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Things you need to know.

  • Investors remain a bit confused – stocks up then down, then up again…this morning they look weaker
  • Yields continue to fall – the 30 Yr bond breaks 2%
  • Earnings to start tomorrow – Financials kick it off
  • Inflation data points Tues & Wed…Sit tight
  • ECB – Did Christine hint of a change?
  • Try the Pasta Piselli

Investors got knocked down on Thursday, but then stood up on Friday and thumbed their nose at the critics…. the move on Friday speaks volumes to the continued confusion in equity markets….  I mean think about it…on Thursday it appeared as if investors had decided that the global economy was circling the drain, stocks around the world fell, and treasury yields sunk to levels not seen in months while pension funds, insurance companies, sovereign funds etc. piled into the treasury market (think safety) – buying up 10’s and 30’s like there was no tomorrow -sending yields plunging, the 10 yr. breaking 1.35%, then 1.3% and then even 1.28% before the bleeding stopped while the 30 yr. broke down and thru 2% – ending the day at 1.95%….  Media pundits blaming the collapse in stock prices on the ‘delta variant’ – which by now you know I think is ridiculous…. Convenient? Yes, but in reality – the move in stocks on Thursday had so much more to do with so many broader issues…. outlined in Friday’s note….and here in my Friday morning’s Fox Business appearance on Varney & Co with Ashley Webster…

In any event – apparently the ‘delta variant’ must have disappeared between 4 pm on Thursday and 6 am on Friday……leaving investors to assess the landscape….and what they found was ‘opportunity’….  Algo’s which were at the forefront of the sell off on Thursday, found themselves behind the steering wheel on Friday morning…and futures surged…. getting stronger as the clock ticked down towards the 9:30 opening bell.

Talking heads now all suddenly discussing the coming ‘strong earnings season’ and the strong macro data that points suggesting a leveling off of activity vs. a decline in activity…and a leveling off of activity is expected…I mean we cannot sustain torrid growth and strong gains month after month after month….I mean at some point it has to settle down…..and so – the delta variant got pushed to the back burner (again conveniently -because on Friday it didn’t fit in the storyline like it did on Thursday) and stocks surged….the Dow, S&P and Nasdaq all closing at NEW highs –   By 4 pm the Dow gained 448 pts or 1.3%, the S&P up 50 pts or 1.13%, the Nasdaq ahead by 142 pts or 1% while the Russell added a whopping 48 pts or 2.1% and the Transports – which had gotten whacked on Thursday falling more than 3.2% found support and buyers causing it to rally 370 pts or 2.54%…. You gotta love this business…. Every day brings a new story….and lots of noise…but like I said on Friday….’Ignore the noise and listen to the music’.

We woke up on Saturday morning and found out that the G-20 (who were meeting in Venice, Italy) have agreed to what is being called a ‘landmark move’  a ‘Tax Crackdown’ establishing a global minimum tax of at least 15% to deter multinationals from shopping around the world for which country offers the lowest corporate tax rate and then setting up shop there to take advantage of the lower taxes….clearly – Ireland is not happy with this and refused to sign on…along with Hungary and 1 or 2 others….but, let’s not focus on that right now….Here is a quickie on the G20 –

[The G-20 (formed in 1999) is a group of finance ministers and central bankers from 19 of the world largest economies plus the European Union – 19 + 1 = 20; their mandate – to promote global economic growth, international trade, and regulation of financial markets.  But they are a forum and not a legal legislative body, so their agreements and decision do not in fact have any legal impact – but they do influence policies and global cooperation…. Members include US, Australia, Canada, Saudi Arabia, India, Russia, South Africa, Turkey, Argentina, Brazil, Mexico, France, Germany, Italy, UK, China, Indonesia, Japan, South Korea, and the EU]

So, now Treasury Secretary Janet Yellen returns to the US and tries to push this through congress – but let us be clear – this is not a done deal by any stretch and while there will be lots of conversations – this is far from done, so put it in perspective.

This morning we wake up to learn that ECB (European Central Bank) President – Christine Lagarde telling global investors to expect an announcement in 10 days about a ‘policy shift’ coming in mid- 2022…. which is interesting isn’t it?  Because Lagarde has always said that the ECB would follow the FED’s lead….and then 3 weeks ago – Jimmy Bullard makes a reference to a possible change in US policy in  Mid – 2022 – which everyone seems to be dismissing, but now Lagarde says that she expects the current $2.2 trillion bond buying program to run ‘at least’ until March 2022 – followed by a ‘transition into a new format’   – being very careful to make sure that she is not creating any anticipation of an exit in the next 6 months.  European stocks are lower this morning on this headline…. more to follow.

