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Things you need to know
- Fed Chair has a change of heart?
- US/Iran continue down a slippery slope
- US/China move forward – Mkt surge
Stocks took it on the chin on Tuesday…….Dow lost 180 pts, S&P lost 27 pts, Nasdaq gave up 120 and the Russell fell 9. Tensions between the US and Iran at the top of the list…..Trump slapped the Ayatollah with more sanctions (announcing on Twitter) designed to further cripple the already weak Iranian economy – and the Iranian President Rhouhani strikes back telling the world that Trump is ‘mentally retarded’. Diplomacy? Welcome to the 21st century…. in fact – Rhouhani says that new US sanctions mean ‘permanent closure of diplomacy’.
Then on top of that – two members of the FED came out and ‘moved the cheese’. It appears that both St. Louis’s Jimmy Bullard and Fed Chair Jay Powell – have had a change of heart.
Now – recall what I said on Monday –
“Now look – the mkt has priced in perfection…..they priced in a deal with China, a de-escalation of tensions with Iran, at least one rate cut – although talk of 3 is all the rage – I guess it just depends on the extent of the cut….will we get a 50 bps cut in July? If so – then that might be it…..Look – Donny has been taking shots at Fed Chair Powell – going so far as suggesting that he will not reappoint him for another term – so that leaves us to wonder – what will Jay do? Will he do what’s right for the country or will he do what Donny is pressuring him to do to try and keep his job? My sense is that jay has no interest in appeasing Trump”
So what happened to perfection? Suddenly – Jimmy no longer thinks that we need 50 bps cut. – that 25 will do and Fed Chair Powell – is now questioning if we need one AT ALL! And that flies in the face of what Donny wants – (like I said – he has no interest in appeasing Trump)….and so the mkt does what you would expect it to do……all of the ‘perfection’ is now called into question….the expectations of multiple rate cuts – which the mkt assumed – are now possibly OFF the table – and guess what? The algo’s don’t like that, they don’t like it at all. And boom – the buyers back off – leaving a void in liquidity and the sellers start hitting bids – patting themselves on the back for a ‘good out’!
Look, the 1% pullback in the S&P is off the 7% surge over the last 3 weeks – and it is off of the 17% ytd performance…..so what is all the fuss about? Are we really going to analyze this and make like it’s the beginning of the end?
Now look – no reason tom be concerned just yet…..Guess what happened overnight? Treasury Sec Stevey Mnuchin anno0unced that the US/China trade deal is 90% DONE and that Donny and Xi Xi should be able to wrap this up at the G20……Guess what? That is not new info…..we were 90% complete before the last breakdown….but considering what happened yesterday in the mkts and what both Bullard and Powell said – which is opposite of what Trumps wants – the administration had to come out and say something….they had to try and stop the mkt from over-reacting…Especially after Donny sends out a tweet congratulating himself – did you see it???? @RealDonaldTrump posted this:
“Stock mkt is on track to have the best June in 50 years! Thank you Mr. President!”
Thank you Mr. President???? It’s comical –
So how do they turn the conversation when the FED chair says that maybe, just maybe we don’t need a cut in rates? They send Stevey out with a message of hope…with a message of – “look we got this…..” and guess what? The mkts are loving it…..
So you see here is where the lunacy of the algo’s take over….yesterday the message was one of concern – the words in the headlines saying it all – Crisis in Iran, Diplomacy Dead, Slippery Slope with Iran, Nuclear Ambitions Rise, FED Reconsiders Rate Cut, Bullard rethinks 50 bps cut…..do you see the pattern….negative words or headlines cause the algo’s to panic….and this morning the headlines are all positive…..it’s all about China and trade – and with Stevey coming out and saying “We’re 90% done…..it’s all good. We’re hopeful for an eventual trade deal, There’s a path to complete this…..’ blah, blah, blah…….and the algo’s go wild…..As you open your eyes this morning – you’ll be happy to see that US futs are gaining and taking back yesterday’s losses….…..S&P up 12, Dow + 106, Nasdaq + 60 and the Russell is adding back 6 pts…..
Remember – it is now Wednesday….there are 3 more trading days in the qtr and the 1st half of the year. The Russell Rebalance is happening – and will culminate on Friday at 4 pm when we see massive shifts out of and into the names affected by the rebalance…..It’s all very dramatic, but means nothing in terms of mkt performance – but you should be aware that it is happening.
Eco data today includes Mortgage Apps – +1.3% (that’s good), Durable Goods – exp of -0.3%, Ex Transports of +0.1%, Retail Inventories m/m of +0.3% and Wholesale Inventories of +0.5%. Tomorrow brings us the final revision to 1st qtr GDP – exp of +3.2% (strong).
Oil is surging on top of yesterday’s gain – currently up $1.06 a barrel to $58.89 after the API (American Petroleum Inst) reported a drawdown of 7 mil barrels late yesterday…..which is nearly 2 ½ times more than the expectation of 2.6 mill barrels. So take that along with the mid-east tensions and you have the perfect recipe for higher prices….Remember what I said on Monday….all 3 trendlines are converging right here at $59.50 ish…..expect a bit of resistance – expect that we test and back off just a bit – in order to gain the strength to pierce up and thru…and once we do – hold on – oil prices will surge to $65 in a heartbeat…..they will talk about the summer driving season, the trade deal and how the economy is doing just fine…..
There are no Fed speakers today but the economic reports could potentially move markets, especially given the less dovish Fed speak yesterday and the movement on US/China Trade….I would look for the S&P to rally right back to the highs of 2950/2970……and as the week ends and we get dribble out of the G20 – it might just be enough to push us into the next century mark – 3000 on the S&P!
Take good care.
Kp
Stuffed Zucchini Flowers
It’s that time of year again for the stuffed zucchini flowers….you can only have these for a short period of time – and now is the time…
On their own – they do not taste like anything – they are perfect for stuffing….There are a couple of very popular ways to make these….you can stuff with just mozzarella or you can stuff with mozzarella and anchovies or mozzarella and prosciutto….either way – they are delicious and always work great as an appetizer with any meal. Here you go –
You will need. Fresh Picked Zucchini Flowers, Mozzarella,1 Bottle Of Beer, All-purpose Flour, 2 Egg Whites, s&p, Olive Oil. If you like anchovies or prosciutto then you will need that too.
Clean the zucchini flowers and carefully remove the stamen. (Do not remove the stem – as you will need it to grasp when dipping and frying) (The stamen is the pollen producing “reproductive organ” of the flower. – while the stem is the stem!)
Cut the mozz into cubes and place a cube inside the flower – then gently twist the ends to close it…..If you want anchovies or prosciutto – here is where you put it.
In a small bowl, add flour and a pinch of s&p. Now add enough beer to the flour to create a batter as thick as heavy cream, whisking until smooth. Beat the two egg whites until stiff, then fold the whites into the batter.
Add the olive oil to the pan…and heat….to about 375 degrees…..
Now put some flour on a plate and dredge the stuffed zucchini flowers in the flour, then dip them into the batter until lightly coated.
Carefully place the stuffed zucchini flowers into the hot oil in batches. Fry for 2-3 minutes, or until crisp and golden brown.
Remove from the oil using a slotted spoon and place on paper towels to drain. Repeat the process with the remaining stuffed zucchini flowers until they are all fried.
Serve on a platter with a sprinkling of sea salt on top, and serve immediately.
Buon Appetito