Investors go 'Hog Wild' sending stocks higher

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  • The macro data point to much brighter days ahead – stocks surge.

  • 10 yr. yields do not move…. suggesting that a buyer is in the wings?

  • Oil falls 6% early on and ends the day down 4% as talk of increasing supply and new outbreaks take the shine off – (an overreaction in my view).

  • Archegos Capital takes down Credit Suisse and Billy Hwang disappears.

  • Try the Spaghetti Carbonara with Asparagus tips.

Investors went hog wild into stocks yesterday……the pent up demand from the very strong NFP report along with the pent up demand for Americans who are  ‘breaking out’ caused stocks to soar…and then add in the very strong economic data points that we discussed yesterday morning and BOOM….Here we go – the algo’s couldn’t wait to be released from the gate, sending stocks surging as the bell began to ring at 11 Wall St.

Markit Services ISM came in better than the already bullish estimate at 60.4 while the ISM Services PMI report completely blew it away – coming it at 63.7 – both numbers well into expansion territory…. and as discussed, the fact that the services ISM numbers remain so strong suggests that the ‘robust recovery’ that we have been discussing is alive and well.  And then comments by Cleveland Fed President Lorretta Mester – who said she is ‘largely unconcerned’ about rising yields in gov’t bonds only added rocket fuel to the tank causing sellers to pull back leaving a void in prices forcing buyers to pay up….and pay up they did! 

The other data points that we got yesterday – think factory orders and durable goods – which were all in fact negative – were not really a surprise – they were expected to be negative and since they were not any worse than the expectation no one paid any attention….

10 yr. Treasury yields held tight at 1.71% (which is interesting to say the least – because you would have expected money to move out of treasuries and into stocks – which would send prices lower in the bond market and yields higher – unless of course there was someone standing there buying bonds defending a ‘position’), the dollar index declined and is now resting on support at 92.479 – a level that was resistance for a long time – broke through two weeks ago and is now testing it once again to see if it really holds. The VIX – which has collapsed in the past month – suggesting complacency closed at 17.91 – an even more complacent level and a level not seen since September 2019 – in the pre-pandemic world.

3 records were shattered!    – The Dow Industrials rose 373 pts or 1.13%, the Dow Transports rose 142 pts or 0.97% and the S&P gained 58 pts or 1.44% – all closing at new all-time highs, the Nasdaq and Russell while both strong gained 225 pts and 11 pts respectively remain below record levels.  On the year so far – the Transports are in the lead – up 19%, followed by the Russell up 14%, the Dow up 9.5%, the S&P’s up 8.5% and in last place is the Nasdaq!  Only up 6.3% – Wow!  How the world has changed!  

And that does make sense based on ‘the science’!  A recovering global economy would do exactly what the market is telling you – Industrial and Transportation stocks will lead us out as the world awakens…And while manufacturing has been strong – we needed to see a rebound in ‘services’ – think leisure, travel, restaurants, hotels, etc. to indicate that the broader economic rebound is really happening, and we have been seeing it and continue to see it and that is good.

Consumer Discretionary – XLY – was the strongest performing sector yesterday up 2.27%, Communications – XLC up 2.11%, Tech – XLK + 2.07%, Industrials – XLI up 1.2%, Consumer Staples  XLP +1.2%, Basic Materials XLB – up 1.2%, Utilities – XLU +1.09%, Healthcare – XLV + 0.7%, Financials – XLF +0.7% and Real Estate – XLRE +0.5%….Energy – XLE fell 2.3% after OPEC confirmed that they will increase production in the months ahead – relieving some of the near term concerns about rapidly rising prices in an artificially ‘supply constrained’ world. Additionally, India and China are once again reporting a spike in virus cases and that caused some to suggest we could see a drop in demand – and to that I say – Stop the histrionics already – demand is not collapsing at all – …. No need to get that concerned though – Energy is a winner so far in 2021 – up 29% ytd.

This morning – we are seeing European stocks trading higher in what can be described as a game of ‘catch up’ – recall that yesterday was Easter Monday across Europe and European investors had the day off….so today – they are re-assessing the latest US macro data points along with Eurozone macro data including the unemployment rate across the region.  In addition, the IMF (Int’l Monetary Fund) is set to release its World Economic Outlook and Global Financial Stability Report later today…. And while people will pay attention to the report – unless it is so different than what we expect – do not expect it to drive the conversation for too long. 

Also, in Europe – we are learning that Credit Suisse is taking a $4.7 billion hit for their exposure to the Archegos collapse last week forcing them to cut their dividend, stop share repurchase and eliminate any executive bonuses that were to be paid along with throwing out a half dozen people identified as having failed to do their jobs – including Investment Bank head – Brian Chin and Chief Risk Officer – Lara Warner.  Again – while this is not an industry or sector wide issue – it is company specific – it will be the subject of int’l case studies at all the biggest and brightest business schools around the world.  As of 6 am – the FTSE + 1.3%, CAC 40 + 0.7%, DAX +1.08%, EUROSTOXX + 1%, SPAIN +0.9% and ITALY +0.77%. 

