Stocks continue to rally back, earnings are now the focus, Delta who?

Stocks continued to surge extending the gains after the Monday temper tantrum…. all while the delta variant – the reason cited for the Monday clubbing – continues to wreak havoc in some parts of the world. Investors have suddenly decided to push that to the back burner and instead focus on the ‘banner start’ to earnings season….which is really curious to me…..and many others….Because those ‘banner’ earnings are not a surprise or at least should not have been a surprise….I mean we’ve been talking about the ‘expected spectacular’ rise in earnings for months now…and the first two weeks of earnings season has proven those expectations to be correct….corporate reports have beaten on both the top and bottom lines and the news couldn’t be better! So far, we have better than 90% of reports beating on both the top and bottom lines…which is far above the usual 72% - 75% beat.

10 yr. treasuries surged in price on Monday and the selling intensified, causing many analysts to warn of an economic slowdown, that the move into treasuries meant that the bond market was forewarning of tougher times ahead…..Yields plummeted as treasury prices rose and stocks fell….the VIX spiked and the tone of the day was definitely negative….….It finally felt like the markets were recognizing many of the other concerns that have been simmering on the side burner….Inflation, deflation, stagflation, FED policy, interest rates, and what no one is yet talking about – the DEBT Ceiling…which we will hit on July 30th….

Now, the move on Monday was not panic at all, in fact I would argue that there was some welcomed relief….as some investors and strategists have been predicting…. myself included. The pullback was the beginning of that re-pricing and the recognition that valuations have become stretched…. or so we thought….

Tuesday and again yesterday saw the tone change dramatically…. not sure what happened between Monday at 4 pm and Tuesday morning…. all the concerns gone…and suddenly the media was focusing on all the positives – turning the narrative completely around…. (Think those banner earnings). Stocks rallied and then rallied again on Wednesday….as buyers tripped over each other trying to ‘get in’…. the same way sellers were tripping over each other on Monday to ‘get out’.

And those rising treasury prices that suggested tougher economic times ahead – think labor shortages, supply chain shortages, non-transitory inflation, and the potential start to a FED tapering apparently are incorrect. Not an issue at all…. The massive move into treasuries says nothing about the next 6 months…. Ok…. Which is curious because that is what they all tell us when yields fall….and prices rise….it means that the bond market is expecting the economy to cool…. that was until Tuesday and then Wednesday and again today.

By the end of the day the Dow was up another 290 pts or 0.8%, the S&P’s up 36 pts or 0.8%, the Nasdaq up 134 pts or 0.9% and the Russell adding 40 pts or 1.8%. As you might expect – every sector except Utilities and Consumer Staples were higher…. (They are more defensive and when the market is going up, investors go for growth and not boring defensive).

This morning US futures are UP again…. Dow up 90 pts, the S&P’s up 8, Nasdaq up 30 and the Russell is up 4 pts. 10 yr. Treasury yields have rebounded a bit and ended the day at 1.29% - suggesting that all those treasury buyers that were concerned on Monday have all changed their minds and now are no longer concerned, …the VIX fell another 9% leaving it at 17. 63....Oil which had fallen to $65.56 at one point on Monday is now trading back at $71/barrel…. do not tell me you are surprised….

But look, I don’t want to be a party pooper, but all of this erratic behavior, with prices suddenly collapsing and then surging is not normal…..it suggests to me that we are in for more volatility ahead….Look – we have not had as much as a 5% pullback since October in the broader market….(But we did see it in the Transports…..- they were down 12% off the May highs until yesterday…when they rallied back enough to leave them only down 9%) …. and while there may not be an alternative at this time, let us not kid ourselves….short term risk is increasing, the August FED meeting at Jackson Hole is one month away…and if we think what is going to happen happens – then we can expect Jay Powell to announce the beginning of a FED taper beginning later this year… (or early next) …. and we are about to enter what is a seasonally weak time for the markets… So, this is not the time to fall asleep…. And while many thinks that the move on Monday was a warning to the FED to not move, it will be interesting to see who is really driving the bus…. Because all the talk over the last 3 months has been about when not if.

We are going to get about 25 reports today…and they include – LUV, T, AAL, NUE, BX, NEM, DOW, AEP, ABT, FCX, UNP….and if the recent behavior holds true you can expect 22 out of the 25 to beat….so do not be surprised…

Eco data today includes – Chicago Fed, Initial Jobless Claims and Continuing Claims, Leading Economic Index, Existing Home Sales, and the Kansas City Fed…

In Europe – Markets are all higher…. on a rash of better earnings…even as the Delta variant continues to spread across the region. In addition – the ECB (European Central Bank) is set to announce their latest thoughts on policy. Recall that they hiked their inflation target to 2% from ‘below but close to’ and this is expected to allow them to let inflation overshoot that level…. (Much like the FED is doing) and they are set to tweak their guidance setting the stage for a change in policy in the months ahead (FED anyone?) …. Get it….and remember – Christine Lagarde told us that the ECB would not make a move until the FED made a move…. It is all very coordinated…as it should be…. As of 6 am – all market centers are up about 0.5%.

Oil is trading back up at $71/barrel…. up 4% even as inventories rise…. SURPRISE! Demand is alive and well…. the panic over the Monday drop is nothing but a bad memory …. not happening…. they want oil in the $70-$80 range – period the end.

Bitcoin is back at $32,000, Ethereum is trading at $2,000 and Doggey coin is trading at 18 cts….the B Event yesterday was uneventful really….People had to listen to Lonnie Musk tell you that he ‘may pump, but he doesn’t dump’ – and while he wanted to get a big laugh out of that – it fell flat on its face….Cathie Wood had some interesting things to say but either way – many still believe that the next move in crypto’s is lower….which doesn’t suggest anything other than a technical correction in the asset before we see another significant surge up.

In any event – the rotation continues. So, there is no reason to change your whole portfolio. Stick to the plan and focus on the goal and not on the short-term noise.

The S&P closed at 4,358 – as it digests the recent turbulence…. we remain within the trading band, so nothing really has changed. As usual – if you need to – tweak your portfolio to keep it in balance and add new monies to underperformers…. If Monday taught you anything – it is that you should not be emotional…but rather be a steady hand in turbulent waters.

Jack daniels chicken thighs

You will need: Chicken Thighs (I prefer on the bone), but you can use boneless. brushed lightly with peanut oil and seasoned with s&p.

For the Sauce - mix: 1/2 c of soy sauce, 4 tablespoons vinegar, 1/2 c of Jack (Daniels), 1/2 c of brown sugar, 3 scallions, grated ginger - like a tblspn, 4 garlic cloves - smashed and chopped. Chop the scallions and mix all the sauce ingredients together and set aside. Taste - make any small adjustments. Season the chicken with s&p – set aside.

Heat the grill to high.... add chicken - careful not to burn - cook about 4 mins on each side - or until lightly browned - .... remove and place in a metal roasting pan.

Turn heat down to low. Add the sauce to the pan and return to the grill (leaving the chicken in the pan on the grill - capisce?) - stirring to coat the chicken pieces well. Continue to cook until the sauce is reduced to all but a glaze on the chicken. Remove and serve.

If you are doing this in the house - then heat a sauté pan to high with a bit of the peanut oil and add chicken pieces cook until lightly browned. Reduce heat and add the sauce. Cook uncovered until only a glaze is left.... serve immediately. Enjoy.