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Things you need to know.

  • BLS reports PPI – Investors ignore the increase
  • Companies adding 10’s of ‘1,000’s of new jobs – Base wages rise
  • Investors go bargain hunting – the value trade is still in the lead
  • Musk now tweeting and supporting Doggey Coin – it rallies 37%
  • Try the Seared Halibut w/ Orange Butter

8:30 am….the BLS reports April PPI…..and the results were as expected…..the estimates missed the actuals…and the actuals were greater than the estimates….Core PPI rose 0.6% (est was +0.3%), Ex food and energy of +0.7% (est of +0.4%), m/m while y/y Core PPI rose 6.2% (est of 5.8%) and Ex food and energy of +4.1% (est of 3.8%)….so what this says is that inputs at the producer level are rising and rising sharply….and then Initial Jobless Claims showed  another monthly decline….with some of the biggest American employers adding ‘tens of thousands’ of new jobs as the economy makes it way back… an effort to woo workers to consider coming back to work…..and to do this they are raising baseline wages……we’ve all heard it – Amazon, McDonald’s, Chipotle, KFC etc.….all offering higher wages and bonuses…..and to help support these increases – these companies are raising prices…..

Futures which had been lower during the early morning started to turn….and then suddenly went from red to green….as the 9 o’clock hour approached…. in defiance of the stronger PPI report – yet in support of the jobless claims report and the idea that employers are not only adding jobs, but are enticing workers with one time bonuses and higher hourly wages….What I found so interesting though was that the media spent zero time on PPI….after the initial report they just moved on…as if it wasn’t the big item it has been made out to be….Compared to all the time they spent on the CPI on Wednesday…it was odd that they spent less than 10 mins on the PPI –  as if they were told to report on it and then push it to the back burner…..Do not spend too much time accentuating the rise in prices at the producer level…..hoping to ignore what those prices mean for future consumer prices….But rather accentuate the positive news around jobs and rising wages…because that is the better part of the story…..If we stop talking about building inflation – then maybe it will go away…..

In any event – it turned into a shopping spree…..bargain hunters finding all kinds of value in so many beaten up stocks – stocks that have broken trendlines and stocks that are just testing the trendlines…..…The only S&P sector in the red yesterday was Energy – the XLE fell 1.2% – but this did make some sense after the price rise due to the Colonial Pipeline hack attack….and now that Colonial paid some $5 mil in ransom and is expected to be back online this weekend – the pressure appears to be off……but don’t despair – Energy is not going lower…..Summer is here, vaccines are now allowing for the free flow of travel and people are excited….WTI remains in the mid 60’s and will most likely surge towards $70 before the 4th of July…..

The best performing sector  though – was unexpected…..Utilities rose by 1.9% – after falling in the latest pullback to sit and test support at the 50 dma…Remember – Utes are a defensive/safety play… is not the first place you  would go if you think there are clear skies ahead….which goes right to the point…..many are still expecting some volatility thus they continue to add to the defensive/less sexy names.  Behind the Utes – we had Industrials – XLI +1.8%, Financials – XLF + 1.6%, Consumer Staples – XLP +1.4% and Basic Materials – XLB +1.5% – which all play into the recovery/value/cyclical trade.

Tech – also surged – XLK +1.3% – which also makes sense if you are bargain hunting…The XLK was down almost 9% since May 1st   on all the FED/Inflation/Taper conversations…. creating bargains in SOME high-profile tech names…. ….and if you are a long-term investor – moves like this are what you wait for….  And while some of the bigger more mature tech names performed well, there is still some concern over other ‘less mature’ but sexy names…concerns that will work themselves out, but it may be a rocky road for a bit longer – and you need to have a stronger constitution to jump in on those…..And by now – you know what they are…..THE DISRUPTORS……and you can find many of them in the ARKK ETF – which continues to get whacked…..yesterday down another 2.6% bringing the weeks performance to a tough 10% loss – and bringing it overall performance to – 38% off its February high.  Ugh….

