.