Tech earnings power stocks higher (Be careful)

• Markets march higher…. TECH is in focus.

• Saudi’s kick off the Future Investment Initiative – the message – expect oil to go higher….as production falls…. hysterical because the world is awash in oil.

• The VIX continues to fade and that is a warning sign.

• ICE Partners with MA and crypto’s get a boost.

• Try the Chicken Milanese.

And the push higher doesn’t stop….and while they appeared a bit weaker in the morning – investors pushed them decisively higher by end of day….at this point it feels way overbought to me, causing me to become even more cautious when allocating new money, but money will go where investors find opportunity….and they are still finding plenty of opportunity in stocks. (Again, because there is no alternative).    The Dow and S&P made new closing highs, rising 64 pts to close at 35,741 and 22 pts to close at 4566 respectively…. the Nasdaq rose 136 pts leaving it just a whisker below its all time high, the Russell gained 22 pts and the Transports added 102 pts.

The excitement was all about TECH earnings…which make up about 30% of the S&P….(so that is significant) and many are expecting nothing short of ‘robust’ earnings – helping to push the S&P – now up 22% ytd….even higher…..remember – Tom Lee of Fundstrat is calling for 4800 by year end  - which would be another 234 pts or 5% from here….feels just a it rich for me considering everything else that is brewing.

And what exactly is that?  Inflation, massive supply chain shortages, difficult labor shortages, surging demand for energy – which is suddenly in short supply and that is sure to cause unrest in some parts of the world.  What I think is interesting now is that some analysts and strategists (myself included) have been concerned about exactly what we are seeing now, have been warning about it, have been writing about it – yet the group think (FED and Administration) was that it wasn’t happening…. remember the word ‘transitory’? 

Well now you have nearly every CEO detailing price pressures in their forward guidance,  You have inflation running at better than 5% on an annualized basis, you have the FED Chair who is acknowledging that ‘maybe’ inflation will last a bit longer than anticipated, You have central banks around the world warning of rising inflationary pressures in their economies, You have energy demand rebounding so strongly that now you have some warning of energy shortages….which will surely cause another set of global issues …..all while the US, Saudi’s and OPEC + have enormous supply….and could easily help to stop this foolishness.

Today, The Saudi’s kicked off the 5th edition of ‘the Future Investment Initiative’ – which is a non-profit organization run by the Saudi Public Investment Fund…..and what we heard is not so bullish for the global economy…..rising energy prices are here to stay and that will pose serious challenges to the global economy and will in some cases raise the risk of social unrest…..Steven Schwarzman of Blackstone telling the crowd that.

“We’re going to end up with a real shortage of energy…it is going to cost a lot more and when that happens, you’re going to get some very unhappy people around the world, in the emerging markets in particular” .

This followed comments by Aramco’s CEO Armin Nassar – who told the crowd that output capacity is dropping quickly – think about that for one minute (recall during the prior administration there was so much capacity that oil prices were in the $30 range) yet now they tell us that output capacity is dropping quickly as gov’ts and investors shift away from investing in fossil fuels because of this crisis being created in climate change…..the issue here is that the world is not ready to convert to renewable energy yet and most likely won’t be for at least 2 more decades yet the push to slow energy production is top of the agenda and that is going to create a lot of unintended consequences…. I just think it is interesting that we had enormous supply when oil was at $30 barrel, but are now experiencing a shortage of supply when its approaching $100 barrel?  In fact – that makes no sense at all unless the shortage in supply is being caused by artificial constraints. But that is another issue.

And the best performer yesterday was?????  Bingo! Energy – with the XLE rising by 1.5% taking its ytd move up more than 55% - by far the leader of the pack.  Behind energy we have Financials XLF up 37% ytd, Real Estate up 30% ytd, followed by Consumer Discretionary, and Tech each up 22%, Healthcare, Industrials and Basic Materials and Communications all up about 18%.  Utilities and Consumer Staples trailing the others significantly – only up 6% and 5% respectively.  The Value trade (SPYV) is up 20% while Growth (SPYG) is up 23.5%.

