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Port, Container Cranes, Sunset, River, Reflection

Things you need to know

  • Earnings continue to surprise, investors are pleased
  • Oil continues to surge, but $200/barrel – not likely anytime soon
  • 10 Yr. treasuries yielding 1.58% – helping stocks to stabilize
  • Bitcoin ETF to start trading today on NYSE Arca under the symbol BITO
  • Try the Pan Seared/Oven Roasted Veal Chop

Stocks began the day weaker and fought all day to stabilize as excitement about the earnings season details how companies are dealing with rising inflationary pressures, supply chain issues and consumer demand.  As expected, – the season has gotten off to a great start with 90% of reports beating the estimates and no one showing any signs of stress (yet).  10 Yr. yields backed off a bit ending the day yielding 1.58%, the VIX settles down, the S&P – rose 15 pts.  The Dow by contrast fell by 36 pts, the Nasdaq gained 125 pts, the Russell added 2 pt. and the Transports gained 92 pts.

Oil which was on another tear higher in the morning ended the day up 5 cts at $82.32 after teasing as high as $83.86.  Talk of $200 oil by this time next year was all the rage yesterday morning after the WSJ article over the weekend defined why it could happen and how options traders are making longer term bets on the price of oil….……And that was part of the reason that we saw oil move higher….but let’s be honest….Oil isn’t going to $200….I would imagine that after it hits $100 – that even more US rigs will be online – last week we added 10 more rigs and the total count now is 543 operating.  And as oil goes even higher – expect more rigs to come online.  This morning – oil is up another 1.35% trading at $83.55/barrel.

Baker Hughes told us that Rig counts are increasing every week….and this corresponds directly with the price of oil…..Hmmm….isn’t that interesting…..see how that works – prices go up and more rigs get added thus more supply gets produced….and when these rigs do come online – then you have to assume that supply will increase and that should stop or at least slow the push higher….unless Joey comes down hard on the industry again….forcing more supply issues and then – maybe $200 oil is a reality….but for now, let’s not overthink this. My gut says – not happening right now.  Nor do I see $200 oil by this time next year. 

Sector performance had Utilities – XLU down 1%, Healthcare – XKV down 0.7%, and Consumer Staples down 0.6%…. Consumer Discretionary – XLY rose by 1.25%, Retail – XRT rose even more -gaining 1.9% while Tech – XLK and Communications – XLC both gained 0.8%.  The Value trade – SPYV fell 0.3% while the Growth trade – SPYG gained 0.9%….

We had 3 earnings reports and all 3 beats (that’s 100%) – while the economic data disappointed investors…. Industrial Production fell by 1.3% vs. the expected gain of 0.1%…. (This as China also reported a disappointing Industrial Production report on Sunday as well).  Capacity Utilization fell to 75.2 from 76.4 – Now you can look at these two ways…. you can say your disappointed but understand that Capacity Utilization speaks directly to inflationary pressures.  Yesterday I told you that if this reading advances into the 80’s then that begins to suggest we are nearing full capacity and that would suggest pressure on prices…(inflation) – so the fact that Cap Util fell, is kind of a good thing, because it takes the pressure off. Capisce?

And then guess who came back to work?  Petey… (Buttigieg – Transportation Secretary).   This after taking 3 months off for paternity leave after only being in the job for 2 months – in the middle of a transportation crisis in this country…but hey – he and his partner did adopt a baby, and everyone is entitled to ‘paternity leave of 3 months’ He told CNN’s Jakey Tapper over the weekend that the massive amount of cargo ships lining the whole coast of CA – is a testament to President Biden who rescued us from a ‘terrifying recession’!  Terrifying?  Really?  Who was terrified?  Petey?  Come on, man…. When Joey took office, we had a 6.5% GDP read…. what’s terrifying about that?  Unless he thought it was a negative 6.5%?  Could he be that out of touch? 

Meanwhile all those cargo ships represent products that consumers bought or want to buy and that is a bullish argument and speaks directly to the job that this administration is doing…ahhhhh….do we really want to go with that argument?

In any event – today is a new day and there are more earnings reports due out…. SBNY (Signature Bank) already reported and guess what?  They beat!

