Things you need to know.
- NFP report blows the window out of the bus – stocks surge
- The Senate passes the $1.9 trillion relief bill – of which only $600 billion goes directly toward relief.
- Saudi oil field comes under attack by Yemeni Houthi’s – oil spikes
- 10 Yr Yields pushing 1.6% again…causing mkts to pause
- Talking heads pushing the 2% story – not to worry at 1.6%
- Try the Lemon Chicken.
Eco data on Friday was all about jobs and the Non-Farm Payroll report was expected to show a 200k job increase for the month of February…. a respectable number for sure but one that was being called into question after the weaker than expected ADP report on Wednesday…. leaving many participants on the ‘edge of their seats’ on Friday morning as the clock ticked down to 8:30 am…. What would it reveal? What would it say about the state of the economy? Was the recent uptick in 10 yr. yields somehow trying to ring the alarm bell that ‘something was brewing’?
Oh boy…. Brewing? It did more than brew – it boiled over – as the gov’t reported a gain of 379k new jobs AND they revised last month’s disappointing gain of 49k jobs to +166k new jobs….and boom – it was off to the races! Unemployment dropped to 6.2% (from 6.3%) all while the underemployment rate remained stubbornly high at 11.1%. Now in the end – we still have 9.5 million less jobs than this time last year, but if this trend holds – it would show we are moving in the right direction…. Stocks surged! And 10 yr. yields rose as well…..closing out the day at 1.566% after trading as high as 1.6238%…as investors suddenly seemed to be turning a blind eye to yields – in a ‘nothing to see here’ response….….by the end of the day – the Dow added 573 pts or 1.8%, the S&P’s up 73 pts or 1.9%, the Nasdaq (which was in correction territory) added back 196 pts or 1.55% (taking it back into the ‘normal range’), the Russell tacked on 45 pts or 2.11% while the Transports were the day’s best performer – rising a whopping 408 pts or 3.09%!
Now what is interesting here is that most of the jobs created were in the service, leisure, hospitality sector – think restaurants, hotels, stores, salons, cruise ships, airlines – and THAT makes perfect sense if you believe that the country and the world is preparing to open the flood gates! And these gains reinforce the economic momentum – income is up, spending is up – much of it supported by both stimulus checks and ‘enhanced’ unemployment checks. Housing and home sales are surging and a ride around Miami reveals a new wave of high-end buildings with all the services and that is causing all kinds of demand for everything housing – think lumber, bricks, wall board, copper and plastic piping, appliances, concrete, windows, doors and toilets, heating and AC units, roofing… Capisce? …
As of Friday, 15 states in the union are going all in – opening their states and businesses full throttle – removing state-imposed mask mandates as they attempt to return to normal.
Now while the state has removed mask mandates – let us not misunderstand – you can and should most likely continue to wear one – in fact, many businesses still demand that you wear one if you enter their store – but either way it is still your choice…. – and those governors in those states are trying hard to get their citizens to work again….and for the most part – they are succeeding. Vaccinations are up, in fact – there are 3 approved vaccines, infections are down, and we are vaccinating people in this country at about 1 million per day…. a massive feat…. herd immunity is now expected to arrive by the spring and that is also helping the overall mood in the markets and causing all kinds of excitement.
Oil and energy prices are surging as demand skyrockets – helped by the fact that OPEC + has imposed artificial production limits and US producers are under attack by the new administration…..within days of taking office – Joey cancelled the Keystone XL Pipeline – and then restricted who could approve any new drilling permits over the next 2 months….essentially – that process has now been moved to political appointees rather than the expert regulators in the field….and then they imposed a moratorium on all oil, gas and coal leasing on 700 million acres of federal land. And while all of this is a threat to the US oil industry – it has caused oil and gasoline prices to surge. In fact – I pointed out in a tweet on Friday that I was paying $3.29/gal for gas – up 43% in 45 days….and the summer season has not even begun never mind the pent-up demand due to the lockdowns across the country. So, expect the oil story to continue and expect to shell out more money to fill up your car – and then consider what those increased prices will do to transportation costs? Trucking/ Rail, Shipping…… Fed-ex, UPS, Amazon drivers, UBER, LYFT, Door Dash – it costs money to transport goods and services – so expect prices to rise as higher fuel costs get passed onto who? Right – You!
And breaking news this morning…. Yemeni Houthi’s attacked a Saudi Oil Production facility over night shutting it down and that sent oil prices surging more than 2%…. WTI now trading at $66.64/barrel…. with Brent North Sea Crude piercing $70/barrel. And while the Saudi’s told us that there was no major damage or loss of life – all it does it raise the risk profile of out renewed dependence on Mid-East oil. (Recall – we have been the world’s largest producer and exporter of oil – so why we are having an issue now is beyond me…but maybe someone can ask Jen Psaki – pronounced ‘Jen-saki’)
In addition – the House passed the $1.9 trillion ‘pork package’ We cannot call it a covid relief package – because in fact only $600 billion is going directly to the covid relief – the other $1.3 trillion is for museums, and big Democratic ‘wants’ that they shoved down our throats – as the vote fell along party lines and since they are the party in control – they win. The bill moved onto the Senate where it was passed – ex the $15/hr. minimum wage provision and is now sent back to the House to be voted on (because the Senate changed the bill they got)…..Nancy is expected to hold that vote on Tuesday and it should be on Joey’s desk by Tuesday afternoon….to be signed into law….and so it goes….another $1.9 trillion spent – with more to come – according to NY Sen Chucky Schumer…..Oh, yes, when he announced this bill, he hinted that there is more to come in the months ahead – so hang on – because this isn’t over.