US futures are taking a breath…. while down slightly – it is not even worth reporting – after yesterday’s brilliant surge higher…. I mean would it concern you if I told you that Dow futures are down 10 pts, S&Ps are off by 7 pts, the Nasdaq lower by 35 pts and the Russell is off 3?  I mean is that going to change your mind.  Hardly. 

Eco data today includes nothing, but tomorrow will bring us the latest FOMC minutes and if anyone is expecting to learn anything new – I would say – go back to bed…. we know what the minutes will reveal, we know what Fed Chair Jay Powell is thinking so if you are planning on learning anything new, you will be disappointed.  Later in the week – we will be getting a report on the latest PPI (Producer Price Index) and while the expectation is for an increase of 0.5% – investors are wondering if this is the month that we see that upside surprise that is coming….and in this case – an upside surprise would be viewed as a negative – because the PPI report – reports on the prices paid by producers to produce their products and if the ‘input prices’ are rising – then that means consumer prices (CPI) will rise…and you know what that means…….come on…you know….begins with an I…..

Expect the market to churn as investors take it all in – there aren’t any data points that will drive the conversation and earnings don’t begin for another week so,  – lots of talk about how corporate America should or should not get involved in politics is at the top of the agenda as analysts opine on what it means to their bottom lines, Vaccination passports for Americans is next in line and pushback by some Dems over the Biden Infrastructure plan and the latest global bank drama caused by the collapse of Archegos Capital are sure to round out the top 4 conversations… and while Credit Suisse is in the leading role – there are two handfuls of global banks that play supporting roles in this drama…..I just want to know – where is Billy Hwang in all of this?  I mean he built a $10 billion ‘family office’ (read hedge fund) by borrowing billions of dollars from global banks – creating complex positions using derivatives (created by these same banks) that apparently no one knew about – and then it all collapsed….and he dropped off the face of the earth….

Oil – fell nearly 6% yesterday at one point before rebounding to end the day down 4% at $58.68/barrel after OPEC announced that they would increase production, and new insights into higher Iranian output (think more supply) all while India and China remain concerned about new outbreaks of the virus potentially dampening demand for energy in those countries!  Really?  Ok…Whatever…. because today – traders do not appear to be concerned any longer…. Oil is up $1.37 or 2.1% teasing $60/barrel. 

Now news that the US and Iran are involved in ‘indirect talks’ about the 2015 nuclear deal is raising some to say that if those talks produce real results and the US lifts sanctions on Iran – then we could see a ‘flood’ of Iranian oil hit the markets and that would increase supply and potentially send prices lower.  I think it is a bit overstated…. but that is me…. you think what you want…. until of course – someone tells you ‘what to think’.  Real trendline support is at $59.99 and while we broke it yesterday – we are once again on the northside of $60….and so we remain in the $60/$65-barrel range.

Bitcoin – is trading at $58,000.  Ethereum is trading at $2115. 

As discussed, the S&P closed in a new century on Thursday and almost closed in another new century yesterday!  The news yesterday sent the S&P up 64 pts at one point – to trade as high as 4083 before settling down a bit to end the day at 4077!  (recall in my note yesterday – I also identified 4086 as the resistance if 4040 failed)

Now remember how I said that the trendline resistance I had identified one month ago was 4040 – Well, we tested that before the opening bell even finished ringing….and btw….there was no resistance…..sellers – well aware that the macro data was so strong – expected the buyers to be like impatient children throwing a temper tantrum..…..and so, they took advantage of the excitement and raised their offering prices to see just how far the buyers would go….(does this sound anything like the housing market today????)  The buyers were tripping over each other to be the first one at the door….and so it goes….

Now remember – when the tone changes or when yields spike up thru 2% or suddenly inflation appears to be out of control, or the Biden plan gets more complicated and onerous then it will be the sellers that throw a temper tantrum – leaving the buyers to take advantage of them….and so the clock ticks and the sun rises (and sets). 

Remember – as a long-term investor – you need to eliminate the daily noise and focus on the plan.  Do not become emotional…. (look at me telling you not to become emotional!)  Take advantage of the move in prices to rebalance your portfolio so that you are not overexposed or out of balance – this will protect you – put new money in underrepresented sectors.

Pork cutlets wrapped in prosciutto and Pine nuts 

So in keeping with the theme today – how about an.

For this you need:  Pine nuts, Raisins – plumped in hot water and then drained, capers – rinsed and soaked in cold water, finely grated Grana Padano Cheese, Chopped flat leaf Parsley, butter, chopped garlic, pork cutlets (pounded thin), prosciutto, s&p.

Pre heat the oven to 475 degrees.

Chop the nuts, raisins, and capers and mix well.  Add in the grated cheese and parsley – set aside.   Season the cutlets with s&p. 

In a non stick pan – melt some butter and sauté the garlic over med heat….Now add the seasoned cutlets and cook for no more than 2 mins per side.  Now remove from heat.  Next dress each cutlet with the nut/cheese mixture – roll it up and wrap in a slice of Prosciutto di Parma (you can use a toothpick to hold it together).  Place in a baking dish and top with a touch of butter.  Bake in the oven for 5 mins and remove. 

Serve immediately with a tossed greens – simple – Arugula & spinach dresse.