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Things you need to know.

  • Stock’s snooze, Investors await Friday’s NFP report
  • Good vs. Bad Inflation – what is your opinion?
  • US gets hit by another Cyber Attack – this time it is the meat industry.
  • Oil marches higher, Airlines welcome back the business traveler.
  • Try the Spinach/Edamame Pesto

So, stocks began June by hitting the snooze button – not much change in the overall themes…. S&P futures were solidly higher on Tuesday morning they failed soon after the explosive opening…. – we saw the S&P open 14 pts higher at 4216 – then rocket up and thru Friday’s high at 4218 then continue to move to challenge the all-time high at 4230 – making a new intraday high at 4234 all in ONE minute….…. before failing and falling back to end the day -2 pts….at 4202.  The Dow did add 45 pts, while the Nasdaq gave back 12 pts and the Russell surged ahead by 25 pts or 1.1%.

The issue over ‘good inflation’ vs. ‘bad inflation’ which saw the markets surge towards month end suddenly has become an issue once again…as investors and asset managers continue to waffle about inflation and other lingering concerns.  High growth names and healthcare names – which were the strongest into month end – were among the weakest on Tuesday.  Healthcare – XLV led the way lower losing 1.6% while Tech – XLK gave back 0.6%.  Even Utilities – XLU lost ground giving up 0.6%.  Economically sensitive sectors once again moving higher…Financials – XLF +0.6%, Energy – XLE +3.8% and Basic Materials – XLB +1.4%. and the Value trade beating Growth again…. SPYV +0.37% and SPYG – 0.45%.

There are issues though,  on the one hand investors have grown more confident that inflation will not be an issue and that global central banks will not unwind any of the stimulus they are providing – yet – valuations for some companies are high (think tech), commodity prices are surging (have you seen coffee, oil, gas, lumber, soybeans, etc.….),  supply chain setbacks causing disruption across a range of sectors and that is raising the caution flag.  All while a very uneven labor market recovery that is leaving some companies unable to fill positions continues to cause angst….…. which is why tomorrow’s ADP employment report and Friday’s Non-Farm Payroll reports are so important and could end up driving FED policy decisions in the months ahead.

Eco data yesterday revealed that Markit US Manufacturing PMI rose to 62.1 – bullish…. while construction spending came in flat with last month vs the expectation of increased spending.  ISM Manufacturing PMI – another measure of the purchasers’ managers indexes also came in strong at 61.2 – again a bullish read.  ISM employment falling to 50.9.  So, it was a mixed performance leaving many to sit back and take a breath.  In the end – it was a bit of a non-event….and it feels the same way today….

This morning – the WSJ runs with a range of headlines…that define the times….
“Oil Price Rises to Two Year High as OPEC and Allies See Higher Demand.”
“Meat Buyers Scramble After Cyberattack Hobbles JBS” (apparently good for crypto ransoms – which coin will be the ransom payment of choice this time?)
“Business Travel is Coming Back” (good for the airlines. and the energy sector!)
US futures are churning in place…. Dow futures + 26 pts, the S&P -1pt, the Nasdaq is down 20 pts, and the Russell is ahead by 1 pt.  10 yr. Treasuries are flat at 1.6%, the Dollar a bit firmer, gold hovering around $1,900 while Oil continues to go higher….

We heard from 3 FED members yesterday…Governor Brainard telling us that we are a LONG way from any target BUT should be prepared to adjust policy if needed.  Vice Chair Randy Quarles saying that IF the FED is wrong about inflation – no need to worry, they can deal with it and St. Louis’s Bullard (who is a non-voting member) acknowledging that while employment remains sub pandemic levels there is SIGNIFICANT evidence of labor market tightness and it may be time for the FED to start talking….and today – we get to hear from Philly’s Patty Harker, Chicago’s Charlie Evans, Atlanta’s Raffi Bostic and Dallas’s Bobby Kaplan.  What will they have to say?

European markets are also churning….no change in the overall theme their either……It is about inflation and the recovery……Investors anxiously awaiting an update from the ECB (European Central bank) tomorrow.  No change is expected.  PPI is due out this morning…and it should reveal the state of inflation across the region.  In mid-morning trade we see the FTSE +0.09%, CAC 40 +0.17%, DAX +0.18%, EUROSTOXX +0.14%, SPAIN +0.15% and ITALY +0.22%.

Bitcoin is trading at $37k, Ethereum at $2,600 and Doggy Coin at 0.40 cts.

OIL continues to march higher…. OPEC + agrees to produce more oil to meet rising demand – the reopening trade that is expected to produce higher demand is also expected to produce higher prices in the months ahead….…. $70 oil is not far away…. the next question is – When does it stop?  $75, $80?

The S&P closed at 4202 – after making that new intraday high at 4234.  Eco data today only includes Mortgage Apps and the Fed’s Beige Book – neither of which will really drive the psyche.  The markets feel a bit tired, extended and need some time to digest what is coming down the pike this month.  The inflation theme, the rate theme, the policy themes are all front and center and will continue to drive the speculation until we hear from the FED on the 16th.  So, sit tight…Friday’s NFP report could create some angst depending on its result.  Will it once again disappoint or will it show explosive growth, making up for last month’s disaster.  In any event – there are plenty of jobs available for those that want to work.

I am still in the cautious camp and continue to believe that volatility is NOT over.  Which does not mean that I am running for the door at all, but I am taking advantage of any price moves to trim, while continuing to put money to work into names (sectors) that are underperforming.

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

Spinach/Edamame Pesto w/Shrimp

For this you need fresh trimmed and cleaned baby spinach, frozen edamame beans, Fresh Parmegiana, olive oil, garlic, s&p, and toasted pignoli nuts. 1 lb cleaned and deveined large shrimps

Set a pot with salted water to boil.  Once it boils – add the edamame and wait until they all float to the top – strain and rinse under cold water.  Set aside.

In the food processor – add, 3 handfuls of spinach, 1 clove of garlic, olive oil and chop, add more spinach and more oil and chop until you have chopped all the spinach.

Next add in a handful of edamame beans and chop.   Now add in two handfuls of parmigiana cheese and some of the pignoli nuts and chop again.  You want a creamy consistency…if you need to add more oil – go for it. Repeat this process until you have enough pesto sauce.

Bring a pot of salted water to a boil. Add the linguine and cook until aldente.  Toss in the shrimps when you have about 3 mins remaining.   Strain – reserving a mugful of water.  Add back to pot – add back a bit of the water and stir…now add the pesto sauce and toss.  Before you serve – put some of the reserved edamame beans on top and serve immediately – have more cheese on the table for your guests.   Delicious.

Buon Appetito.