The S&P closed at 2747.30 – So today’s circuit breakers are:
Level 1. 192.31 pts (7%) or 2554.99
Level 2. 357.15 pts (13% total) or 2390.15
Level 3. 549.46 pts (20% total) or 2197.84
And BOOM! Investors couldn’t buy stocks fast enough….
Enter stage left…. the paparazzi got a hold of Treasury Secretary Stevie Mnuchin – on the train to Philly to ‘tour the US mint’….and when pressed about the economy and all of the concerns that seem to be simmering on the back burner – his response was to ‘brush aside any signs of nervousness at all……rising prices? – NOT TO WORRY, increasing debt load? – AGAIN, NO WORRIES, Trumps economic agenda to cause inflation? – DON’T BE RIDICULOUS….and the kicker –
“You can have wage inflation and not necessarily have inflation concerns in general”
Well if that was the case – then why did the mkts react so violently to the increasing wage data from the NFP report at the beginning of the month? Did everyone just misunderstand the gov’t issued report? Did every analysts/strategist get it wrong? Concerns that rising wages will have ZERO effect on inflation were overblown? And the wild card – new FED chair Jay Powell and what he may be forced to do to ‘slow it down?’
And if you read between the lines….’not necessarily doesn’t mean it won’t happen – it just means it MAY NOT happen, but IT COULD happen’ – So the voice inside Stevey’s head says –
I’ll just ride the fence and try to jawbone the mkts higher as I downplay the risks of another potentially swift and damaging reaction…. Of course, you will…. all that good GS training you got…. suggests that no one else has a clue….
Right from the pre-mkt trade data thru the opening and closing bells – the mkt marched higher….by the end of the day – the Dow had soared by 1.5% or 347 pts, the S&P surged by 1.6% or 43 pts while the Nasdaq was the day’s real winner – soaring by 1.77% or 127 pts as investors loved everything ‘tech’…..So – as of Friday the Dow is UP 2.3%, the S&P is ahead by 2.7% and the Nasdaq is way out in front (again) and is UP 6.29% – ytd…..and that itty bitty (11%) correction and tantrum that we had – is nothing but a distant memory……
And this morning – US futures are pointing higher yet again…. over the weekend and this morning on CNBC’s Squawk Box – we heard from Uncle Warren (Buffet) and while he was his usual low-key self – he did highlight a couple of key issues….
One – he did NOT support tax reform – BUT the truth is that the new tax law is a huge benefit to Berkshire Hathaway (BRK) and is a ‘huge tailwind for businesses’. The tax reform package delivered $29 bil to his bottom line on top of the $36 bil from operations. And two – he now has about $120 bil – give or take $4 bil – to spend – BUT he ‘can’t find anything reasonable to buy….’ saying
“…. virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high…. Berkshires goal is to substantially increase the earning of the non-insurance group. For that to happen, we will need to make one or more huge acquisitions….”
Oh – so now you think the mkt will come in? Do you really think the mkt is gonna sell off on that news??? Ah…. think again sports fans…. Futures are surging – we broke thru resistance at 2730 on Friday – closing at 2747 and with futures on fire this morning – we’ll be kissing 2800 soon enough……
I mean – why should anyone be concerned that the mkt suffered a stroke 3 weeks ago only to march on back towards the highs in the days that followed? Concerns over an overheating economy or rising interest rates, or run-away inflation are nothing but ‘conspiracy theories’… (a conspiracy theory is a theory that explains an event as being the result of a plot by a covert group or organization) – so in this case – the mkt sell off that occurred in early February didn’t really happen…I mean – it did happen, but the reasons why it happened don’t really exist – so in the end – it didn’t really happen at all….
Jeffrey Gundlach of Double Line Capital and a recognized bond expert took to Twitter (TWTR @TruthGundlach) on Friday after Stevie’s comments hit the tape and had this to say:
“Mnuchin: policies will raise wages w/out inflation. Yeah, sure. And we are going to expand the Buffalo Art Museum without making it bigger. Inflation is inflationary. If inflation is going up in a certain sector, like wages, then all things being equal, inflation is going up. Sure, there could be some other sector that inflation goes down, but that’s not happening right now.”
Sounds to me like Gundy thinks Stevey is a bit ‘delusional’ – but what do I know? And so, it is…. who is right and who is wrong? The mkts (or really investors/traders) will always have an opinion – and apparently, they are in Stevie’s camp – now – that is until they are not.
