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Things you need to know
- Summer is officially over in just 5 days….
- Will Jay Powell finally announce a decision at the September FED meeting that begins on 9/21 and ends on 9/22?
- Gold and Oil are fighting trendline resistance while the Dollar tests trendline support
- Try the Chicken Provencal
It’s over – the month that is….and it ended on a bit of a sour note…. By the end of the day – the Dow gave back 40 pts or 0.1%, the S&P off 6 or 0.13%, the Nasdaq down 6 or 0.04%, the Russell gained 8 pts or +0.34% and the Transports gave back 175 pts or 1.18% – the biggest loss of all. While the day was overall negative, the indexes ended up for the month amid very strong corporate earnings and the ongoing delivery of massive stimulus. YTD the market is up nicely as well – the Dow up 15.5%, the S&P up 20.4%, the Nasdaq up 18.4%, the Russell up 15.1% and the transports up 17%. Not so bad for 8 months in….
Media cites valuation concerns for yesterday’s weakness. Really?
It’s laughable because if you listen to the media – they are trying to tell you that the ‘weakness’ is due to investors assessing whether or not the markets can support these ‘lofty valuations’ considering the coming taper…. And I say it’s laughable because what are we talking about – a market that lost basically 0.20% overall yesterday? I mean come on……I would say you have to wait to use that argument until investors start to run for the exits when the official announcement details the plan…and when we see declines approaching 5%, 7% or maybe even 10%…. then I would say – yeah…. investors thought the market was a bit overvalued…. but a loss of 0.2% really? That’s nothing but a pimple on your (fill in the blank).
And then they pointed to the eco data – one data point suggesting that home prices continue to surge (which is a negative for buyers/positive for sellers if they can find the buyer) while the Conference Board Consumer Confidence survey fell by 16 pts – coming in at 113.8 vs. last month’s 129.1. And just for good measure – if you need to help support a negative story – you can always add in the resurging virus that is delaying some of the global reopening’s (although everyone poo pooed that idea on Monday) which is what then lets you start the conversation about ‘stretched valuations’….
7 of the 11 S&P sectors lost value yesterday…. only consumer discretionary, Consumer Staples, Communications and Real Estate advanced…. Energy once again leading the way lower – but that is not a surprise at all – considering the spike in prices during the last week.
All this as what? As we approach the September/October time frame – which historically is full of seasonal weakness. In fact – you could say that the coming announcement by the FED will only amplify the potential volatility in the weeks ahead. And then the news that the ‘Squad’ wants to fire Fed Chair Jay Powell – because he is not designing monetary policy around climate change or social injustice – which is just another reason to have the Excedrin ready…because if this becomes the conversation – then we are all in trouble. I must ask – where in the FED mandate does it say anything about climate change or social injustice? And here is the answer – IT DOESN’T. Period. Their mandate is clear – you can find it on google and just to be clear it says…
“Since 1977, the Federal Reserve has operated under a mandate from Congress to “effectively promote the goals of maximum employment, stable prices, and moderate long term interest rates” — what is now commonly referred to as the Fed’s “dual mandate.” –
Where do you see climate change and social injustice in that definition? Now climate change and social injustice are real, but they are not the purview of the FED – so just stop. I just wish someone in a leadership position would stand up and grow a pair…. but apparently that isn’t happening either.
OK – so it is now Wednesday September 1st, 2021 – we are in the final stretch before the ball drops in Times SquareO…. There are exactly 123 more days and only 86 more trading days until December 31st – …. And that means that there are only 116 more shopping days until Christmas….so expect to hear all about the quarter long ‘Black Friday Sales’ which are due to start even before the pumpkins are picked for Halloween. Or will we?
Supply chain issues are causing all kinds of shortages (we are told), so will retailers really be wiling to slash prices the way they have in the past? Or will they hold the line? And if they hold the line, what will consumers do? Because, if the consumer says no, then at some point the retailer will cut prices – the question – Who blinks first? The consumer or the retailer? We are about to find out in the weeks ahead – Just fyi – the chatter among street analysts is that this shopping/holiday season will be strong, and retailers will benefit…. We’ll see….
