Things you need to know
- Stocks under pressure as investors rethink the narrative
- Europeans on edge about tomorrow’s ECB statement
- Treasuries fall, sending yields higher, Dollar strengthens, Commodities fall
- Bitcoin and Ethereum had a wild day – ending lower by 10%
- Try the Gemelli
Stocks FELL on Tuesday – September 7th…. that’s right – I said that stocks FELL (gasp!). The Dow lost 268 pts or 0.8%, the S&P gave back 15 pts or 0.3%, the Russel gave back 13 pts or 0.6%, the Transports fell 102 pts or 0.7% all while the Nasdaq rose 10 pts or 0.10%. What happened between Friday and Tuesday?
Maybe it was just the long holiday weekend that gave investors an opportunity to think about that weak NFP report finally hitting home….and that maybe just maybe the recovery was faltering….but maybe it was the wages part of the report that is causing more angst….you see average hourly earnings jumped by 0.6% for the month – that was double the expectation – and if you peel back the onion you see even more…..wages in the leisure and hospitality sector saw wage increases of 1.3% m/m and 10.3% y/y. This just as the FED is caught between a rock and a hard place….What to do? What about inflation? That is the question….
And as expected we are hearing more from some of the FED Heads….and this morning without fail it was St. Louis’s Jimmy Bullard (a NON-Voting member) …who gave an interview to the Financial Times (FT) today and in it he says that it is time to move on a plan….and dismissed concerns that there is any problem at all in the labor market – telling the FT
“There is plenty of demand for workers and there are more job openings than there are unemployed workers…”
And that my friends is true – we have more than 10 million job openings….and today’s JOLTS report (Job Opening & Labor Turnover Survey) will confirm that – So, will the market listen to Jimmy? Let’s see.
Last week we heard from Atlanta’s Raffi Bostic (voting member) and now St Louis’s Jimmy Bullard (non-voting member) – who is next? San Fran’s Mary Daly and she is one to watch – as she is also a voting member – so like Raffi – she does have some sway…. Capisce?
And in yesterday’s note – I made mention that even the Europeans are beginning to wonder what the European Central Bank (ECB) is set to do – with speculation running rampant that they too are readying to take the candy jar away as well and that caused European markets to end Tuesday in the negative category and that weak tone is all over the region again today…with markets down over 1% across the board.
Yesterday – The 10 yr. treasury rose 5 basis points to end the day yielding 1.373% – helping to send the dollar higher……and if treasury yields continue to rise – then expect the dollar to do better as well…..as yield is the driver for a stronger dollar, but if 10 yr. rates remain anchored right here then the dollar will stall, but if the 10 yr. yield continues to climb then watch what happens to the dollar and then by default to the commodity complex.
Now – the dollar rose 0.5% to 92.55 – leaving it just a hair away from trendline resistance at 92.64….and if it should pierce that level – then expect the dollar to rally back to the August highs of 93.70 as yields continue to climb. This morning – the dollar has pierced that trendline and 10 yr. yields are holding steady but the day is young…… The commodity complex came under pressure as the dollar strengthened. (Think gold, silver, oil). Gold lost 2% or $38, Silver lost 1.7%n or 0.41 cts and Oil fell 1.3% or 0.90 cts to end the day at $68.40.
The VIX rose 8.5% as stocks fell….and that is not a surprise at all….because remember last week when the VIX rose and stocks rose – I pointed out that was illogical – because as FEAR increases – stock prices should retreat (even if just a little) – but as the VIX rose so did stock prices and I noted that maybe – investor FEAR was building but that no one was really ready to run for the door – they were confused….. – so they played on both sides of the fence – not sure what to believe….and now that there is more analysis and commentary there is a bit more concern – and that makes sense….fear rises and prices retreat….
There is no eco data to really speak of this week in terms of easing anyone’s mind about what’s coming….3rd qtr. growth estimates are being revised lower – and that too is not a surprise….we all know that the 2nd qtr. was the peak – that has been discussed ad nauseum….. all while concerns that the Delta variant raises the temperature in the room one day and then cools the next. News out of China that both exports and imports grew faster than expected should help to ease any concerns about reopening and supply chain issues. Or maybe not…..
