Stocks getting slammed: How hot is hot?/Try the glazed chicken breasts

• Tech got crushed yesterday and is getting crushed again today.

• Investors now taking notice and re-pricing the broader market.

• Yields and Inflation now front and center in investors’ minds.

• Fed Chair Powell to address Congress today…. Everyone will be listening.

• Oil up 5% in 2 days, and Bitcoin down 22% in 2 days.

• Try the Glazed Chicken Breasts.

Tech stocks got crushed yesterday….as valuation concerns come to the top of the agenda after bond yields once again edged higher…trading up to 1.375% from 1.344% on Friday.  The dollar (something we do not talk about enough) continues to get beaten up (think easy money…)  helping to support the commodity complex across the board.  Lumber, silver, copper, gold, oil, etc.…all higher on the day.  Stronger growth yes, but now the talking heads are talking about ‘faster inflation’ – and that will be the second ball to drop.  Because as much as the FED says that they are willing to let inflation run ‘hot’ – who is defining ‘hot’? And how hot is hot? 

Now what was remarkably interesting was the continued advances of both the Dow industrials and the Dow transports…. are you following me?  Recall what I said in yesterday’s note about Dow theory….and what both the industrials and transports are trying to tell us. As they both advance – and make new high after new high – the theory says that there are better days ahead…. (at least for the Dow names!).

But like I pointed out and have been pointing out – the high growth names are about to get hammered – if rates continue to rally and inflation fears heat up.  And that could not have been more evident in the action yesterday.   Both the industrials and transports moved higher…. the Dow up 27 pts or 0.09% while the transports advanced 107 pts or 0.81% - all while the S&P lost 30 pts or 0.77%, the Nasdaq got crushed – down 341 pts or 2.45% and the Russell gave up 15 pts or 0.69%.    But we knew this coming into the day…. Asia and Europe were lower on fears of higher treasury rates and that was causing the tech names to get hit…. I pointed that out in my note yesterday morning.

In any event – it is what it is….and the pullback that I (along with others) have been discussing may now be in motion….as investors are now seemingly drawing that line in the sand.

BA – which lost $4.75 or 2.2% weighed on the down taking 30 pts out of the index – MSFT, CRM, NKE, AAPL, HD, INTC, were also all weaker took another 170 pts off the index…. while CAT, DIS, AXP, V, UNH, CVS, DOW, TRV and IBM supported the industrials adding 240 pts – so it was a game of cat and mouse again today.  In any event – we are beginning to see that shift in investor psyche.

The eco data which was about regional FED surveys was better across the board -and that may have helped a little bit support both the industrial and transportation complex.  The Dallas Fed Manufacturing Index was up 17.2 vs. the expected 8.5 estimate and 7 in January.  New orders, new shipments, capital expenditures all stronger while wages and employment ticked a bit lower, but the trend is still moving in the right direction. 

 Today we are going to get data on Housing prices, consumer confidence and the Richmond Fed Manufacturing Index.  Analysts will be looking to see if we get the same kind of data out of Richmond that we did out of Dallas.

We are also going to be paying attention Capitol Hill …because Fed Chair Jay Powell is due to appear in front of the House Financial Services Committee in his semi-annual Humphrey Hawkins testimony – Expect to hear more of the same – in terms of what the FED thinks should happen…. Think a massive relief package, a big infrastructure package and the promise to keep rates at zero for months to come.  The question is – is the market tired of hearing about all of this?  Does it make a difference anymore how much money we throw at it?  And what happens if the market does not get exactly what it wants?  Oh boy…. remember those two-year-old temper tantrums?  Need I say more?

Look like investors/traders/analysts/strategists get more comfortable about the coming recovery – treasuries have sold off – which makes some sense – but when this happens, yields move up and when yields move up bonds become an attractive alternative to the riskier growth names and that is what we are seeing now.  Think of it this way – if you are getting next to zero in yields on gov’t bonds (which is what you have been getting) then you are willing to take more risk with stocks, but as yields begin to increase you may reconsider that ‘risk equation’ and be less willing to ‘pay up’ for those same growth names.

So here is the next question – what happens when the 10 yr. hits 2%?  Well first it will be that line in the sand that causes a broader pullback, but then what happens if the FED comes to the rescue and imposes yield curve control (YCC).  YCC forces the FED to focus on the prices of bonds vs. the quantity of bonds as it does in Quantitative Easing (QE).  And so, they will commit to buy ‘whatever’ it takes to keep bonds at a specific target price and once that happens and the market accepts it -that target price becomes the market price – and the FED is the buyer of last resort, because private buyers will not bother competing – because the price they are willing to pay is artificial…. Capisce?  And this is where it will get interesting…. because in the end – we are in uncharted territory…. we are flying by the seat of our pants…. But do not worry – the FED tells us not to worry…. until inflation rears its ugly head and surges past 2% on its way to 3%, 5%, 8%, 12%....do you see what is happening here? And do not tell me that it cannot happen – for those of you too young to remember – long term interest rates were 21% when I was 20 years old….my first 30 yr. mortgage was 15.5% on $196,000 my monthly payment was $2556 - so do not tell me it cannot happen or that I do not get it – because it can happen, and I do get it….