This morning US futures are lower…. Dow down 90 pts, the S&Ps are off 32 pts, the Nasdaq down 237 pts and the Russell off by 20 pts. And that should also not really be that much of a surprise – considering what happened on Friday……And again – what has really changed? Nothing…. expectations of job growth were strong to begin with, so the added strength only added to the excitement…. allowing investors to ignore the rise in 10 yr. yields on Friday – but that rise is now once again front and center on investor minds…
Look – the covid relief bill passed – but we knew that and that was already priced in – so this is not new news…in fact – the additional round of gov’t spending could cause the treasury market to shudder…….and that could mean that we see another spike in yields which will cause another shift lower in equity prices….because remember – it was that rapid move in treasuries that unnerved investors and sent those ‘high flyers’ into a tail spin.
Tomorrow we get the CPI (Consumer Price Index) report….and the expectation is for +0.4% and ex food and energy of +0.2% m/m and 1.7% and 1.4% y/y…. Recall that two weeks ago we got the PPI number (Producer Price Index) and that blew the roof of the house…. prices at the producer level rose much faster and stronger than the mkt expected – and what do you think happens next? Yup – those higher prices get passed onto you and me and so tomorrows CPI report will be closely watched. Because – as we saw last week – many in the industry are already convinced that the FED has lost control of inflation and that suddenly we will get an unexpected burst of inflation that will not be ‘transitory’.
There is no significant eco data today to be concerned with – so the focus will be on Friday’s surge higher, action in the treasury market and what tomorrow’s report might reveal….and then – what that means for stocks going forward. See my weekend IG commentary here – https://www.instagram.com/p/CMIEWzrA2gR/
European markets are a bit higher this morning as investors there consider the covid relief package, the end of lockdowns across parts of Europe, rising bond yields and commentary due on Thursday from Christine Lagarde – ECB President about the future of monetary policy. There is no other economic news. At 6 am – the FTSE -0.19%, CAC 40 +0.62%, DAX +1.04%, EUROSTOXX +0.77%, SPAIN +0.55% and ITALY +1.36%.
And oil is now trading at $66.44/barrel up from $65.50 ish last week…. Part is that the story remains bullish…. demand is up, OPEC production cuts to remain in place and US production being artificially restricted in addition to last night’s attack. Like I said last week – oil is now like a ‘meme stock’ – with momentum building and carrying oil higher– oil is now a momentum trade and with Goldy pushing their book – and production cuts in full force – we could see WTI challenge $70 sooner than expected and then watch what happens to gasoline at the pump.
Bitcoin – is up $1000 at $50,000.
The S&P closed at 3841 after Friday’s strong rally…. testing a high and low of 3730/3851 – leaving it above the trendline at 3821 and solidly back in the trending channel of 3770/4040. This morning futures are pointing lower, and we could test that trendline as soon as the 9:30 bell rings. Will a spike in Treasuries force investors to test lower today – my sense is yes…. because there is nothing new that is unknown that will cause the markets to rally again – other than some talking heads trying to convince the markets that anything less than a 2% 10 yr. yield is nothing to worry about. Ok – then let us go….
As always, I would advise you to stick to the plan, trim where necessary and put money to work in some of the underperformers….
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you. You can now get a video version of this note on my IG (Instagram) feed – my handle is Kennyp1961 (https://www.instagram.com/kennyp1961/)
Take Good Care
Chief Market Strategist, Consultant
This is a great dish if you are planning a party….it is easy to prepare and goes along way. You can make it ahead of time and just heat it up in the oven when ready. Served with another entree in a buffet style along with a large mixed green salad, Rice Pilaf and some sautéed broccolini – it makes a great presentation.
You will need to start with boneless/skinless breasts, and thighs. rinse drain and pat dry….
To prepare – you need: – 4 lemons – sliced into 1/8-inch slices…. seasoned flour (s&p), beef broth, butter, and bit of olive oil.
Cut the chicken breasts/thighs into bite size pieces – dredge in seasoned flour and set aside. Next – in a large sauté pan – melt the butter and a bit of olive oil to prevent the butter from burning – make sure it is hot before adding chicken. Add enough to fill the pan – but do not overcrowd. Keep the heat on med high/high. brown the chicken all over….it will take on a golden hue…. should be about 10 mins or so……
next add enough beef broth to bathe the chicken pieces – lay lemon slices on top of chicken and cover. Turn heat to med and allow the lemon and broth to permeate the chicken. About 3 mins more. Keep your eye on it and turn the chicken so that it does not burn. The broth will begin to thicken so make sure to not overcook. Transfer to a baking dish and repeat process for the balance of the chicken. You can cover and keep warm in the oven until complete.