Next – Eco data….and there is a lot of it this week…. But the two most important reads will be CPI and PPI.  Tomorrow’s CPI (consumer Price Index) survey will detail the latest read on inflation…. The expectation for the CPI is +0.5% m/m and + 4.9% y/y and Ex food and energy of +0.4% and 4% respectively.  On Wednesday it will be PPI (Producer Price Index) survey and the expectations call for +0.5% m/m and 6.7% y/y – ex food and energy of +0.5% and +5% respectively.

Thursday will bring Jay Powell to Capitol Hill where he will deliver his semi-annual Monetary Policy Report otherwise known as the Humphrey Hawkins testimony – expect investors to pay close attention to what he has to say – always looking for some clue that no one else hears….

Next are earnings….and as you know – the financials kick it off starting tomorrow – we will hear from – JPM, C, BAC, GS, MS, BLK etc.….and what will we hear?  Look, banks have been under a bit of pressure recently as yields decline, yet earnings are expected to be strong – some estimates as high as +60% y/y ….and remember – earnings are history…and yields only began to get banged two weeks ago…. when the quarter was mostly over….so what will be important is what the guidance is…. Expect lots of excitement ….so strap in…. the immediate question is – can these stocks keep going higher or will we see strong earnings and a pause in prices?

Look, I continue to think that the month will be a bit volatile and that you will get the chance to buy stocks at lower prices, but investing is dynamic, so if you are an active trader – get ready, if you are a long-term investor – then get ready.

This morning the 10 yr. is hovering at 1.33%, the 30 yr. bond is yielding 1.95%, the VIX is up 5%, gold is down $9 at $1,800/oz, the Dollar index is up andoil is down 1.5% at $73.44/barrel.

US futures are a bit lower and higher…Dow is down 140 pts, S&P’s down 10, while Nasdaq is up 29 and the Russell is down 16 pts all this as investors set themselves up for what is sure to be a busy week….

European markets are all a bit lower…. continued concern over the delta variant and the latest comments out of the ECB causing a pause in investor appetite. Earnings are also set to begin – so markets await.  There is no eco data today to drive the action.  Across the board – all markets are lower by about 0.5%.

Yesterday the world witnessed Sir Richard Branson and his crew touch the edge of  space in what is now launching a billionaire battle to see who has the ‘biggest rocket’.  This morning SPCE is bing quoted up 8% at $53.

And the Italians won the Euro cup…. Bravo.

Bitcoin is flat at $33,800, Ethereum is trading at $2,100 and doggey coin is at 0.22 cts.
The S&P closed at 4,369 – a new closing high…. – after testing as high as 4371…. or 20 pts away from my yearend target and another century mark….

Remember that JPM, MS and Blackrock are out there banging the drum, saying that global growth is still on track and earnings over the next 4 weeks will support their thesis while the ECB is implying changes ahead…. mimicking the FED…. because while Jay says it is all systems go, the FOMC minutes suggest something different…. In any event – sit tight….  The outlook is positive, and currently governments remain overly supportive and central banks remain very dovish – and that also implies that the ‘buy the dip mentality’ is alive and well…

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

Pasta Piselli (Pasta & Peas)

So last night I got hungry at 8 pm so I whipped up an easy childhood favorite…Pasta & Peas….and then I posted a picture of it on my Twitter – and got all kinds of requests for the recipe.  Now last night I used ditalini (because that is all I had in the house, but usually I would use medium shells – to catch the peas) …so here it is….so simple and so good.

You need – I box of ditalini (see picture), 1 lg bag of frozen peas, 1 big white onion, olive oil, butter, s&p, and fresh grated parmigiana cheese….

Begin by bringing a pot of salted water to a rolling boil.

In a separate pot – add the oil and the onions – sauté for 10 mins, now add the frozen peas – stir to coat and break them apart.  Season with s&p – turn heat to med low and cook for 10 mins. – stirring occasionally.

Now add the pasta to the water and cook for 8 mins or so…. remember – aldente.  Strain – reserving a mugful of water…. Put the pasta back in the pot – add a dollop of butter – stir to coat the pasta.  Now add the peas – mix well.  Add 1 or 2 handfuls of the fresh grated cheese and mix again.  Serve immediately.  Mmmmm…so good.  (See the picture).

Buon Appetito.