This post was originally published on this site

Delta, Variant, Delta Variant, Vaccine, Corona, Medical

Things you need to know

  • NFP report is hot, but not hot enough
  • New virus cases causing renewed concerns for both the vaccinated and the unvaccinated
  • The Dollar Index continues to advance putting pressure on the commodity complex – gold, oil, and the broad commodity index -BCOM all lower
  • No eco data today, but later in the week, we will get both the CPI and PPI
  • Try the Scallops with Tomato Bruschetta

Non-Farm Payroll – comes in a bit ‘hotter ‘than expected but not ‘hot’ enough to create panic at the FED…..the report was expected to show a gain of 870k new jobs in July and we got 943k…on top of that they revised UP June’s report from 850k to 938k – so it’s all good….we are creating jobs at the fastest pace since July 2020 and as such the unemployment rate is declining…Friday unemployment rate dropped 3/10th of 1 percent – going from 5.7% to 5.4%…..manufacturing, education, professional and business services, arts, entertainment and recreation all gained….and while leisure and hospitality gained as well (+380k jobs) that sector is still off by 1.7 million jobs from February of 2020 – in the weeks before the crisis began….Avg hourly earnings m/m and y/y are up, and the underemployment rate dropped a bit more as well, going from 9.8% to 9.2%….in the end the takeaway is that cities are opening back up, offices are opening back up and the growth in service sector jobs suggest that the consumer and by default consumer spending is returning.   So that’s all good….

Investors celebrated – taking the Dow, S&P, Russell and Transports all higher all while the better report raises fresh questions about what’s next at the FED.  Not surprising, the Nasdaq (and by default tech names) got slapped as investors once again toy with the idea that a tapering and rising rate will not be good for that sector…… Now in any event – while the US labor market charges ahead – accentuating the robust recovery, the delta variant continues to spread – like wildfire in some parts of the country (and the world)  among everyone….vaxxed or not and that is beginning to cause a new set of concerns, concerns over the efficacy of the vaccines and concerns over possible new lockdowns that will once again disrupt the supply chain – a chain that has YET to recover fully from the initial shock of the global lockdown.

Life is returning to normal (or is it?)  and that forces us to ask – Ok, now what?  Are the better macro data points of late pointing to a more hawkish FED or not? And that my friends is the million dollar question…..there are some who think yes, while there are others that believe we are not there yet and that the FED will need to see even more and better data points before they begin the process especially in the face of rising virus cases around the country and the world never mind the rising rate of inflation in this country that they still tell us is transitory.

In addition, we always have the latest regulatory assault coming out of Beijing on big tech and that will remain an issue for months to come, with or without the virus.   Stocks continue to struggle – at the highs – as investors consider the better-than-expected earnings reports and macro data all while feeling a bit fragile and stretched.  Additionally, we have now entered the seasonally weak period of the year and that will remain a concern for investors as we make our way thru Halloween…..Recall, we have the big Kansas City Fed boondoggle  – Jackson Hole on August 26th – 28th and it is there that many expect Fed Chair Jay Powell to suggest the start of the tapering process late 2021/early 2022 while others say ‘no deal’, ‘not happening’….and so, we shall see…

This morning – US futures are lower…. Dow futures – 82 pts, S&P’s -7 pts, Nasdaq +3 pts and the Russell is -12 pts.  Over the weekend – many analysts, strategists and investors had the opportunity to consider the latest NFP report and the sense is that IF we continue to get robust job growth, better macro data and continued rising inflation – then the FED will have to do something.

In addition – over the weekend – the Senate worked hard on the $1 trillion infrastructure bill, and it looks like it has the bi-partisan support to pass (68/32) and that should become clear either today or tomorrow.  Now to be clear – once this part of the infrastructure bill is passed, expect Chucky Schumer to offer up a budget resolution that will set the stage for democrats (alone) to pass the $3.5 trillion in additional spending that they want.  But here is the issue – there are a handful of republican senators that are still holding out to stall the process so that the democrats will not be able to pass the additional bill and that is causing a new level of frustration on Capitol Hill. Tennessee senator Billy Hagerty saying that

Democrats true intention is to rush this bill through so that they can hurry up and light the fuse on their $3.5 trillion spending spree, a socialist debt bomb, then leave town on vacation.” 