Onto the tech earnings…. FB reported after the bell earnings per share of $3.22 vs the $3.19 cts…so that was a modest beat, Revenues came in at $29.01 bil vs. the expected $29.57 bil – so that was a bit of disappointment…. while average revenue per user (ARPU) came in at $10 vs. the expected $10.15 also a disappointment.  Yet – traders took the stock UP in the afterhours session – Why?  Because FB has lost 16% of its value in the past 2 months as the drama surrounding expected lower ad sales and the explosive whistleblower drama over what Zucky and Sandberg knew about how addictive practices at FB and IG have negatively impacted users all while enriching them….so now that the earnings are out, the trader types are making a bet that they will see it bounce of the trendline and move higher… and that is what it is doing…this morning in the pre-mkt we are seeing quoted up $10 at $337/$338. 

Today we will hear from GOOG and MSFT after the bell and the expectations are for both to report ‘robust earnings’ Analysts are expecting GOOG earnings to come in 43% higher over last year while MSFT is expected to get a boost from its Azure business line.  GOOG is down 7% from its September highs while MSFT is kissing new all-time highs….so if it works out the way everyone thinks, you might see traders take GOOG up and push MSFT down after the announcements….In any event – for the long term investors it is a non-event –  You own them for a reason….I doubt very much that today’s announcement is going to change the fundamental story of either of them.

In addition, we are going to get earnings from LLY (earnings missed small, but revs are up, and full year guidance is stronger), GE, UPS, HAS and V.

Yesterday ICE rallied by nearly 3% after news hit the tape that they are partnering with Mastercard in a move that will allow cardholders to integrate cryptocurrencies into their services…. ICE’s spinoff – BAKKT will provide the custodial services for the crypto assets….and this is giving even more legitimacy to the future of crypto’s.

Amazon is due to report Thursday evening after the bell. 

Treasury yields are yielding 1.625% which was just down a hair on the day – as it consolidates before moving higher into year end.  The VIX also backed off as stocks pushed higher – ending the day at 14.93.….and this is making me become even more cautious…. because every time we get to these levels – something comes along that causes a spike in the VIX and pressure on stocks.

US futures are up big this morning…. Dow futures ahead by 125 pts, S&P’s up 16 pts, the Nasdaq up 84 pts and the Russell is ahead by 9.  All the talking heads pushing the slew of tech earnings…. that are coming.

DC is paring back its stimulus plan from $3.5 trillion to $1.5 trillion and pushing for a broader ‘wealth tax’ which appears to be gaining ‘some speed’…. which is also interesting because there is still no clarity on how they expect to pull that off- - What is the very DEFINITION of income....that is now the question.…. but we are about to find out…. and then we’ll see how much support it gets…. Just not sure how you tax unrealized gains without allowing for unrealized losses.

European markets are also higher this morning…on the back of strong earnings…. There was no eco data to drive the action…. at 7 am – all markets across the region are up between 0.5% - 0.9%.

Bitcoin is trading at $62,700 while Ethereum is at $4,200.

The S&P ended the day at 4566 – ending the day at another new high….and it looks like we are about to make another new high today…if the action this morning is any indication……While a rising market makes everyone feel good, don’t get too euphoric just yet and keep your eyes on the ball….   Next week’s FED statement will be interesting…what will change this month in the narrative?  What language will Jay Powell use to define the next phase of monetary policy….and then how will investors react.  I will say- he has done a good job so far, but it is clear now that the future is a bit ‘less clear’…. (Cloudy might be a good way to define it).  Just sayin’.

The trendline suggests that we won’t hit resistance until 4700 and we can find support is now at 4440. 

Chicken Milanese

Topped w/Arugula, Chopped Tomatoes and Grana Padano.

This is a 'simple dish', easy to make and takes no time at all.

For this you need: Chicken cutlets - pounded thin, homemade Italian breadcrumbs, Arugula, Red Onion and Shaved Grana Padano Cheese, Eggs, flour.

You begin with pounded chicken cutlets. Rinse under cold water and pat dry with paper towel.  dredge the cutlet in flour, then dip in egg wash (scrambled eggs before you cook them) .... then cover in the homemade Italian style breadcrumbs and set aside.

When completed - heat up olive oil in a baking dish under the broiler... (. being careful to watch as the oil will ignite if it gets too hot before you begin cooking.)   Dip one side of the breaded cutlet in the hot oil and flip to the other side and broil - 3 to 4 mins.  While broiling prepares the Arugula for the finishing touch.

Mix the arugula with the chopped tomatoes and red onion - season with s&p and dress with fresh lemon juice and toss.  

Flip the cutlet and broil the other side. When done remove from oven and place on center of warmed plate.  Now using salad tongs place the Arugula salad on top of the cutlet top with the shaved Grana Padano and drizzle with olive oil.