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Things you need to know:

  • Moderna announces phase 1 trial results and scores big
  • The algos go wild taking stocks up more than 3.5%
  • Investors around the world celebrate
  • Oil up again as demand is expected to surge as well
  • Try Nonna’s Bolognese

Stocks exploded higher…..the Dow adds 900 pts or 3.85%, the S&Ps jumped 90 pts or 3.15%, the Nasdaq surged 220 pts or 2.44% and the Russell adds 76 pts or 6.1%!

“Ac-Cent-Tchu-Ate the Positives, Eliminate the negatives, Focus on the affirmatives” – 1945 – Bing Crosby and the Andrew Sisters – it was the end of WWII and the beginning of a new era in the world….and this song rose to the top of the charts.

Click here – for anyone that remembers it – enjoy the moment and for all who don’t – listen to it and weep……Weep for the simplicity of the message.

Weep for a time gone by……

And that my friends is what they did yesterday they ACCENTUATED THE POSITIVES.

Algos had a field day!  Sending stocks higher as they accentuated every single positive headline they could find!  There wasn’t one negative headline…and the ones that were negative were turned into positives….

I mean – the US/China cat fight going on – where was that?  What about the surging unemployment expected to go to 25% – Where was that?  What about the re-opening of the country and the world and the expected second wave?  – what happened to that argument?  What about the unlimited printing press and all the money that the FED and the gov’t is printing and spending that is sure to come back and kick and bite us in the …. – Where was THAT argument?  What about commercial real estate and office towers that are sure to remain empty as we re-imagine ourselves in the post Covid world – Where is that argument?  What about the 4 million households that have stopped paying their mortgages because of financial difficulties – Aren’t we talking about that anymore?   What about all the expected bankruptcies in both the retail and energy space that have been consuming the investor psyche – How come we aren’t talking about that anymore?  And to think – Warren, Stanley and Davey (with little Billy tagging along)  all told us last week that we should be prepared for the end of the world – OMG – what happened to that revelation???

Apparently those arguments are all history…..the algos did not care one iota…..What they did care about though was the news that hit the tape right before the opening…Moderna (MRNA) – located in Cambridge, MA  – is a clinical stage bio-tech company that focuses on the development and discovery of ‘messenger RNA therapeutics and vaccines’  had an announcement to make….

(OK – WT….?  So I googled it  – Messenger RNA therapeutics is ‘the form of RNA in which genetic information transcribed from DNA as a sequence of bases is transferred to a ribosome – Do me a favor – don’t ask – just read – sounds like a steak to me – ……..And the RNA is a ‘ribonucleic acid that is present in all living cells and its role is to act as a messenger carrying instructions from the DNA for controlling the synthesis of proteins. – Oxford Dictionary – Now are we clear?)

Ok – back to the MRNA story – at 7:36 am on Monday, May 18th – the story broke – futures which were already trending higher in the pre-mkt got a shot of testosterone and BAM – off we go…..the story?

Moderna said “the first human study of its experimental coronavirus vaccine induced immune responses in all 45 trial participants who were vaccinated” suggesting that they are well on their way to producing a vaccine that may be available by the fall – but here is the kicker – the results are PRELIMINARY and many vaccines fail after early stage testing – the next trial results won’t come until July…..the stock initially jumped more than 39% on the headline only to close up 20% or $13 to end the day at $80/share.

Next up was the news that infections and fatality rates are falling (that’s good) and that Fed Chair Jay Powell re-iterated – for those who are hard of hearing – that he is willing to continue to throw money at the problem and that rates will remain at ZERO for the foreseeable future…I mean can the news GET ANY BETTER?  (Not one conversation about what this will mean for inflation and taxes in the future)

And so it goes….stocks rallied hard as did oil (see below) – with every sector surging….Energy (XLE) the clear winner adding 8.1%, Industrials (XLI) up 6.5%, Real Estate (IYR) up 5.8%,  followed by Financials (XLF) up 5.1%, Basic Materials (IYM) up 5%, Utilities (XLU) rose 4%, Consumer Discretionary (XLY) rose 3.7%, Tech (XLK) rose 2.4%, Communications (XLC) rose 2%, Consumer Staples rose 1.5% and Healthcare (XLV) carried up the rear – rising 0.83%.

Oil is enjoying the news as well….as traders took it up 11% to end the day at $32.74!  Now well above that 50 dma trendline at $25– which was resistance for so long…and decisively above the psychological $30 mark.  Oil is now up 414% in a month- yes – that’s right it was one month ago when oil collapsed and went negative for a time….remember that move?  Anyway – all the good news about the vaccine and the drop in infections and fatalities and the expected surge in demand as the world wakes up from this coma all contributing to the latest move.  The Saudis, the Russians and others have slashed production, US production has fallen as oil prices collapsed yet supply is still a bit ahead of demand – and that story is about to change – demand will surge when we turn on the lights and the oversupply – will be consumed fairly quickly – bringing  the whole demand/supply conversation to a different conclusion.  Next stop for oil is trendline resistance at $39.15 – so for now we are solidly within the $25/$39 range.