This morning – US futures are UP while commodity prices are down…. …. suggesting that all the concern of the last month or so may be overdone…. or is it just that the concerns of the last month have created greater long-term opportunities?  I am in the second camp…. And you know that I have been cautious in the near term but still look for the year to end higher.  I have been telling you that the trading channel has been S&P 3960/4400 -and on Wednesday – during the worst of the week – we tested as low as 4055 and held…and this morning it appears as if we will continue to bounce.  The new channel is now 4000/4400….so let us see….

This morning – Dow futures are +154 pts, S&P’s + 28, Nasdaq + 145 and the Russell up 16….  A look at the Bloomberg Commodity Index – BCOM reveals a pullback off the highs yesterday and now again today…and while prices are still high investors appear to be celebrating the pullback…. Whatever….

In any event – investors and traders appear to be finding some stability and equilibrium after the push lower….as the focus is once again on the benefits of the re-opening and the recovery vs. the negative side-effects of inflation.  So, the value trade is alive and well with the SPYV gaining 1.3% now up 15% ytd vs. the SPYG up 1% but only up 4.4% ytd.

Eco data today includes RETAIL SALES……and this will be interesting because it speaks to the consumer…. Advance sales exp to be +1%, Ex autos and gas of + 0.3%, Industrial Production of +1% and Capacity Utilization at 75% – still below what would be considered upward pressure…. that level would be north of 80% and we are not there yet….so that is also causing some to poo poo the inflation argument.

Asian markets surged overnight…. Japan +2.3%, Hong Kong +1%, China +2.3% and Australia +0.5%……..European markets are all higher as well….as the focus also returns to the recovery trade and away from any inflation or monetary policy changes anytime soon.  There are no eco data reports driving the action – so more of it appears to be bargain hunting based on the weakness earlier in the week. …. At 6:30 the FTSE +0.67%, CAC 40 +0.68%, DAX +0.58%, EUROSTOXX +0.74%, SPAIN +0.85% and ITALY +0.42%.

DXY – is down 20 cts….at 90.55.

Oil is up 43 cts at $64.25….

Bitcoin is trading at $50,500, Ethereum is at $3,950 and Doggy Coin is trading back up 37% at 0.53 cts…. Why?  Credit more Lonnie Musk…. Tweeting this –

“Working with Doggey coin to improve system transaction efficiency, potentially promising.”

Are you kidding?  It is exhausting……what he did not reveal though was his personal position in Doggey coin……

The S&P closed at 4112…. My gut tells me that it might run to 4150 ish…today…. if we mimic what Europe is doing…. But if we get more strong consumer data today – they might push it to 4180…. In any event – it is Friday, we have had a volatile week – I suspect the action today will be one of calm and churn…as investors/traders digest the action.  Immediate support in the near term would be the 50 dma at 4055 while resistance is 4180….

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

Seared Halibut w/Orange, Lemon Butter

Halibut is a great fish to cook with.  It is a white fish, flaky and takes to any number of dressings.  Today –we are going to sear it in a little butter/oil and then roast in the oven until tender.  When serving – you drizzle some homemade Orange/Lemon Butter…Sound good?

For this you need: 2 lbs. of Halibut, butter, olive oil, s&p.

For the sauce you need: Fresh squeezed lemon juice, fresh squeezed orange juice, shallot, white wine, butter.

Begin by adding the juice from the lemon and orange to a saucepan and reduce by half over med heat – set aside.

Preheat the oven to 400 degrees.

Season the halibut with s&p.

In a sauté pan – heat up a dollop of butter and a splash of olive oil – when sizzling – add the halibut and sear nicely until golden brown on both sides.  Remove and set in a roasting pan and place in the oven for 15 mins (or so).

While this is cooking…. find another saucepan…add in a half a stick of butter – when melted – add the sliced shallots and sauté.  Now add about ¾ cup of white wine and cook until reduced by half.  Turn the heat to simmer…. add a tbsp. on butter and whisk – when incorporated, add another tbsp. of butter and repeat – continue for 2 more tbsps.  Now slowly add in the citrus juice and mix well.

This looks great on a bed of spinach.  Place the halibut on top and then spoon the sauce over the top.  Serve with your favorite white wine.

Buon Appetito.