This morning we are seeing some follow thru….US futures are down….although – not as much as they were overnight when we saw triple digit losses of 200+ pts in the Dow. At 6 am – we are seeing some attempt at a rally…Dow futures are only down 55 pts, S&P’s off by 5, the Nasdaq down by 10 pts and the Russell off by 4 pts – But I am not sure that we will get any at all….Expect to hear more about Jimmy Bullard’s commentary and analysis of what he said – which is all true and I am on his side – it is about time to move…in fact – if you ask me, we should have moved much earlier than now, but hey – I’m not the FED chair….Talk of a push to move will clearly put pressure on the markets – since all the talk on Friday suggested that the weak jobs report would give Jay Powell cover to do nothing.
The only eco data today besides the JOLTS report that is of any importance is mortgage apps and the FED’s Beige Book – which details the state of the union broken down by the 12 Federal Reserve districts – this is published at 2 pm….Watch to see what the FED has to say about the state of the union…..and will this report give Jay even more cover to do nothing?
This morning – we are seeing weakness across Europe – which makes sense…..as they await the ECB results tomorrow morning…..recall that last week I told you that the recent spike in EZ inflation and an increase in economic activity is causing the hawkish members to make noise….but remember – Christine Lagarde has confirmed that the ECB will not move until the FED moves….But do investors believe her? As of 6:30 am – all those markets are down nearly 0.8%.
Bitcoin lost nearly 10% yesterday after trading as high as $52k before ending the day at $47k……I guess investors are not sure what the El Salvador news really means…Remember I said yesterday morning that the pop would be short lived…..Or was it just that investors in the coin decided to take some money off the table on the spike – ahead of what might be a volatile time in the weeks ahead. Ethereum which also pushed up and through 4k is now trading at 3300 on the same logic……
The S&P ended the day at 4520…the weakness this morning will give a reason to test yesterday’s lows of 4513 to see if it holds…if it does not – then 4470 would be the next target to see if the buyers are lurking…..even that would only be a 2% move off the high….maybe enough for the buy the dipper crowd – but I’m still waiting for that bigger pullback. Morgan Stanley put a report that says stocks are fully valued and that they expect a 10% – 15% pullback before year end – but that story is not getting a lot of attention because Tommy Lee of Fundstrat is telling everyone that September is going to be a blowout month….that stocks are going to reach new highs – blah, blah, blah….so – Stick to the plan….do not get sidelined by the noise if you are a long term investor.
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.
You can follow me on Twitter @kennypolcari and on IG @kennyp1961.
You can also find my daily videos on my YouTube channel – Kennypolcarimedia – My URL address here: https://www.youtube.com/user/kennypolcarimedia
Take Good Care
Chief Market Strategist, Consultant
Gemelli Pasta w/Basil Pesto, Potatoes and Green Beans
This is a great dish – simple to make – and so good.
For this you need: 1 lb. of gemelli pasta, pine nuts, 3 cloves of unpeeled garlic, 1 lb. peeled red potatoes cut into bit sized cubes, s&p, green beans – trimmed and cut into 1 in lengths, Fresh basil, fresh grated parmigiana cheese, olive oil, butter and 1 tbsp. of fresh squeezed lemon juice.
Bring a pot of salted water to a rolling boil. – add the potatoes and cook for about 10 mins or until tender – and this will depend on the size cubes you make. Once cooked – remove the potatoes with a slotted spoon and set aside on a baking sheet.
***DO NOT THROW THIS WATER AWAY – YOU ARE GOING TO USE IT FOR THE PASTA! ***
Toast the pine nuts and the garlic cloves in a skillet over med hi heat – careful not to burn – do not use any oil…just the pine nuts and the garlic. Once browned = remove and set aside – let cool. Now peel the garlic –
In the same pan – add water and a bit of salt and add the cut green beans – cook until tender – maybe 6 – 8 mins max. Drain and set aside with the potatoes.
In the food processor – add the basil, olive oil, parmigiana cheese, garlic, pine nuts and a dash of salt – pulse until smooth – about 1 min.
Now add the gemelli pasta to the water that had the potatoes – cook until aldente – maybe 8 mins….
Reserve a mugful of the pasta water – and then strain the rest in a colander.
Now put the pasta back in the pot – add in ½ stick of butter that you sliced up so that it melts faster. Now add the potatoes and beans and the fresh lemon juice and the pesto sauce. Add in ½ of the mug of cooking water. Stir vigorously- but not hard enough to smash the potatoes…. If you need to add more water – do so now…but don’t make it wet…. leave it a bit ‘creamy’.