This morning US futures are down again…. but this time – all the indexes are under pressure.  Dow futures are down 55 pts, S&P’s are off by 26 pts, the Nasdaq is getting crushed again – down 245 pts and the Russell is off by 25 pts…Home Depot just reported and as expected they beat, and sales surged by 25% - yet the stock is falling along with the broader market.  Commodity stocks getting a boost as the dollar weakens further.  The chatter now is that investors have already priced in so much of the stimulus that we are still talking about…so what else is left to do?  Oh right, reprice stocks based on the idea that global central banks are going to begin to reconsider their next move – the timing of which is completely uncertain….and so the pullback we have been discussing appears to be happening….and again that is not a reason to despair…. it is though, a reason to think about your portfolio.  And like I have been saying for weeks now – there was no reason to chase stocks higher and there is still no reason to chase stocks higher….so be patient.  Pick the names you want to add to or new names that you would like to pick up…. The tick up in 10 yr. treasuries is taking root and it will spook the markets – which will create opportunity in a broad range of names.  So, if you are a long-term investor – then get ready…. your time is coming….

European markets also moving lower –At 6:30 am the FTSE -0.55%, CAC 40 -0.38%, DAX -1.44%, EUROSTOXX -1.06%, SPAIN +0.18% and ITALY -1.09%.  ECB President Christine Lagarde saying that the ECB is closely monitoring long-term nominal bond yields while the Eurozone reports that inflation rose by 0.2% m/m.  Investors in Europe listening intently to what Fed Chair Jay Powell has to say today and what that may mean for the US treasury markets and the US stock market.    

Oil – which surged higher yesterday is up again today…. WTI now trading at $62.18 – which is up nearly 5% in 3 days…as we await the re-opening of refineries in Texas – which they now say is taking a bit longer than originally expected…….and the shale producers are telling us that it will take at least 2 more weeks to restart output due to the frozen pipes and power supply interruptions.  In addition, GS is now calling for $75 /barrel by the fall.  (talking their book.).

Bitcoin – getting slammed down more than $9k at $45,500…. after Janet Yellen appeared to switch gears and warn us that Bitcoin is ‘extremely inefficient’ and is ringing the alarm bells about its legitimacy and stability……saying.

“To the extent that bitcoin is widely used as a transaction mechanism, I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.” 

Which is a bit surprising considering all the Bitcoin bulls would dispute that comment – in any event – it is getting crushed now. 

The S&P closed at 3876 – not only testing last week’s low of 3884, but then breaching it to trade as low as 3874 before gaining back 2 pts to end the day just off the lows.  Today’s action is suggesting a further shakeout on what could be a test of trendline support at 3790.   You can feel the angst in the markets, with some looking to ring the cash register while others are trying to pick a bottom….  So, for the past couple of days, I have been asking:  How long will investors be able to ignore the threat of rising rates bubbling beneath the surface as we keep telling ourselves that it is all OK?  I guess we are finding out now….

We remain in the channel of 3771/4040.  You know how I feel - the market feels tired – and the attempts to advance feel less robust…. There is no reason at all to chase anything.  

Stick to the plan, trim where necessary and put money to work in some of the underperformers…. Stay awake…. this is not the time to doze off.

Grilled glazed chicken breasts

For this need boneless, skinless chicken breasts,
For the Brine you need:   ¼ c of salt, ¼ c of sugar.
For the glaze you need:  2 tbls cider vinegar, 1 tsp cornstarch, 3 tblsp Dijon mustard, 3 tblsp Honey, 1 crushed and minced garlic clove. 

Mix the vinegar and cornstarch together - add the honey, mustard, and garlic.  Now bring this mixture to a boil and mix until thickened – maybe 1 min.  Remove from the heat and set aside.

Dissolve the salt and sugar in 1 qt of water.  Add the chicken breasts, cover, and refrigerate for an hour., Remove the chicken and pat dry with paper towels. 

Heat the grill (or the grill pan) – Rub the breasts with just a bit of olive oil and season with pepper.  Place on the grill (or the grill pan).

Cook for 2 mins and then flip – brush the grilled side with the glaze, repeat – 2 mins then flip and brush with the glaze.  If you have thin sliced breasts – then make sure to not overcook them If you use thick cut breasts, then you will flip and glaze twice on each side.  Remove and set aside.  Serve with a large mixed salad dressed in lemon and olive oil seasoned with s&p and oregano.  You can serve this with roasted butternut squash. Delish.