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Things you need to know.

  • It’s Memorial Day – volumes expected to be light, thus moves exaggerated
  • Eco data yesterday supposedly driving the action – I’m not so sure
  • 10 Yields and Gold remain steady, Oil rises and Bitcoin falls
  • Try the Watermelon /Tomato Salad

It’s Memorial Day – A time to remember all of those men and women who have paid the ultimate price for our freedom.  God Bless them, God Bless their families and God Bless America.

So stocks are ending the month of May in a euphoric mood….better economic data yesterday keeping this flame alive…..Initial Jobless claims yesterday showed only 406k new claims (vs. the expected 444k) which many are suggesting is sign of better days to come supposedly causing buyers to go ‘all in’ in  a ‘risk on’ trade…….….all while Continuing Claims remains remain stubbornly high at 3.6million people….

Now – Continuing Claims refers to those that have already filed an initial claim and then continue to remain on the doll as they claim to be unable to find any employment in the weeks that follow… for me Continuing claims remain an issue – because what I don’t understand is that there are so many jobs out there, there are so many businesses looking for employees – yet the continuing claims report remains stubbornly high…..which means that there are NOT truly the number of jobs available that they tell us OR that those receiving unemployment are making more money by staying at home therefore are not really looking for a job  yet….many willing to ride the wave until those ‘enhanced benefits’ run out….  Either way – I think the reaction to this report was a bit overdone.

And then we got a revision to 1st qtr. GDP – which wasn’t’ a revision at all….it came in at 6.4% – exactly where it came in last month….so no surprise there…and while so many will sing its praises of the continuing economic recovery – recall where we have been…so let us not get overly dramatic….so much of this good news is already priced into stocks….
And Pending Home Sales fell by 4.4% vs. the estimate of +0.4% – suggesting that maybe just maybe buyers are tiring of the out-of-control housing prices….and are choosing to step back just a bit…. note that the most recent housing stats are showing some weakness…. just a thought.

In any event – no matter what the reason for the euphoria – the indexes did end the day mostly higher…. Tech, Utilities, Staples, Healthcare all ended the day lower while Industrials, Financials, energy, discretionary, communications and basic materials all ended the day higher.  Value once again outperforming growth.

At the end of the day, we saw the Dow was gain 141 pts, the S&P’s rose 5 pts, the Nasdaq lost 2 pts while the Russell was the outperformer again – gaining 24 pts or 1%.
10 yr. Treasuries are now yielding 1.60% – remaining stuck in that 1.55% – 1.65% range, Dollar index remains at 90, Gold ended the day in 1898 while Bitcoin ended the day at $39k and Ethereum at $2,800.  WTI crude closed at $66.80/barrel – that was UP just in case you were not sure and this morning it is UP again…. Hello????

US futures are all up this morning as the sun rises over the Atlantic…. Dow futures are +162 pts, S&P’s +15 pts, the Nasdaq +43 pts, and the Russell +9 pts.  And to reiterate the new level of complacency – the VIX continues to get weaker and weaker – suggesting even more complacency – which only means the risk rises…. I continue to think the market will remain in a holding pattern defined by 4087/4230 until the next FED meeting on June 15th-16th….

Eco data today includes Personal Income – exp to be down 14.2% while Personal Spending is expected to be up 0.5%, U of Michigan 1 yr. inflation and 3 – 5 yr. inflation expectations are also due out.

The Biden budget plan is out and in it he expects to spend more than $6 Trillion dollars, raise taxes on everyone by 2025, while raising taxes on some Americans this year…. even suggesting that capital gains tax increases to be retroactive!  Oh boy – you can see where this is going…

European markets are marching higher as well…. Eurozone economic sentiment is now at a 3 yr. high, while the French economy contracted by 0.1% in the 1st qtr.  UK’s Boris Johnson telling Brits that the June 21st target date to lift all covid 19 restrictions may be delayed due to a rise in Indian variant covid cases.  At 6:30 am – the FTSE +0.24%, CAC 40 +0.56%, DAX +0.56%, EUROSTOXX +0.56%, SPAIN +0.25% and ITALY +0.15%.
Bitcoin is trading down 6% at $36,000, Ethereum is down 8% at $2,500 and Doggey Coin is down 5% at 31 cts.

The S&P closed at 4200 – after trading as high as 4213….in a move I was kind of surprised at but can be explained away as so many investors/traders/ Portfolio managers etc. started the long weekend early as the CDC has given us permission to leave the house.  So, orders are placed well above and well below current levels to take advantage of price swings exacerbated by lower volumes and lighter books.  I suspect that today will see more of the same.  And with futures pointing up 16 pts right now, we are sure to test and pierce that high from yesterday at the opening.  Remember – I did say that the broader trend channel is 4087/4230 – so we do remain within that channel, and we may even see the S&P attempt to challenge that high today…it is only a 0.7% move from here – but once everyone gets back to their desks next week – we could see that change rather quickly.

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.

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

Tomato & Watermelon Salad

Enjoy the weekend and include this refreshing and delicious Watermelon and Tomato Salad….The colors, and freshness of this chilled salad will make any summer BBQ table a pleasure to look at and more so – a delight to eat.  If you have never had this salad – you must make it…and if you have had it then you can appreciate the simplicity of it.
For this – you need:  Fresh Garden tomatoes, mint, watermelon, feta cheese, s&p, Olive oil, and balsamic vinegar….

Cut the tomatoes in half and then slice the halves in slices (you understand what I mean – no?).  Next slice the watermelon and cut away from the rind…. cut into cubes and place a large bowl.  Now add the tomatoes, crumbled feta and chopped fresh mint… Drizzle with Olive oil and a splash of Balsamic – season lightly with s&p… (you can also hit it with a smidge of sugar) …. cover and place in the fridge to keep chilled.  Spectacular.

Buon Appetito.