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Things you need to know:

  • Markets in overdrive – the momo (momentum) guys can’t get enough
  • Another slew of earnings reports – so far – all beat… HELLO?
  • US/China tensions grow as US accuses China of stealing secrets – Go figure!
  • S&P is filling the gap – will we pierce 3300 today?
  • Try the Linguine Michael Angelo…


It’s like a broken record now… and again the market marches higher… Yesterday 23 companies announced earnings… 18 ‘beat the expectations’ – 5 ‘missed’… 78% hit rate… in line with what we have been seeing so far with now 150 companies reported and ~ 80% have beaten the estimates… along with that – the macro data continues to improve, and the while the virus cases are now ‘exploding’ higher and virus ‘recoveries’ are surging higher – virus deaths are falling and with better treatments and a list of possible vaccines not too far off – investors are betting that the SUN will shine again… and that the darkness that has washed over the world will soon be gone… taking many back to Genesis 1:3 when God said – “Let there be light, and there was light…”

By the end of the day – the Dow added 165 pts or 0.62% leaving that index still down 5.3% on the year, the S&P rose 18 pts or 0.57% bringing that index up 1.4% on the year, the Nasdaq – added 25 pts or +0.24% marking a 19.32% gain on the year while the Russell added a measly 2 pts leaving that index still down double digits at 10%.

After the close – the two reports that kept everyone on the edge of their seats hit the tape… Microsoft (MSFT +$3 or 1.44%) during the trading day… reported $1.46 vs. the expected $1.36 as ‘sustained demand for cloud computing services’ drove the story. Quarterly sales rose 13% to $38 billion – net profit of $11.2 billion – as more and more people shift from the office to working online from home… Cloud computing division – Azure – grew an astonishing 47% – which is DOWN from last quarters 59% and DOWN from 64% growth rate one year ago… (accentuate the negative in the word DOWN) – here go the naysayers… We Want More! I mean, it’s a bit ridiculous… So, in the afterhours session – trader types took the stock DOWN 4 pts… in what we discussed yesterday… MSFT is up 42% since April – 42%! So when they beat all of those trader types – ring the bell and take some off the table in a SELL the NEWS event… Larger asset managers – will also most likely take some off the table today as well – as they peel a little bit back, maintain a core position and redirect the new found cash into underperforming sectors that are still playing catch-up! I discussed this as well – in yesterday’s note – as the reaction to the tech earnings may very well be to sell them… OK – hold on… MSFT isn’t going anywhere… Capisce?

And then there was TESLA (TSLA +$22 or 1.4%) during the day – as everyone had something to say expectations ran from ‘ah to wow’… estimates called for -0.02 cts/share – but remember – it’s TESLA, It’s Lonnie Musk, It’s the future and the had all kinds of gov’t credits for producing zero emission electric cars to cash in (all legal)… and they reaffirmed their 2020 guidance of delivering 500k cars… and there is talk of it being added into the S&P 500 index… which means that anyone who uses that index as a benchmark NEEDS to own TESLA if it does in fact get added – which might explain away some of the chart action of late… Look – it’s is up 280%  for the year and 230% of that has come since April (when those rumors started…) In addition he announced the beginning of a new major spending cycle (growth stock – not surprising) with the construction of a new ‘GIGA Factory’ plant on the outskirts of Austin, TX – soon to be renamed – GIGA, TX! Sure to have statues of Lonnie all over the place and the streets to be laid out in a grid – with the ‘Lonnie Avenues’ going north to south and the “Lonnie Streets’ going East to West – very NYC-ish…

And this morning… the markets are up yet again… futures surging as the S&P continues to ‘fill the gap’ created back in February. Recall – we discussed this gap on Tuesday… Here is what I said –

“The SPX closed at 3251 and is now positive on the year… (+0.65%) … This morning, it appears that it wants to try and fill the gap it created back in February as well. That gap was the collapse from 3337 to 3257… and if this morning’s action is any indication – we can expect the S&P to open at 3275-ish… clearly beginning to fill that gap… The sense is it wants to challenge and test the February highs of 3380!”