This morning stocks around the world are revealing a mixed message – Asian markets surged on the back of the US moves and on hopes that the world might have a vaccine at hand….(still early, but it just demonstrates how good news like this can change investment psyche).  In addition – Chinese President Xi Xi announced that ‘his country will provide more than $2 billion over 2 years to help other countries combat the impact of the coronavirus pandemic’……Hmmmm?  Isn’t that interesting?  Japan +1.4%, Hong Kong +1.9%, China +0.84% and the ASX +1.8%.

In Europe – markets which closed up big yesterday and opened higher this morning are now down as investors begin to digest and dissect the coronavirus progress along with news that both Germany and France are backing the European Union $546 Billion ‘Recovery Fund’.  Even a German survey – showed that consumers are becoming more confident yet the markets have turned slightly sour.  Again it makes sense after the surge yesterday…..investors and markets need to breathe….FTSE -0.37%, CAC 40 -0.75%, DAX -0.42%, EUROSTOXX -0.53%, SPAIN -1.5% and ITALY -1.05%.

US futures are down – also taking a breather as all of this ‘news’ settles in….Dow futures are -48 pts, S&P’s lower by 9, the Nasdaq off 3 pts and the Russell off 9.   Earnings from Home Depot, Wal-Mart and Kohl’s are due out this morning and are expected to be ‘off the charts’ as homeowners remodel and repair their homes either for themselves or for resale and consumers go shopping for bargains.  Either way – watch for the news…it is sure to be exciting.  Expect more discussion over Moderna and a possible vaccine, more discussion about re-opening, more discussions about the economic hurricane that has swept the shores of countries around the world, expect more discussions about oil and the expected surge in demand and expect more discussions about the news that Donny has been taking hydrochloroquine as a ‘prophylactic’ against the virus…..

The S&P closed at 2953 – a new closing high – although it did trade a bit higher during the day kissing 2961 on what looked like a real challenge at one point of S&P 3000!  It feels like today will be a digestion day….I suspect that even with all this good news – the market will back off a bit as trader types ‘ring the cash register’ and book some profits.  Longer term asset managers will tweak portfolios – taking some money out of names that have surged (maintaining a core position) and re-allocating to names that still have room to run.

We are still in between the trendlines….2720/3000 – and will most likely stay there unless we get even more good news out of Moderna…….not likely as the next set of results is due out in July…..but I guess we could hear from the likes of Regeneron or some other bio-tech company that is also trying to be the ‘winner’ in the fight against the virus as well while any indiciation that infection rates are NOT surging as state re-open will also give investor psyche a boost.  But until we see what happens next I think 3000 will be a formidable resistance level for stocks.  Stay awake – the day is young…..

Take good care.

Kenneth Polcari
Chief Market Strategist, Consultant

Rigatoni in a Classic Bolognese Sauce

The news is good, investors appear to be happy and the world appears to be on the mend – It’s like going to Nonna’s house – where it always made you feel good and you could smell the Bolognese sauce simmering on the stove……

What exactly is Bolognese sauce?  It is a meat based thick, hearty sauce for pasta –that originated in Bologna.   Now Bologna is the largest city in the region of Emilia-Romagna in Northern Italy and is the 7th largest city in all of Italy.    It is a very cosmopolitan city rich in art, history, music, culture and food.   It is also home to many of Italy’s finest universities.   This particular sauce has numerous variations – but no matter how you make it – you cannot go wrong at all….

For this you need:

Equal parts, ground beef, veal & pork, 3 lg cans of plum tomatoes, fresh basil, whole milk, olive oil, s&p, onions, carrots, celery and garlic.

Begin by sautéing sliced garlic in some olive oil over med hi heat.   Next add in the sliced onions, diced carrots and diced celery – stir and cover – allow to cook thru and soften up, stirring every 5 mins or so.  Once the veggies have softened – add in the equal parts of meat…and brown nicely.  Season with s&p.

Next run the plum tomatoes thru the blender – quickly – you want some chunk left to them… do not liquefy.  Add to the meat and simmer.

Now you want enough tomatoes so that you have sauce and not all just meat – capisce?  But this is supposed to be a hearty sauce – so keep that in mind.   Add in some fresh chopped basil, s&p and bring to a boil.  Now turn it down to low and let simmer for 45 mins…Now turn off the heat – let it cool for 10 mins and add in 1 cup of whole milk or even half & half and stir.     – taste and adjust if necessary.

Bring a pot of salted water to a boil and add the Rigatoni pasta – cook until aldente  about 8 – 10 mins.

Before straining – remove a mugful of the pasta water to remoisten.  Drain the pasta and return to the pot….add back quarter cup of the pasta water and stir. Allow the pasta to absorb the water – do not make a puddle on the bottom of the pan….Add a ladle or two of the sauce to the pot and mix well to coat.

Next – serve in warmed bowls…..add a ladle of the Bolognese sauce on top and sprinkle with fresh grated Parmegiana cheese.  Always have more cheese on the table for your guests.

Buon Appetito.