Stocks Continue The Rally

Stocks continue the rally, taking the indexes higher yet again as investors/traders and algos don’t seem to care at all about the coronavirus at all. In fact, what I find very funny this morning is a quote in Wall Street Journal by RBC’s Global Macro Strategist, Peter Schaffrik:

“The story in the market is the repricing virus fear. What people are currently looking at is the rate of spread of the outbreak: the number of cases is still going up, but the growth rate is slowing down.”

REALLY? This is why the market is rallying?

This guy would have you believe that yesterday’s surge (and never mind the surges since Monday) of 483 pts or 1.7% in the Dow, or the 37 pt or 1.3% for the S&P, 40 pts or 0.43% for the Nasdaq and the 25 pts or 1.52% for the Russell is due to the “slowing rate of growth” of this virus?

Somebody help me. This virus has only gotten worse. And it’s not clear that the rate of spreading is slowing. In fact, the news this morning suggests just the opposite. It is spreading and the locations around the world are increasing. While yesterday’s rumor of a supposed antibiotic is good news, it was just that a rumor. There is NO vaccine for this thing, not yet. And while I am not being an alarmist, let’s be honest, the market is not surging because this virus is slowing. As of this morning, the news is that it’s getting worse. China has reported 28,018 infections and 563 deaths. With a new born baby only hours old being one of the latest to be infected. Cruise ships around the world are being held in quarantine and new cases of the virus showing up all around the world. So I’m not sure that market is rallying because the spread is slowing…

Shift to the fundamentals

Since Friday’s “meltdown” the indexes have all surged nearly 4% and we can thank a couple of things: First, the China injection project on Sunday evening, as well as the lowering of rates, then more improving macro data around the world, including China! Ongoing better than expected earnings (around the world) an Iowa caucus (while a complete tech failure) did ultimately give the win to Petey rather than Bernie, suggesting that the FAR left might need to rethink the strategy, as the group descends on New Hampshire. Better earnings and finally, yesterday’s US macro data was “so much better than expected.” ADP Payrolls – came in at +290k job created versus the expected 150k and Markit US Services PMI and Composite PMI both well into expansionary territory. Those are reasons for the markets to surge.

And this morning, guess what? Global markets are UP again. Overnight, China announced that they are cutting tariffs on hundreds of US imports as of Valentine’s day. Is that in a show of “love” for Donny and the US? Asian market surged. China’s finance ministry has this to say:

“…the move was made to advance the healthy and stable development of China/US trade…”

And BOOM! The algos kick into high gear again and take all those markets higher. Oil, soybeans, pork, chicken are just some of the beneficiaries, as Beijing honors the commitment of the Phase One trade deal. Remember there is that “disaster clause” written into the agreement that would let China off the hook in the event of a “disaster” and if this virus thing gets worse (and it very well may) they could claim a “disaster” and then throw the trade deal into chaos. But as of now, Xi Xi is moving ahead and cutting tariffs. By the close of trade, we saw:

Japan +2.38%, Hong Kong +2.64%, China +1.86% and ASX +1.05%.

In Europe, the party continues. Markets there now open and the mood is good. The story is the same, better earnings, better macro data, low rates, and fading fears of the virus all contributing to the action. Later today, we will get German Industrial Orders.

FTSE +0.27%, CAC 40 + 0.66%, DAX +0.70%, EUROSTOXX +0.53%, SPAIN +0.59% and ITALY +0.60%.

US futures are surging once again in the pre-dawn hours, with Dow futures up 80 pts, S&P’s up 8 pts, the Nasdaq up 32 pts and the Russell ahead by 3 pts. Economic data today includes: Initial jobless claims and Continuing Claims.

The S&P as expected, pierced 3300 right at the open yesterday and then soared as morning turned to afternoon, closing at 3334 and marking a NEW CLOSING HIGH for that index. Nasdaq closed at a new high as well, while the Dow is only a whisker away and the Russell needs a bit more time.

Oil is alive and well, surging again. There are two reasons: One, OPEC/Russia production cut talks (word this morning is a call for 600k barrels to be cut) and two, the news out of China over tariffs. Both of these have changed the conversation. NOW demand is supposed to be re-ignited because Xi Xi is cutting tariffs. And oil is just one of the beneficiaries, while production cuts will impact supply. On the back burner there is also the idea that if the virus slows and things return to normal in Asia, then there will be “big demand” for this fossil fuel. We found support right at the $50 level and now see oil trading $51.10 after having surged as high as $52.20. As noted, I think its overdone and will return to the $55/$60 range.

Take good care.

Kp


fried chicken

Southern Fried Chicken

Who doesn’t love fried chicken – I always find it to be a source of comfort in an uncomfortable time so here we go…

For this you need: Chicken pieces, 1 1/2 cups milk, 2 large eggs, about 2 1/2 cups flour, s&p (some people use cayenne pepper or hot red pepper sauce), garlic powder, and 4 cups of vegetable oil or Crisco.

Next you need to rinse the chicken pieces… then pat dry and set aside.

Next mix the milk and eggs in a bowl – (if you are using hot red pepper sauce – add here also) whisk until blended.

Combine the flour, s&p and garlic powder in a paper bag. Now – dip 2 or 3 chicken pieces in the milk mix – lift and allow the excess to drain – Place in the bag, fold the top and shake to coat the pieces well.  Remove and put on a plate and repeat with the remaining pieces.

Now – be careful here… heat the oil to 350 degrees in a large heavy duty pot – when ready – fry the chicken – a bit at a time –  The breasts will cook a bit faster – about 10 mins, the thighs and legs should take about 15 mins. Make sure the juices run clear when you pierce with a fork. If so – remove from the pot and place on a plate lined with paper towels to drain. Serve immediately with a large mixed salad and maybe some garlic mashed potatoes.

Buon Appetito.

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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