Eco data this morning is all about the ADP employment report -and the estimates call for an increase of 680k jobs…and this is always the pre-cursor for the Non-Farm Payroll Report – which comes out on the first Friday of every month– and the estimates for that suggest that we created 780k new jobs. In addition – we will get Markit US Manufacturing PMI (Purchasing Managers Index) – expectation of 61.2, Construction spending of +0.2% and ISM Manufacturing PMI -expectation of 58.5. Remember – PMI’s have both a contraction and expansion read….50 is the neutral line – North of 50 is expansion, south of 50 is contraction….and with all the PMI’s expected to be in the high 50’s/ low 60’s we are still in expansion mode -so no need to worry (yet).
This morning we are seeing global markets all higher as the new month begins. In Asia – China rallied 1.3% as investors seem to think that the worst of the tech regulatory clampdown has seen its worst days…. In addition – China’s Manufacturing PMI for August came in at 49.2 – putting that country into ‘contraction’ territory (if you even believe them) – meaning more stimulus out of the PBoC (People’s Bank of China). Australia’s GDP rose by 0.7% – beating expectations of +0.5%. Japan added 1.3% while Hong Kong was up 0.6%.
In Europe – markets there are also all higher across the board…. This even as the ECB (European Central Bank) made some more hawkish comments regarding the start of their tapering policy – which will start after the US launches theirs. Apparently, the sense in Europe is that even a reduction in stimulus would be the equivalent of emptying a swimming pool using a teaspoon – so investors do not appear to be that concerned yet…. but if they decide to use a ladle then watch out! In addition – Eurozone inflation data for August came in at +3% – well ahead of the +2% target. Watch for individual PMI readings from a handful of countries in the region. At 6 am – the FTSE +0.8%, CAC 40 + 1.1%, DAX + 0.4%, EUROSTOXX +0.9%, SPAIN +1.8% and ITALY + 0.9%.
US futures are up – Dow +121 pts, S&P’s +15 pts, the Nasdaq +23 pts, and the Russell up 14 pts. The Focus today will be on the economic data as we move into Friday’s all important NFP report. But it is a long weekend coming up – expect volumes to slow and any moves up or down to be exaggerated because of lower volumes. The next FED meeting is on September 21st/22nd – where we are expecting Jay to announce a more defined plan on asset tapering – Expect lots of speculation over the next 3 weeks about what exactly that will look like as they try to prepare investors for ‘the event’.
The 10 Yr. treasury ended the day yielding 1.31%, Gold continues to fight the converging trendlines at $1816 – my sense is that it will pierce it and then look to rally towards $1900. The dollar index has fallen back to trendline support and will look to find stability at 92.60.
Oil ended the day down 1% at $68.51 but is up this morning…. Trading at $68.77 as it too struggles with piercing trendline resistance at $69.61. A move up and through that level will see oil rally back to the mid $70’s.
Bitcoin is trading at $47,700 and Ethereum is trading at $3,500.
The S&P ended the day at 4522…after trading in a very tight range…. a look at the chart continues to show that the index keeps hugging the trendline as it claws its way higher. While many – myself included- are calling for a pullback – it eludes us…. My advice remains the same…Stick to the plan – keep putting some of allocated money to work in the underrepresented sectors while remaining aware that the coming correction will provide a greater opportunity to put money to work. I would not be chasing the leaders of the pack at all…. because those leaders will be the first ones to lead lower when the tone changes.
Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.
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Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Chicken Provencal
This is a great dish and one that you can use for a large gathering.
For this you need: Legs and thighs (on the bone), celery, carrots, onions, garlic, potatoes, olive oil, butter, s&p, crushed tomatoes & white wine.
Pre-heat oven to 325 degrees
Begin by heating up some olive oil and a qtr. stick of butter in a large frying pan. While that is happening – place the chopped celery, carrots, onions, and crushed garlic in the bottom of a deep baking dish. Add in the peeled and cubed potatoes – leave them a bit chunky so that they don’t melt away.
Now season the chicken pieces and fry them until they are golden brown all over. Now place in the baking dish on top of the veggies. When you have fried all the chicken – add a dollop more of butter and deglaze the pan with white wine – I used Pinot Grigio. Pour over the chicken.
Next in the same pan – add the crushed tomatoes – season with s&p and heat up. Pour the tomatoes over the chicken pieces and cover tightly.
Place in the oven at 350 degrees and let bake for 1 hr.….
Then remove the foil – turn the heat up to 375 degrees and let it continue to bake in the oven for another 20 mins…. Then turn the pieces of chicken over and let cook for another 20 mins. You want the chicken pieces to brown up nicely.
When complete – remove and serve on a bit platter. Make sure to have a large green salad. – Delish.
Buon Appetito.