So bond yields fell – as investors bought bonds – sending yields lower (2.87%)- exactly the opposite of what happened on Wednesday – when investors sold bonds – sending yield hurtling towards 3% (they closed that day at 2.95%)- causing the mkts to convulse a bit…….as the concerns continue to build about what 3% yields really mean……now remember – when he mkt went into a free fall in early February it was about what will happen to stocks if and when yields hit 3%…..clearly – there is or was some concern…until the brain trusts tried to tell everyone that there was absolutely no reason to worry until rates approached 4% – causing investors to rush back into the party…..and so expect more of the same in the weeks ahead – – FYI –Over the weekend we had MGS tells us that the bond mkt sell off is over and it’s time to get bullish on bonds (Which would keep yields in line) – leaving stocks the asset of choice…. Ok – so let’s see what happens at 3% yields….
Now look – this is another week of a tug of war over what the bond mkt is doing to stocks. We have a host of eco prints every day this week and while the facts suggest that we have a strong global economy – which will lead to higher global rates and higher inflation – what is the new tipping point is the question….and my guess is that we about to find out….because as rates and inflation rise risk models will have to adjust for those higher rates and inflation calculations – which will cause a change in valuations…..I am just sayin – be careful…not to get sucked into the hysteria…..
And so, it is game on…. Eco data today includes: New Home sales – exp of +3.6%, Dallas Fed Survey of 30, Later in the week we get Retail Sales m/m, Durable Goods of -2% (bearish), but Durable ex transports are expected to be +0.4% (bullish), Cap Goods Non-Defense of +0.5%, Housing price index of +0.4%, GDP of 2.5% (1st revision), Chicago Purch Managers Survey of 64.6. Personal Inc & Spending of +0.3% and +0.2% respectively…. ISM Manf of 58.7….
This week is also Jay Powell’s first official visit to Capitol Hill to deliver the semiannual Humphrey Hawkins testimony to congress…. This is the testimony that forces the FED to formally report what the FED is thinking to congress…which is always a hoot to watch – because so many in congress have no clue what the FED does….and the questions reveal as much…. This is scheduled for Wed/Thurs this week…so stay tuned as traders will be looking for any clues about what the March FED meeting will bring.
European mkts are surging on eh back of the US rally on Friday…Tech and telecoms on fire…. after they announced timelines for the adoption of 5G networks…. In Germany –
Angie is set to ink a deal with the Social Democrats and in the mother country (Italy) – Italians are preparing to go to the polls on Sunday to vote in Parliamentary elections. FTSE + 0.51%, CAC 40 + 0.47%., DAX + 0.24%, EUROSTOXX + 0.51%, SPAIN + 0.32% and ITALY +0.18%.
With US futs up 11 pts – in early trade – look for a solid triple digit opening on the Dow as it too attempts to trade on the northside of resistance at 25,230. And with the technology so swift and sophisticated – a surge right back towards the highs does not feel out of line…. St Louis Fed Pres Jimmy Bullard is speaking at the NABE conference in DC at 8 am. (National Assis for Business Economics) – and while Jimmy is a popular figure – he is not a voting member…so take his view in stride.
Take good care –
Today really calls for the Giambotta! For those of you who are unfamiliar with this dish…it translates into – “clean out the fridge”…….It’s a stew…can be all vegetables or you can make it your own by adding beef, sausage or chicken.
The traditional recipe for Giambotta calls for onions, garlic, potatoes, eggplant, bell pepper, tomatoes, tomato paste and vegetable broth and seasoning. It is really up to you…. you can add or delete any veggie you want as it is open to interpretation……Although the dish is mostly vegetarian, feel free to add in beef stew meat, sweet sausage or even cut up chicken pieces…
Preheat a heavy bottom pot – add olive oil and crushed garlic – sauté. Next add chopped onions and cook over med temp….. Prepare the other veggies…. cut up the potatoes, eggplant, zucchini and peppers…. add to pot and season with s&p… cover and cook….
Now add in a can of crushed tomatoes and the veggie stock (if you want it thicker then add in the small can of tomato paste) – bring to a boil and then turn to simmer…. if you are adding meat (stew sized cubes) – then in a frying pan – quickly brown the meat – season with s&p and then add to the pot…. toss in some fresh basil and let simmer for 20 mins…
Under the broiler – make some garlic bread…once toasted – top with grated cheese and toast for 30 secs more…. Remove and serve immediately in warmed bowls….
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