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Things you need to know.

  • It’s NFP day…will the report surge thru the whisper number?
  • Unemployment is expected to fall to 5.8%, Underemployment remains at 10%
  • Tech rallied into the close, are buyers suddenly finding value in tech?
  • Oil, unchanged, the Dollar is weaker and the 10 yr is at 1.57%
  • Try the Gemelli w/Sausage in a Tomato Cream Sauce

Dow stocks continued to move higher while the Nasdaq and Russell names continued to move lower for most of the day….……by 3 pm the Dow was up 100 pts, the S&P was flat on the day, while the Nasdaq was under pressure down over 100 pts and the Russell was losing 30 pts…and then the tone changed, and stocks surged into the closing bell.  By the end of the day the Dow added 318 pts or 0.9% – taking that index to yet another new high, the Dow Transports adding 84 pts or 0.5% taking that to a new high, the S&P up 34 pts or 0.8%, the Nasdaq took back all its losses rallying 150 pts to end the day up 50 pts or 0.4% and the Russell ended just north of the flat line….

It was an incredible display of desire and opportunity… the money continues to favor the value, cyclical, recovery names, but suddenly found new opportunity in some of the beaten up Nasdaq, high growth names as well….and rightly so, some of these names have gotten punished for being nothing other than a technology name – companies that not only beat on all measures during the earnings season but have offered robust guidance going forward…and while the market is trying to assess what the recovery means for inflation, interest rates and FED policy, it is also trying to discern what the Biden infrastructure plan and tax plan will mean for stock and stock market valuations going forward.

And in another sign of strength – the Dow Transports like the Dow Industrials are not looking back…. the transports are considered a barometer of the health of the economy and the fact that both Dow indexes are notching new highs confirms what is known as the Dow Theory.  Dow theory is a framework that is used to predict future market gains or losses….in this case we are talking advances…so when the Dow industrials make a new high (which they just did) and then the Transports make a new high (which they just did) then the analysis tells us that there are better days ahead – at least for the Dow names…. clearly the Nasdaq names are not participating…. (now).

Much of the weakness in the tech space this week can be traced back to a number of factors – conflicting comments by different Fed Presidents, Governors and the Vice Chair (note that Jay Powell was mum this week as the others battled it out) about building inflationary pressures and the direction of interest rates along with the comments out of last week’s Berkshire Hathaway’s annual meeting where Uncle Warren (Buffet) made it very clear that he and his portfolio of S&P companies are seeing ‘very substantial inflation’ everywhere.  Saying

“We got nine homebuilders in addition to our manufactured housing and operation, which is the largest in the country…. the costs are UP, UP UP.  Steel costs, you know, just every day they’re going up”. 

This coming from one of the country’s most legendary investors – someone that doesn’t get worked up that often – but appears to be very concerned about the inflation monster and that has given analysts and strategists reason for pause and reason to consider their own valuation models and we can see what is happening…..everything that we all feared would be happening…..there is a re-pricing going on that is beginning to reflect the impact of inflation and higher interest rates on the markets and the shift out of Growth into Value continues.

Every S&P sector ended in the green yesterday…. with Financials, XLF, Consumer Staples XLP, Communications – XLC, and Technology – XLK leading the way – all up better than 1%.  The 10 yr. settling in at 1.57% and the VIX retreating a bit to settle back at 18.34 after trading as high as 21.72 earlier in the week – an 18% move up in the VIX reflecting investors/trader angst.

And today the market awaits the all-important NFP report….as you know estimates call for 1 mil new jobs to be created while the whisper number is as high as 1.2 million with some even questioning if that is enough…on the contra side – there are some suggesting (minority camp) that the report will miss the estimate.  In any event – unemployment is expected to drop to 5.8% down from 6% while the underemployment rate remains in the double digits around 10%.  Avg hourly earnings are expected to be flat while the labor force participation rate remains at 61.6%.

