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Things you need to know

  • US grants temporary     relief for Huawei – mkts surge
  • No eco data to drive the     conversation
  • Tomorrow brings us the     May 1st FOMC mins

 Crash, Bang, Boom – stocks got punished yesterday (although they did finish off their lows)  as the fight rages on…The Dow giving up 84 pts or 0.33%, the S&P lost 19 pts or 0.67%, the Nasdaq got pummeled losing 113 pts or 1.46% while the Russell 2000 lost 10 pts or 0.7%…

 Technology taking the brunt of the selling pressure – and that makes sense after the Trump upped the ante and blacklisted Huawei (essentially forbidding US companies to do business with them)  causing the big US tech companies to announce that they were cutting access to their technology for Huawei….. leaving the next move very uncertain as this latest move is beginning to have ramifications for Huawei beyond America – further inflaming tensions between the US and China.  Zhang Ming – China’s Envoy to the EU (European Union) had this to say –

 “This is wrong behavior, so there will be a necessary response. Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by.”  He added that China would defend the rights of these Chinese companies.  (Now I say companies – because Trump also included ZTE – another telecommunications company from selling their equipment in the US. )

 As the day wore on – the rhetoric got more heated with Chinese state media suggesting that the ‘misjudgment by the US could produce grave consequences’.  After that comment – rumor had it that the US was considering granting temporary exemptions against Huawei causing the mkts to rally just a bit but still ending lower on the day. 

 Tech – which has been the mkt leader  this year – has seen some tremendous gains in individual names while taking the Nasdaq up nearly 25% by early May – but the recent action, which has created such uncertainty has seen that index give up nearly 6% in the past week – yesterday’s move sent that index down thru its short term support level (7,874) before closing at 7,702  and is now ready to test longer term support at 7,532.  As expected – the S&P also broke short term support at 2,870 closing at 2,840 – appearing to also want to test longer term support at 2,776.  The Dow which broke short term support last week – and has already tested longer term support at 25,440 – is struggling to hang on…as a failure for the Dow will ignite a wave of sell orders dragging the other indexes lower as well. 

 This morning – Guess what?  The US did grant a temporary waiver to companies using Huawei technology – and mkts around the globe are celebrating…..can you believe that? As you can imagine – The Chinese stock mkt surged by 1.35% while Japan and Hong Kong continued to struggle a bit ending the day slightly lower by 0.14% and 0.47% respectively.  European mkts – which had also lost ground on Monday – are all in the green as the tone calms down….

 US futures are UP!  S&P gaining 10 pts, The Dow adding 143 pts, the Nasdaq surging by 71 pts and the Russell ahead by 9 pts.  Again this just begs the question – who knew what yesterday?  No matter – while stocks have been whipsawed around for the last couple of months – as the tone went from super positive (we will have a deal any day now) to super negative (we are upping the tariffs on $200 bil of good and will add in new tariffs on another $325 bil of goods – and to add insult to injury we will stop doing business with your largest telecom company that has a global reach – causing even more pain..).  For all of the noise – the S&P is only off 4% from the May highs – leaving that index up 13% on the year. 

 Eco data today includes: Existing Home Sales – exp +2.7% m/m – but tomorrow bring us the FOMC mins from a couple of weeks ago….and while the mkts will be paying attn – do not expect to learn anything new in terms of policy….the FED is on hold – speculation continues to build about what the next move is – Is it UP or DOWN?  Look,  so much of this cycle – the mkt has been driven by fundamentals – but over the past 6 months or so – the focus has shifted to policy – both central bank policy and trade policy…causing mkts to become more volatile yet all the while surging to new highs…..This latest conversation is clearly a setback – but not out of line – investors just need to re-price the expectation over where the trade conversation is going and what are the probabilities that the end is in sight as those probabilities have clearly changed. 

 Look for today’s action to be driven by more Huawei conversation and the overnight relief that the Trump Administration granted them.  And if yesterday wasn’t enough of FED speak – today we will hear from them again….Atlanta’s Raffi Bostic at 7:50 am, Chicago’s Charlie Evans at 10:45 am and Boston’s Eric Rosengren at 12 pm.  (But none of their commentary is expected to be any kind of catalyst for the mkts) – the focus today – is squarely on trade and last nights development.  What will China say today? 

 SPX is up 10 leaving us well within the 2776/2870 range.  Again – unless there is a breakthrough – I think the move you need to watch for is the test of support at 2776….a test and failure here will also ignite a wave of sell orders and will little to no support – we could easily see the mkt test lower at 2600….

 Oil marches higher still…..up another 50 cts at $63.60/barrel……the move being supported by the ongoing threats between the US and Iran as well as a cut in supplies from OPEC and Russia.  Look for oil to remain in the $62.15/$66.15 range and if the rhetoric between the US and Iran escalates then watch as they take oil up and thru that upper band. 

Take good care.


Baked Shells w/Broccoli Florets, Goat Cheese and Toasted Breadcrumbs

 Preheat oven to 350 degrees F., and lightly butter a 9 x 13 inch oven-proof baking dish.

 Bring two pots of salted water to a rolling boil.  In one – blanch the florets and set aside.  The other one is for the pasta.

 Begin with the sauce – for this you need:

 Butter, flour, whole milk, grated Fontina Cheese, Softened Goat Cheese, s&p and minced garlic.

 In a heavy saucepan, melt the butter – add the minced garlic and stir for 2 or 3 mins.  Now whisk in the flour.  Cook, whisking continuously until just lightly colored.  Slowly pour in the milk, whisking to blend.  Cook over medium heat until the sauce is creamy and thick – keep whisking.   Reduce the heat to low, then add the fontina and goat cheese – stir to melt and mix well.  Season with s & p and continue to stir until the sauce is very smooth.   Keep the sauce warm – on simmer.  – this should take you about 10 -15 mins max.

 Now add the pasta shells to the water and cook for 8 mins…..Drain well (always reserving a mugful of water). Return to the pot – add back ¼ c to re-moisten and stir….do not soak the pasta…just enough to re-moisten.

 Add the blanched broccoli and the sauce to the pot…mix well to coat.  Now pour it into the buttered baking dish.

 For the topping – you need:  olive oil, 2 cups of coarse plain breadcrumbs, s&p and fresh grated Parmegiana cheese.  – Mix together well and then sprinkle over the pasta – Do not mix – leave it on top.

 Put in the oven and bake until golden brown – no more than 20 mins.  Remove from the oven and serve family style.    

  Buon Appetito.

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