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Things you need to know.

  • US markets finished mixed last week, futures are up this morning
  • Services PMI – scores 70.1 as the country re-opens
  • Crypto assets continue to swing wildly all week-end
  • Oil is trading up – GS re-iterates the bullish argument
  • Try the Veal Scallopine

Good Monday morning – US stocks finished mixed on Friday, giving back most of the morning’s highs the Dow gained 123 pts, the S&P lost 4 pts, the Nasdaq lost 65 pts and the Russell added 7 pts……for the week the Dow, S&P and Russell lost ground while the Nasdaq scored a win – ending the week with a gain.  Value outperformed growth, Financials (XLF +1%), energy (XLE +0.25%), materials (XLB +0.22%) and industrials (XLI +0.5%) were best performers. Tech (XLK -0.55%), communications services (XLC – 0.34%) and Consumer discretionary (XLY – 0.5%) were among the worst performers. Retailers have reported blowout numbers as earnings continue to easily beat expectations, although some are warning about margin headwinds.

Treasuries were narrowly mixed ending with a yield of 1.62%.  The Dollar index continues to come under pressure, Gold up on the week – finished the day flat at $1878. Bitcoin was all over the place and is one of the reasons that we saw stocks weaken into the close – by 4 pm it lost 12% to end the day ~$35,000 and Ethereum lost 18% to end the day at ~$2200.   More news of another round of crackdown comments out of China as well as comments by the US Treasury that surrounding regulation and tax compliance sent shivers through the spines of traders – while a JPM report revealed that institutional investors are dumping Bitcoin in favor of Gold raising new concerns about institutional support.  All while investors took advantage of the sale in WTI crude oil taking that commodity up 3.1% to end the day at $63.86.

US May flash manufacturing and services PMIs surprised to the upside, with manufacturing advancing to 61.5 (exp of 60.2) and services seeing a record expansion advancing to 70.1 (vs. exp of 64.3) and that speaks directly to the reopening of the US economy…. recall that I told you – we are a 75% services economy – so this latest read is BULLISH….and reflective of the excitement building over our waking up.  However!  This does not come without a cost……What we saw embedded in these reports is what we already know…. supply shortages and unprecedented rates of increases in average selling prices for goods and services. Existing home sales for April show continued ‘cooling off’ – falling by 2.7% m/m as skyrocketing prices and short supply remain obstacles for buyers now….

And what is new in DC?  Joey is set to reduce his infrastructure proposal to $1.7 trillion from $2.25 trillion in ongoing negotiations but GOP legislators quickly said NO – differences in the very definition of infrastructure as well as how to pay for all this remain key issues. Fed Presidents Patty Harker (Philly) and Dallas’s Bobby Kaplan both said that the Fed should start talking about tapering bond purchases.  Note – they skipped right over the ‘hinting about hinting about talking’ instead going to directly ‘talking’ about it…. which speaks volumes about what the thinking is inside the brain trust.  Recall that on Thursday – post the FOMC minutes I told you ‘You were now officially warned…’

And over the weekend – we witnessed continued volatility in the crypto space – as the digital assets once again got slammed on Sunday with Bitcoin trading below $32,000, Ethereum cracked $1,900 and Doggeycoin below 25 cts…but as of 5 am this morning we have seen then stabilize and attempt to move higher…with Bitcoin now trading at $36,000, Ethereum at $2,300 and Doggeycoin 30 cts.

US futures are up this morning despite the crypto meltdown over the weekend……Dow futures are up 125 pts, S&P’s up 17 pts, the Nasdaq up 63 pts and the Russell adding 10 pts.  Rumors that the continued weakness in cryptos may cause margin calls that would force selling in the broader market are not proving to be true…(yet) but hold onto that thought…. Hints that the FED is expecting another weak job report for May when it gets reported next week is causing investors to think the FED is not going anywhere thus it is ‘risk on’….…and both the FED and the Bidens continue to suggest that the economy is doing just fine despite the most recent spike in prices that threaten to cause the FED to change lanes.  And while some FED members clearly want to discuss tapering, the move in futures this morning suggests that Jay is just not ready yet… (which I think is a head fake.)