FITB, JNJ, BK, SI, PM, HAL, PG – all due out before the opening…while we will get NFLX right at the stroke of 4 pm.  And you can feel the excitement building…. What will they say – If anything – about the latest blockbuster – a South Korean thriller – Squid Games…a human survival drama series that hit the airwaves only 3 weeks ago….and has rocked the human psyche?  It really is a messed-up show.  It’s disturbing really, but what do I know….it has become the latest blockbuster for the network.
Eco data includes Housing Starts of 1.6 mil or -0.2%, Building permits of 1.68 mil or down -2.4%.

Yesterday – Asian and European markets were lower, and US futures were lower in the pre-mkt…. today – Asian markets ended the day higher – Tech leading the way higher.  The RBA (Reserve Bank of Australia) reported that they expect their economy to come back online this quarter and then return to pre-covid levels by this time next year.  Japan +0.6%, Hong Kong up 1.5%, China up 1%, Australia flat, South Korea up 0.7% and Taiwan up 1.2%.

European markets are trading around the flat line.  There is no eco data that will drive the market, so the focus is squarely on earnings…At 6:15 the FTSE, CAC 40 and DAX are flat, Eurostoxx is up 0.2%, Spain is +0.7% and Italy is +0.25%.

And….US futures are UP again…. Dow futures up 100 pts, the S&P up 16 pts, the Nasdaq ahead by 40 pts and the Russell up 11 pts.   Investors apparently like what they hear…. robust earnings are stealing the spotlight over the prospect of tightening monetary policy.  We will hear from a few Feds heads this week so it will be interesting to see what they say and then on Friday – Jay Powell will take part in a policy panel discussion that is sure to get lots of commentary and analysis.

Earnings will continue to be in the spotlight…. Investors are assessing the impact of supply chain shortages, rising input prices and higher wages on company margins…. Remember – it’s all about pricing power…. who has it and who doesn’t…?

Bitcoin – is trading at $62,000 and Ethereum is at $3,800 – this as ProShares is set to launch the first Bitcoin futures ETF today. (I thought it was yesterday, my bad). The symbol is BITO – you can expect all kinds of excitement over this today….

The S&P ended the day at 4486 – just 2 pts off the daily high and 70 pts below the yearly high.  If earnings continue to ‘surprise’ and the eco data remains in line – and there isn’t any new variant of covid to infect the world, then it feels like the investors are comfortable.  Remember – we still have the FED meeting on November 2nd and 3rd – where it is now expected that Jay will announce the start of the tapering as soon as mid-November….and while this has been well telegraphed, we won’t really know how investors react to it until they react to it….so sit tight.

We are now back in the 4440/4550 trading range.

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

Pan Seared/Oven Roasted Veal Chop

I made this dish on Saturday night…you can find the picture of the completed dish on my Twitter (@kennyPolcari).  Pasta portion was a Lemon Cream Linguine….Yum.

 You will need:  thick cut veal chops on the bone, butter, shallot, leeks, beef stock, s&p, olive oil, fresh thyme….

***Preheat oven to 500 degrees.  This is important so that the oven is ready to receive the chops once you have pan roasted them.

Remove the chops from fridge and let come up to room temp.   Rinse and then pat dry with a paper towel. Season with s&p – set aside.

Prepare the leeks – by washing/rinsing very thoroughly…. Leeks grow in sandy soil – fyi – and as a result – the soil gets trapped in the stalk….so – trim off the bottom – separate the stalks and rinse well.   Now cut the stalks in half and then slice.   Peel and chop the shallot.

Next in a heavy bottom pan – heat the about 1/4 stick of butter on simmer/med low heat…. **very important*** you do not want to burn the butter – add the leeks and the shallot…. cook on this low heat for about 15 mins…. this is called sweating. You do not want any color – you just want them to be soft and translucent.
Now – add about 1/2 cup or so of beef stock and turn up the heat to medium.  Simmer for about 5 mins…. then cover, turn off heat and set aside.  The mixture should not very liquidy – it should be moist and thick….

In an oven proof grill pan – add a dollop of butter and a splash of olive oil.  Heat the pan on med hi until you see the butter and oil glisten…. add seasoned veal chop and brown on both sides – about 3 or 4 mins per side.   Once browned and caramelized – put the oven proof pan in the oven and continue cooking for about 8 / 10 mins…depending on how you like your chop.

Next add about 1 tsp of fresh thyme to the shallot and leeks – season with s&p and heat.  For the presentation – spoon out some of the mixture in the center of a warmed plate and place the veal chop directly on top.  You can complement this dish with your favorite green vegetable – asparagus, or broccolini and a large mixed salad.

Buon Appetito.