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Things you need to know.

  • Broader market churns – MEME stocks on fire
  • FED’s Beige Book reveals a robust recovery AND building inflationary pressures.
  • Employment is the focus today.
  • Treasuries yielding 1.6%, Gold trading at $1900, Oil at $68.70
  • Bitcoin $39k, Etherum at $2,800 and Doggy Coin is at 41 cts.
  • Try the Pork Cutlet Caprese

Most stocks continued to take a nap…. but the Reddit stocks – otherwise known as MEME stocks continue to outperform and make the news….and yesterday it was the usual suspects.  GME +13%, AMC + 96%, & BB +31%…. all very exciting and all producing some outsized returns for some traders, because remember – you only hear from the ones that want to brag about how ‘great’ they did, how they made money on every trade, how they are so ‘hot’ and everything they touch turns to gold…. blah, blah, blah.  And in addition- make sure you understand – there are only 498 million AMC shares outstanding and yesterday saw nearly 700 million shares trade hands……that is 140% of outstanding shares trading hands – and you think these are ‘long term investors?

This morning – AMC is up another 20% in the pre-mkt session – having already traded some 6 million shares – leaving many to ask What exactly is going on?  A story in the WSJ this morning – reveals that the company announced on Wednesday that they would ‘reward the loyalty of individual investors who had bet big on its this year, giving them special benefits at theaters.’

And what is that exactly?  “A FREE large popcorn ‘on us’, when they attend their first movie at an AMC theater this summer” – (you have to bring your robin hood account statement to show you are a loyal long-term shareholder! – LOL) The paper conveniently forgot to credit the AMC C-suite person to make such a promise.  And I have to say – Wow – a free large popcorn!  Wait – let me go out and buy more……!

In any event – the broader market has been trading in a very tight range with a lot of push and pull, but nothing particularly exciting surrounding the high-profile themes. Today’s focus is all about employment with ADP private payrolls and initial jobless claims this morning, followed by the May Non-Farm Payroll employment report on Friday.  The employment data is expected to provide more color on the labor shortage dynamic and will certainly influence near-term investor psyche surrounding fiscal stimulus – with many still asking when will the tapering begin?   Now remember – while the tapering schedule remains the most important issue for the market, the FED is delivering a mixed message.  Some Fed officials (Brainard) saying that we need to see several more months of data before we even start hinting about talking about it given all the noise while others (Harker) are suggesting the time has come to begin the process.  In any event – expect to hear more and more in the months ahead…and watch as investors position themselves for what they think is the next move.  Will the markets suffer a taper tantrum, or will the FED do such a good job of jawboning their actions that investors and the markets will settle down and take it all in stride?  And that is the question…. Many street analysts appear to be moving into the ‘it’s ok camp’ and that a meltdown is not in the cards….

We also found out that the FED is preparing to sell its $13 billion of corporate bond and ETF portfolio that it acquired during the covid crisis in a vehicle known as Secondary Market Corporate Credit Facility – they were clear that this move is completely unrelated to any monetary policy currently in effect and is expected to be completed by December.   Recall- that this facility was part of the covid response and not the decade old GFC response – so Jay is right when he said that this move is unrelated to the longer-term policy discussions taking place now.  This facility is separate and distinct from the $7.3 trillion of debt on the FED’ balance sheet.  And $13 bil is a pimple on the FED’s backside…so this is not an issue at all.

Eco data yesterday revealed that the FED’s Beige Book report continues to support a robust recovery but is seeing sign of inflationary pressure building….and today ADP report is expected to show a gain of 650k new jobs while Initial Jobless Claims is expected to fall by another 30k claims taking into the 387k range.

US futures are weaker this morning……. Dow futures -113 pts, the S&P -15 pts, the Nasdaq is down 46 pts, and the Russell is off by 6 pts.  10 yr. Treasuries are flat at 1.6%, the Dollar is trading back below 90 and gold which rallied yesterday is off $11 this morning – hovering around $1,900 while Oil is steady at $68.70/barrel.

European markets are also lower this morning as investors react to some weaker China data overnight…. the Caixin/Markit Services PMI for May came in at 55.1 vs last month’s 56.3.  In Europe – the IHS Markit final composite PMI reading for the Eurozone rose to 57.1 up from 53.8 in April – so that is a positive.  Other than that – investors waiting on US data.  In mid-morning trade we see the FTSE -0.92%, CAC 40 -0.26%, DAX -0.50%, EUROSTOXX -0.54%, SPAIN -0.46% and ITALY -0.54%.

Bitcoin is trading up at $39k, Ethereum at $2,800 and Doggy Coin at 0.42 cts.

OIL is taking a breather…. churning right here at $68.70 on expectations of a surge in fuel demand from around the world.  OPEC suggests that daily demand will be 99.8 mil/barrels per day vs the supply of 97.5 million/barrels per day…. which clearly suggest that demand will outstrip supply which then means that prices are most likely headed higher…. Econ 101…. Supply vs. Demand.

The S&P closed at 4208 after trading in a tight range of 4198/4217 as investors sort it all out…. – The markets feel a bit tired, extended and need some time to digest what is coming down the pike this month.  The inflation, rates, policy, and employment 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…There is no real reason to do much unless of course you are trading the MEME stocks!

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

Pork Cutlets Caprese

Pork Cutlet Milanese with Tomato, Arugula and Red Onion Salad.  This is a great dish – colorful, hearty, and easy to make.

For this you need – Pork cutlets (pounded thin), flour, eggs, seasoned breadcrumbs, olive oil, butter, fresh arugula, Ripe Cherry Tomatoes, sliced red onion, lemon juice, and shaved parmegiana cheese.
Preheat the oven to broil.

In a bowl – beat 3 eggs (add a splash of milk), on a separate plate put some flour and on a third plate – place the seasoned breadcrumbs.  (It is like an assembly line – capisce?)

Begin by pounding the cutlets to thin them out.  Now – in this order – dredge the cutlet in the flour – dip in the egg wash and then cover in breadcrumbs – pressing gently so that the breadcrumbs adhere to the cutlet.  Place on a plate.

When ready – place a Pyrex dish in the oven with enough olive oil to cover the bottom of the dish.  You can add a dollop of butter (never a problem) – place the cutlets in the dish – on one side then immediately flip them and allow to broil.  Cook the cutlets until they are crispy golden brown then flip and repeat.

When ready to serve – place a cutlet on a warmed plate.   Top the cutlet with some arugula, then the cherry tomatoes (cut in half), and the red onion.  Squeeze fresh lemon juice sparingly – drizzle some olive oil – season with s&p and top with shavings of Parmegiana cheese.   Simple yet outstanding.  Enjoy your favorite wine a nice French Rose works well with this dish – but you can always have what you prefer.

Buon Appetito.