What has been a topic lately is the fact that companies are trying to hire workers, yet they say, no one shows up at the job fairs.  MCD offering to pay potential workers $50 just to show up for an interview – to no avail…. which seems at odds with what they tell us…. that there are still some 9 million without jobs vs. the pre-pandemic – so I must ask – Where are all these people?  If they got new jobs in other fields, then that would be reflected in that 9 million number, yet it is not.  So why then is no one showing up?  Well, you can credit the continued enhanced unemployment benefits, benefits that pay you more money to stay at home rather than get out and work and now we are seeing Montana, South Carolina, and others ending their participation in the enhanced programs citing ‘worker shortages’ as these states re-open and attempt to recover.   Montana’s Republican Governor Greg Gianforte saying that.

“Montana is open for business again, but I hear too many employers throughout our state who can’t find workers. Nearly every sector in our economy faces a labor shortage.”

So, you can bet that today’s NFP report is going to be all the rage….as it gets dissected and analyzed.

This morning US futures are up in anticipation…. Dow futures up 88 pts, the S&P’s up 11, the Nasdaq up 40 and the Russell is ahead by 15 pts.  – the economic data to be released at 8:30 am….

European stocks are all trading higher as well….as they digest more decent earnings reports and rising commodity prices – suggesting that recovering economy story.  In addition, they are waiting on the US NFP report to assess the state of the US economy as well and what that means (or not) for FED policy.  Eco data – German exports grew by 1.2% in March – marking the 11th month in a row. Industrial Output grew by 2.5% m/m.  In France – industrial output grew by 0.8%.  At 6:30 the FTSE +0.67%, CAC 40 +0.22%, DAX +1.24%, EUROSTOXX +0.56%, SPAIN +0.54% and ITALY +0.16%.

DXY – is down 16 at 90.79….and today’s NFP report will drive the next move…. remember – support was at 91.05…. the next level of support should be 90.50.

Oil is trading at $64.67 only off 5 cts.  No new story there.

Bitcoin is trading at $56,500, Ethereum is at $3,500 and Doggy Coin continues to rise…now trading at .62 cts.

The S&P closed at 4201! And if this morning’s action is any indication – we will see the S&P try and test its most recent high at 4218…. Again, I think it fails, but if they come after the Tech names with a vengeance then we could see the S&P spike higher as it has been held back this week because of that very weakness.  Remember – Tommy Lee of Fundstrat is calling for S&P 4400 before the coming correction!

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 YouTube Channel.  KennyPolcari
Take Good Care

Chief Market Strategist, Consultant

Gemelli in a Sausage Tomato Cream Sauce

For this you need:  Gemelli Pasta, Garlic, Onions, Sweet Sausage, White Wine, Heavy Cream and Crushed Tomatoes

Heat olive oil in a pot…add crushed garlic and one diced onion (Vidalia if you can get it).  Sauté until soft and sweet, next add the sausage meat – which you have removed from the casing – until brown.  Next add 2 cups of dry white wine and let the alcohol burn off…. open 28 oz can of plum tomatoes and rough crush – so that it is a bit lumpy. Bring to a boil and then immediately turn to simmer.  Stir and cover.  Do not go too far because you will need to stir again.

Now add 1 cup + a little more of heavy cream (you can use lite cream if you prefer – but heavy cream gives it a richer taste).  Let simmer until thickens…only about 4 or 5 mins….

In a separate pot bring salted water to a boil and add pasta – You can use any type of pasta you like – typically a short pasta is better vs. a spaghetti or linguine for this dish.  Today I am using Gemelli –

Cook until aldente – 8 / 10 mins…strain – reserving a mugful of the pasta water…. Add the pasta directly into the sauce and stir – making sure to coat well.  Add a handful or two of parmigiana cheese and mix.  If it looks like it needs some more liquid -add a bit of the pasta water to moisten.  Serve immediately – offering more grated cheese to your guests.  –

On a separate plate – make some garlic bread – using “Panne di Casa” sliced loaf.  Melt butter/olive oil add crushed garlic and heat so that the garlic permeates the butter.  Next using a pastry brush – brush the bread with the butter/garlic mixture and place under broiler until golden brown.  Turnover and toast.  When done — remove from oven – slice in half and serve alongside the pasta…. It does not get any better than this….

Buon Appetito.