Last night the S&P closed at 3276! And this morning S&P futures at 6:15 am are surging by another 13 pts… as it races towards the century mark – 3300 further FILLING that gap…

Earnings today include: WST, APD & DOW – all reported early and all beat… we await a long list of others… DHR, LUV, BX, CLGX, CTXS, POOL. AAL, T, SHY, PHM, ADS, FCX, TWTR, TRV, KMB and UNP.

Eco data – Initial Jobless Claims exp of 1.3 mil, and Continuing Claims of 17.1 million.  Leading Economic Indicators of +2.1% and the Kansas City Fed survey – exp of 5.

Now – there is a resurgence in trade tensions between the US and China, new bullets being shot across the Pacific as China reacts to the US closure of their consulate in Houston after we claimed that 2 Chinese hackers have been targeting American companies working on a vaccine… Xi Xi is not happy and is suggesting that this is a Trump Election move… that China would never spy on the US or steal intellectual property from a consulate located in Houston… China stocks just a bit lower as the chatter across that country is for Beijing to demand the US close its consulate in Hong Kong in retaliation… South Korea reports a decline in 2nd quarter GDP  as exports fall precipitously… leaving that market down 0.56% dragging Taiwan with it… -0.48%.  Australia bucked the trend – rising 0.32% as financials and energy rose… Japan closed for a holiday…

European markets are all in the plus category… German forward-looking consumer confidence read is expected to rise to -0.3 vs. the current level of -9.4. European earnings continued to suggest some difficulty – but all that is that we can expect continued support by the ECB (European Central Bank) and the IMF (Int’l Monetary Fund). As of 6:50 am – FTSE +0.53%, CAC 40 + 0.56%, DAX + 0.66%, EUROSTOXX +0.63%, SPAIN +0.40% and ITALY – flat.

Like I said – US futures are positive… DOW +102 pts, S&P + 12 pts, Nasdaq +100 pts and the Russell +10 pts. News that we will pay PFE German partner BioNTech $2 billion for 100 million vaccines IF their version proves safe and effective. In addition – word is that Congress is getting close to extending a ‘watered down’ version of the 5th stimulus package concerning Federal unemployment benefits through year end.

This morning, oil is trading up small as oil traders/investor parse the latest data… a build in inventories and a build in production… is not causing any real pullback at all… the usual back and forth – but nothing dramatic. You know how I feel – there is nothing wrong with demand and there is plenty of supply which is why I think we will remain in the $35/$45 range and I don’t’ expect it to break out until there is more clarity on the election, the re-opening, the virus and the vaccine.

The SPX closed at 3276 and is now up 1.42% on the year… It took a bit of a breather yesterday… backing and filling its recent advance… as it attempts to complete filling the gap. We did trade as high as 3279 yesterday and if futures hold – we look to open at about 3290-ish… very close to 3300 which I think it pierces and then backs off. Sit tight – It’s Opening Day for Baseball… Yankees face the Nationals at 7 pm est  and LA Dodgers face the Giants. At 10 pm est.

Take good care

Kenneth Polcari
Chief Market Strategist, Consultant

Linguine Michael-Angelo

This is a simple dish to make… it is a favorite of Italian sculptor, painter, architect and poet of the high renaissance.  A man of unparallel influence over the world. Michael Angelo – long considered one of the greatest living artists the world has known was also a simple man – enjoying simple dishes – so today – Won’t you give this a try?

For this you need: Linguine, fresh spinach, yellow raisins, pignogli nuts, fresh ricotta, olive oil and fresh grated parmegiano.

Begin by bringing a pot of salted water to a boil. Add the Linguine.

In a bowl – add hot water and soak the raisins.

Now in a deep frying pan – add a bit of olive oil and toast the nuts… stirring not to burn. Once toasted – set aside. In the same pan – add a bit more oil and the spinach. Season with s&p and sauté.

After about 3 mins – add in a small container of the fresh ricotta – stir to melt and blend. Now – add in a ladle of the pasta water. Stir.

Now add the raisins – stir – When the pasta is almost done – remove directly from the pan and add to the frying pan with the spinach and ricotta mix. Toss nicely to coat. Add the pignogli nuts and a bit more pasta water.

Once well mixed – add in a couple of hands of fresh cheese – toss and serve.

Simple and very classic – just like Michael-Angelo.