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Board, Blackboard, Business, Inflation

Things you need to know 

  • And we’re off!  BLK and JPM report ‘better than expected’ results
  • CPI (Inflation data) due out at 8:30 am….
  • Jimmy B – once again warning of ‘hotter than expected inflation’ as he vies for the Chairman’s seat at the FED
  • Try the Salmon with Lemon Dill

Stocks mostly end the day lower….the Dow lost 118 pts, the S&P lost 10, the Nasdaq gave up 20 pts while the Russell and the Transports added 13 and 134 pts respectively.  The 10 yr. actually backed off – ending the day yielding 1.57% and that was down from the 1.63% that it traded at in the early morning – Which should have been a plus for stocks – and still they sold off…..which then says something about the mood ahead of earnings season.

Recall – yesterday morning – in my note I said that on Monday – stocks lost ground and closed on their lows – which usually means they trade lower the next day….so, it should be no surprise that that is what we saw.

The issues – remain the same….inflation, inflation and more inflation…ahead of earnings…What will we see?  What will companies tell us about price pressures, supply chain issues, logistical problems, vaccine mandates and what that means for employees, (we’ve heard from so many so far….and recognize that there is push back against it), margin pressures and economic outlook going into what is sure to be a rocky 6 – 8 months….

Now I say a rocky 6 – 8 months because if the FED announces in November that they will begin tapering in December (seems to be consensus – although I still think it is an early 2022 event)  and that it should take 8 months to fully end this stimulus program if they stick to the plan they laid out – then I expect that we will see a rocky road ahead as investors understand the new landscape and then price stocks accordingly.  And if the plan changes mid-stream then expect even more volatility.   All this means is that investors should be prepared, it does not mean run for the exits at all, it just means stick to the plan, don’t get an upset stomach, look forward to the goal.

This morning we are hearing once again from St. Louis’s Fed President Jimmy B (who by they way is vying for Powell’s seat in the new year – it couldn’t be more obvious…).  He reminds us that he supports the start of tapering as soon as November and that the FED should be aggressive in removing the stimulus in the event that inflation runs ‘hotter’ than they are telling us…..and all that means is that inflation IS running hotter than they are telling (as if we need anyone to tell us what we already know….)  – because that is the way the release information and then test investor reaction…..and Jimmy is always happy to be the one to take the lead in the media….

Yesterday 5 of the 11 S&P sectors ended lower….Industrials, Technology, Financials, Communications and Healthcare while the Utilities, Consumer Discretionary, Consumer Staples, Energy, Basic Materials, and Real Estate all moved a bit higher…..Both the Growth and Values trades moved in tandem closing out the day lower as well, which is a bit curious – because you’d think that in a nervous market – money would had found support in the value trade.  That now leaves the SPYG just 1% ahead of the SPYV – YTD returns of +16.5% vs. + 15.25%.   I am still in the value camp in terms of portfolio balance.

This morning US futures are trading just above the unchanged line….Dow futures up 40 pts, the S&P’s up 7, the Nasdaq is ahead by 65 pts and the Russell is up 3 pts. Get ready – at any moment we are about to hear from DAL, JPM and BLK – I suspect all 3 will beat on both top and bottom lines.

The 10 yr. treasury is beginning the day yielding 1.59% while the dollar index is holding tight at 94.30.  Gold is up $10 at $1,770 and is about to kiss its trendline at $1,777 – a level that may prove to cause some resistance, but I think only briefly…..If the inflation story continues to heat up, then I expect money will move into this hard asset as a protection/safety play. 

Oil is off 50 cts at $80.11/barrel as investors digest the recent surge – before it surges again.

Eco data today includes – CPI (Consumer Price Index) – exp of +0.3% m/m and +5.3% y/y.  Ex food and energy of +0.2% and +4% respectively.  This will be a key to today’s earnings…

Apple news after the bell last night reveals that apple is slashing production of its phones due to supply chain issues….semi-conductor shortages….the stock is quoted down a couple of bucks ($140) this morning on top of the $1.30 loss yesterday….Apple is now down 10% off the early September highs….so that puts it in ‘correction mode’.  If it remains weaker during the day – then look for the 200 dma trendline to offer some support ….and that number is $135.

BLK just announces and BLOWS THE DOORS OFF THE BUS……earnings of $10.89/sh vs. the expected $9.35/sh – a 16% beat to the estimate…..the stock is quoted up $60…..I hope you read my note from yesterday……here is what I said –

“Keep you eyes on BLK today…$820 is the level to watch…that is the long term trendline….a level it has tested 4 times in the past week….If what I think will happen, happens, then they will report a strong number and a big increase in AUM and then boom….it’s off to the races”

Headlines suggest that they beat on all lines and AUM are approaching $10 trillion  – we don’t have the official number yet…but I would be surprised if they DIDN’T blow thru that as well.

JPM also announces and guess what?  OH – they beat as well…..(Here we go….) Jamie reports earning per share of $3.74 vs. the expected $2.97 (26% beat)…..and they beat on every line as well….
European markets are mixed ahead of the start of earnings season…..News that the IMF (Int’l Monetary Fund) cuts global growth forecast due to all of the issues we have been talking about….supply chains, pandemic losses etc….is not really an issue – WHY?  Because they cut it to 5.9% down from 6% – I mean come on, man…..UK GDP coming in at 6.9% vs. the 6.7% estimate.  At 6:45 am – we seen the regional markets trading tight around the flat line.

Bitcoin – is trading at $55,000 and Ethereum is at $3450.  News that bitcoin mining is moving to America as China comes down hard on them.  And this will create an interesting story for the left – because the issue with bitcoin mining is the amount of energy it takes to run all those computers that mine for bitcoin.  And where will that energy come from?

The S&P ended the day at 4350…. After attempting to stabilize ahead of the official start of earnings season….We are now down 4.5% from the September highs and closed last night below its intermediate term trendline at 4362…..As I said yesterday morning….the indexes closed on their lows on Monday and as is usual – had a follow thru ‘flush’ yesterday…..  In addition to the bank earnings due out today – we are also getting eco data which is all about inflation…

The S&P is now in the 4160/4360 trading range…  A test of the September lows of 4280 is now NOT out of the question over the next couple of weeks.  Earnings today will start to set the tone to what we can expect – although – banks won’t have logistics or supply chain issues – so be careful how you assume the season will go

I do not expect the recent volatility to subside anytime soon….and expect more turbulence in the weeks ahead…. Remember during earnings season – the devil will be in the details – future guidance, input prices, rising dollar, supply chain issues, and how future FED policy may help or harm all these projections – so stay close to your desk….

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Take Good Care

Chief Market Strategist, Consultant

Salmon in a Lemon Dill Sauce

Here is a great Salmon Filet dish.  It is easy to make, and you can eat it either right out of the oven or serve it room temp at a Sunday brunch –

For this you need:  1 ½ cup of mayo, ½ c prepared mustard-not yellow preferably a brown mustard, I tsp lemon juice, 2 tsps. prepared horseradish, 2 cloves garlic, ¼ cup Fresh dill—must be fresh, S&P  to taste, 2 pound salmon fillet

Start by seasoning the filet with s&p.  Set aside.

In a bowl combine the mayo, mustard, lemon, horseradish, garlic, salt and pepper to taste and dill.  Spread the dill/mayo sauce on the flesh side of the fish.  Bake skin side down in a 350 oven for around 15 minutes or so –  or until it reaches your desired wellness.

Buon Appetito.