Stocks Danced While Oil Surges

The Dow and S&P danced in place - after Tuesday sharp rally....The Nasdaq - rallied another 22 pts to end the day at 5,897  or just a hair below its all time high close of 5,901 as the biotech's (XBI) once again surge....this group is now up 4.5% since the failed healthcare vote last week...suggesting that the lack of reform is good for this group......along with some individual company news out of Vertex Pharma (VRTX) - which was up 20% yesterday - after they announced some positive results (study data) for their experimental cystic fibrosis drug.  

The broader mkt was helped by energy (XLE) now up 4% in 3 days as a decline in the pace of stockpiles suggests that the OPEC production cuts may finally be working - And if so - then look for oil to challenge what is now resistance at $51.33.  Look much of the recent rally in the past week is more technical in nature.....oil broke down and found support at $48/barrel....and now with the latest reports of declining stockpiles it causes more of a technical bounce....But in reality - nothing has really changed,  While OPEC is cutting production the US is ramping up and producing/exporting at a brisk pace and any uptick in prices will only encourage us to keep producing.....

Now some strategists will tell us that there is now a surge in demand - Come on!  Really?  I am not a believer in the uptick in demand story at all.... Demand is what it is - there is NO lack of global demand for crude and gasoline products  - if anything oil demand will fall off now as we move from winter to spring in the Northern Hemisphere - yet it will pick up in the Southern Hemisphere as they move from summer to winter....and gasoline demand in the Northern Hemisphere may increase as we move from winter to spring/summer  but will fall in the Southern Hemisphere  - I mean if the argument is good for the US then it is good for the globe.  If weather or seasons is a factor - then you MUST include weather and seasons around the world - so, in my opinion,  one cancels the other - but hey - what do I know? 

Anyway - where are we headed?  Well are investors/traders really willing to push prices to new highs in the face of congressional resistance to many of the Trump policies....?  And what will the FED do now?  They were looking to raise rates in concert with tax and economic reforms and if we don't get those reforms anytime soon - can the FED continue down this road?  Well yesterday we heard from Boston's Eric Rosengren who said that  some asset markets are “a little rich”, ( think stocks) while also suggesting that the real estate values are “pretty ebullient”. and this makes you think that the FED is concerned about various 'bubbles' - He went onto say that

"in order to deflate these different asset prices that are in a bubble would take more rate hikes than the three originally scheduled for 2017." 

 He intimated that it would probably take 4 rate hikes this year to slow down the mkts and pull them back a bit, stating that “rich asset prices are another reason for the central bank to tighten faster”.

First of all - there we go with that 4 number again.....this is starting to become a theme.....it started at 2 to 3 hikes in January and now we are hearing more of these bankers throw out 3 to 4 hikes in 2017......so let's see what they do....if we don't get reforms then is there analysis unchanged?  Would 4 hikes cause a mkt meltdown and if it does is the FED concerned about that?  According to Rosengren (and Kashkari)

"stock mkt values are not a driving force for monetary policy"   -

that is almost laughable because for the last 8 years - whenever the stock mkt has fallen anywhere from 5% to 10% the Fed has shifted their stance and become extremely dovish in their talk and in their actions, postponing rate hike threats again and again......I'm just sayin.....

Next up was San Fran's John Williams - and he is clearly calling for a pullback....saying that current stock mkt values are 'FROTHY' and that in order to correct this - traders/investors would HAVE to be disappointed in FED policy which really means that the FED wants to raise rates more than what the mkt expects to get that negative reaction and let some of the air out without causing a meltdown. 

The question now is - what is that number?  4? 5?  And if we don't get any reforms out of DC then investors will have to re-think all of the moves that they have made in anticipation... because the models will now to be re-calculated and the 'robots' will then react..... and this is where it gets dicey...because robots do not have the human sense - they just take in 'data' and then adjust accordingly to the data without experiencing the emotion of it all.....and it is the emotion, the human feeling that makes the mkt ALIVE......if we sterilize it (with robots) - then we kill it.......But that is a conversation for another day.....

This morning we find European mkts in standby mode....not doing anything really. as they come to terms with the reality of the UK exit.  There was no other mkt moving news overnight - so mkt remain quiet...FTSE -0.21%, CAC 40 - 0.06%, DAX +0.09%, EUROSTOXX -0.2%, SPAIN -0.08% and ITALY -0.2%.

US futures are down 3 pts in pre-mkt trading.....Eco data today includes the usual suspects....Initial jobless claims exp of 247k, Cont Claims of 2.03 mil, 4Q final revision of GDP - exp of 2% (which is a slight uptick from last month) and Personal Consumption of 3%.   There is also a potentially important event featuring President Trump and Economic Advisor Gary Cohn - expectations are that it is all about Tax Reform - and if so - then look for the mkts to be listening carefully.....because not matter the discussion - the mkts will now look for ACTION.    We remain in the broader 2,335/2375 trading range and have no real reason to break out on the upside unless we start to see ACTION from DC vs. just TALK.   

We will get 3 FED speakers today.....San Fran's Williams at 11 am, Dallas's Kaplan at 3 pm and NY's Dudley at 4:30 pm. 

 Take Good Care
KP

Campanelle w/Spinach, Sun Dried Tomatoes & Mascarpone Cheese 

This is a simple 20 min recipe.  It uses mascarpone cheese….for those of you who do not know what that is – it is a soft creamy cheese – it has a tingle of sweetness and is used in many Italian deserts.  But I have to tell you – it is very versatile and can be used in a number of ways in pasta dishes….and here is one for you…
 
You will need: Campanelle pasta (Italian for “little bells”),  Mascarpone cheese (room temp), zest & juice of a Lemon, s&p, olive oil, minced garlic, diced onion, chopped sun-dried tomatoes,  1 bag baby spinach, toasted bread crumbs and of course fresh grated Parmegiana or Pecornio Romano Cheese. 
 
Begin by combining the zest, lemon juice, mascarpone, and s&p in a bowl, whisk to combine.
 
Bring a pot of salted water to boil – add pasta.
 
While this is happening (you have like 8 mins) heat the oil in a skillet, add the garlic and diced onion and cook until fragrant.  Turn off heat and set aside.   
 
Cook the pasta until al dente, like 8 mins….do not let it get soft and mushy.  Strain reserving a mugful of the pasta water.
 
Return the pasta to the pot, and set over medium heat.  Stir in the garlic and oil – toss well. Now add the mascarpone and lemon mixture, sun-dried tomatoes, and spinach.  Add back about ¼ c of the pasta water and toss  together until the spinach has wilted and everything is piping hot, adding a little additional pasta water if needed.
 
Serve immediately in warmed bowls topping each bowl with grated cheese and some toasted breadcrumbs – do not overdo. 
 
**you can add some texture to this dish by sautéing some seasoned diced chicken in the pan with the garlic and diced onions.  Add the chicken when you are putting the whole dish together in the pot.

 

 
Buon Appetito.