So, expect to hear more about this, this week….and next and then the week after that.

The 10 yr. treasury yield rose to 1.28% on Friday and the Dollar index continues to advance (on bets that the FED will announce a tapering in August)  – testing the most recent highs of 93.60 back in July and that is helping to put pressure on the commodity complex – remember that commodities are priced in dollars, so as the dollar gets stronger, commodity prices get weaker and vis versa…..Gold (commodity) is now trading at $1,744/oz down 9% since mid-July and that goes hand in hand with the stronger dollar.  The Bloomberg commodity index – BCOM is also down about 3.5% since late July as well.

And this morning oil – the biggest commodity in the crowd for equity traders – is also getting slammed – down 4% or $2.75 at $65.54/barrel on both the stronger dollar and the continued hysteria over the delta variant story.  You see over the weekend – China reports a rise in new cases and China’s July oil imports are down 20% y/y….and so, many in the industry are using that data point to suggest a collapse in oil demand and thus in oil prices…I guess the real clue will be when our friends at Goldy come out and change their outlook for yearend….that will be after they get out of their oil positions just fyi….

The VIX is up 6% this morning at 17.21…. still below the trendline but attempting to pierce it…and anything that truly disrupts the equity markets will see the VIX soar, or if we see the VIX begin to surge, then we can expect stocks to take a hit – it’s the age-old question – Which came first?  The chicken or the egg?

Economic data this week includes the CPI on Wednesday and the PPI on Thursday, and both of those data points will be keenly watched as it speaks directly to the rate of ‘transitory’ inflation….

European markets are just a bit lower…. there is also no significant news out, so it’s more about the churn.  At 6:45 am – markets across the region are off about 0.20%.

And crypto’s?  They are advancing nicely…. Bitcoin is trading at $45k, up 12% since Friday while Ethereum is trading at $3,000 or up 7%.  All the recent news surrounding the SEC and new regulation along with some of the major banks launching crypto platforms and investment opportunities for clients only strengthens the crypto story and that speaks volumes about how investors feel about the future of this technology. Again – if you are in the market – this asset class should be some percentage of your portfolio – what that is, is your call, but it should be in there.

The S&P closed at 4,436 – after testing as high as 4440……The trendline suggests that 4455 should be a level of resistance, but we are in unchartered territory, so everyone is flying by the seat of their pants.   There are no economic reports today to drive the action – so it will be all about interpretation of the most recent data. The weakness this morning is not suggesting a big pullback, just some churn.  There appears to be plenty of support down 1 or 2%, but that could change if investors expect the FED to change course.

In any event – stick to the plan…remember – investing is dynamic…keep some cash ready to deploy, but don’t be so quick on the trigger just yet…

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

Seared Sea Scallops w/Tomato Bruschetta

Ingredients: Sea Scallops, Dried Porcini Powder, Butter, s&p,

For The Bruschetta:
Ripe, Plum Tomatoes, Garlic, Peeled and Sliced, Olive Oil, s&p

Make the bruschetta and let it sit. Dice the tomatoes and place in a bowl.Add the sliced garlic – maybe 2 cloves, olive oil and then season with s&p. Mix well and set aside

Rinse and pat the scallops dry with a paper towel.  Now – sprinkle the scallops with the dried porcini powder on both sides.

In a heavy frying pan – heat the butter – add a drop of oil until it sizzles – do not let it burn!

Add the scallops – maybe 4 at a time – if you add to many – they will cool the pan and not sear properly.  Sear on med high heat for about 3 minutes on each side. The scallops will have a light, crisp outer crust.  – Remove and place on a plate – (Cover with tin foil to keep warm) and repeat the process until finished – placing 4 scallops on each plate.

Once you sear them all finish by spooning a bit of the bruschetta over the scallops and serve immediately.  Serve with your favorite white wine.   A simple – yet elegant dish.

Buon Appetito.