We are starting to see pressure on other central banks to slow the rate of asset purchases – the BoE (bank of England) being the latest one to slow its rate of purchases from 4.4 billion pounds/week to 3.2 billion pounds/week all while making sure to tell investors that while it looks like tapering, it really isn’t tapering at all….because they did not change the final target at year end….which means if they need to, they can ramp up the purchases to hit that goal…’s all semantics….a cut of 1.2 billion pounds/week is a cut – period.

Eco data this week includes: Housing Price Index (do we need a formal report for this? new home sales – expected to be down 7% m/m, Richmond Fed Survey, Mortgage Apps, Durable Goods of +0.8%, 1st revision to 1st qtr. GDP, Pending Home Sales of +0.5%, Kansas City Fed, Wholesale and retail inventories, Personal Income and Personal Spending …. along with the usual weekly suspects.

European markets that are open are higher – with a half dozen of them closed for a holiday…there is not economic data to drive the action. all at 5:15 am – the FTSE +0.25%, CAC 40 +0.16%, DAX closed, EUROSTOXX +0.05%, SPAIN +0.20% and ITALY -0.38%.

Oil continues to rise….as investors take it up another 1.8% to $64.76…..our friends at Goldman telling us that the case for higher prices remains intact despite the threat of increasing supplies out of Iran….Again – let’s not get overly excited – Iran is NOT flooding the oil markets with millions of barrels….we are talking about 1 million more barrels a day by year end IF a nuclear deal is reached….In my opinion – hardly a reason to see oil collapse.  Global demand is still expected to surge…and oil prices are expected to pierce $70 by summer.

The S&P closed at 4155 after having tested KEY trendline support at 4087 –  3 times over the past week and holding……The action this morning suggests that we are cautiously moving higher as the angst seen over the past couple of weeks dissipates….Which now means we are back in the 4087/4230 trading range…..I am still in the camp that the volatility is NOT over so take advantage of any price moves to trim and rebalance into names that have underperformed. And do not allow crypto to be any more than a 3% – 5% position of your portfolio – unless of course you think you are in Vegas….

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss the markets or a plan.  You can now get a video version of this note on my YouTube Channel.

You can follow me on Twitter – @kennypolcari
Take Good Care

Chief Market Strategist, Consultant

Veal Scallopine in a White Wine Cream w/Porcini Mushrooms

You will need:  3/4 oz of dried porcini, 1/b of fresh mushrooms, 1/2 stick butter, dried sage leaves (finely chopped), 6 veal scaloppine, 3/4 cup white wine, chopped Italian parsley, s&p, 1/2 cup heavy cream.
Soak the dried porcini in 1 cup of warm water for about 1/2 hr.  Once soaked – remove with a slotted spoon – next line a strainer with paper towel and strain the soaking water into a bowl and set aside.  Rinse the porcini in cold water to remove any grit then large chop – set aside.
Next cut the fresh mushrooms into thin slices – set aside.
Add the butter and the sage into a sauté pan and turn heat to med high. Add a touch of olive oil to prevent the butter from burning.  Next add the veal scaloppine so as not to crowd the pan.  Brown well on one side – then flip and brown the other side…you should probably cook for about 4/6 mins total…. they should be pink on the inside….
Add the wine and let it boil – after 30 secs or so…remove the veal and place on a plate.  continue to steam the wine – scraping the bottom of the pan until all the wine is evaporated.  Now add back the mushroom water. And the porcinis to the pan…. stirring – allowing all the liquid to evaporate…. Now add the fresh mushrooms and the chopped parsley.  Season with s&p – turn heat to low and cover pan…. the fresh mushrooms will make their own juice – keep cooking – stirring every once and a while – remove cover until the juice evaporates.  Now add back a splash of white wine and the heavy cream and stir until it becomes a little thicker – 3 or 4 mins.  Now – season the veal with s&p and add back to the pan – leaving long enough just to reheat.  Turn them once or twice to assure even heating.
Present on a warmed plate and serve this dish with steamed asparagus – seasoned with s&p and a dab of butter.  Prepare a salad of arugula, Boston bib and maybe some fresh spinach.  Add red onions, cucumbers, and sliced tomatoes.  Season with s&p, oregano, a squirt of fresh lemon juice, red wine vinegar and Olive oil.    I like a nice Merlot with this meal as it is a medium bodied red.

Buon Appetito.