Trump vs. China

Do I really need to tell you what happened yesterday? You have two choices – up or down, so it’s 50/50… and if you guessed UP – you’d be right… Initial Jobless Claims came in better than expected – at 1.18 mil vs the expected 1.4 mil… Continuing Claims – remained steady at 16.1 million, talk of a stimulus bill in DC helping the mood, falling virus cases, and excitement around a fall vaccine all continuing to help investors/traders and algos take the market higher… Tensions between US and China doing little to give pause… at least until today… but more on that below.

The Nasdaq – which has been playing the starring role this year – did it again… While opening stronger and piercing 11,000 within mins – it struggled – moving up and thru then down then up and thru again as it teased investors – leaving them wanting more… and then at 11:59 am – it pierced 11,000 for the last time and began its ascent… by the end of the day investors bought more and more tech – think the big FAANG+M names… FB + 6.5%, AAPL +3.5%, AMZN +0.6%, NFLX +1.4%, GOOG +1.8% and MSFT +1.6%. What was interesting is that the WFH (work from home) stocks came under pressure and did not participate in the rally. The ETF – WFH fell by 1% with some individual members falling even more and this makes some sense for a couple of reasons… that stock is up 13% since its debut back in June… individual names up even more… and so when talk of falling virus cases and a possible vaccine as early as late fall begin to take hold and the school year is about to begin (talk of kids actually going back to school) – it makes sense that these names would come under some pressure… as the WFH phenomenon may begin to fade… It won’t go away, but it may take a breather and that doesn’t mean the bottom is about to fall out – not by any stretch – it just means the group is consolidating.

Bio-Techs – which have been on fire of late have also been consolidating a bit – but holding well above trendlines… while talk of a vaccine is good for them – the moment we get good news, we also get those that immediately try to poke holes in the results or try to accentuate the ‘side-effects’ (think negative) which has put a cap on the group for now… In addition, there was a headline that suggests that even if we get that vaccine in the fall – there won’t be enough to vaccinate even the most ‘at risk demographic’. Just FYI – I’m not buying that at all… The XBI fell by 0.5% as it consolidates above its 50-dma trendline… Talk of rapid testing results and a possible number of vaccines will continue to support this group.

And just a side note – did you see the circus surrounding Ohio Governor DeWine yesterday? They claimed he tested positive for the virus and sent out a ‘BREAKING NEWS ALERT’ even as the report claimed he showed no symptoms (he was not in the ICU) and then he got retested and was told that he was negative for the virus… but conveniently there was no ‘BREAKING NEWS ALERT’ for that headline… Which just goes to my point… Why did we even get the first headline? To create angst? Beyond frustrating.

By the end of the day – the Dow added 185 pts or 0.68%, the S&P gained 22 pts or 0.64%, the Nasdaq surged 109 pts or 1% while the Russell ended the day flat. Now the other thing to note here is the move by the S&P! Recall how we have been discussing the need for the index to ‘fill the gap’ that was created in the downdraft back on February 24th. Well folks – it did that yesterday… the S&P needed to trade as high as 3337 to close it – in fact – it not only did that, but moved higher (as expected) to end the day at 3349. This now sets it up to challenge the yearly high at 3386 – but maybe not today… Why?

Futures are lower… Trump makes more noise overnight issuing a pair of executive orders that put new limits on both TikTok and WeChat (the Chinese version of WhatsApp) and more talk of the WH putting pressure on US listed Chinese companies – forcing them to ‘de-list’ if they don’t open their books and comply with US auditing rules. This is causing more tension and a bit of selloff across the board – which – in my opinion – is just an excuse to ring the cash register… and that is not a bad thing – what I am saying is that it is not the beginning of a broader sell off.

As of 6:30 am Dow futures are -154 pts, the S&P is down 17 pts, the Nasdaq is off 60 pts and the Russell down 2 pts. If the tone gets more negative then look for money to come out the ‘tech’ names as they will be the first to get hit – because they have soared the most… Capisce?

Investors today will certainly focus on the tensions that it created but they will also be paying attention to the ongoing stimulus discussions – which are expected to be completed today – but clearly there is concern that they won’t be which will force Trump to take executive action… (perceived as negative.)

Investors will also be paying attention to today’s Non-Farm Payroll report… Now for those of you who do not know what this report is – it is a key economic indicator… It is ‘intended’ to represent the total number of paid workers in the US – minus gov’t, farm, private household and non-profit employees. It is obviously an important number – at least during this crisis. Expectations call for 1.48 mil jobs created… Manufacturing jobs expected to increase by 261k & unemployment is expected to be 10.6%… but just like the ADP number on Wednesday – many analysts aren’t buying it… Some even calling for 0 job growth… so if today’s number is a miss – pay attention to last month’s revision… because if they revise up (like they did for the ADP report) then it will not be the shock that some are calling for. Either way – the tone this morning is negative – right… so if today’s number is perceived as a disappointment then it will only add to the early negative tone… again – something that may not be such a bad thing at all after the recent surges across the board in all of the indexes.

European markets are all in sell-off mode – not big, but just reacting to the negative news created by Trump which is giving global investors a reason to take some off the table. They are also awaiting the US Non-Farm Payroll report due out at 8:30 am and the stimulus discussions. As of 7 am – the FTSE -0.05%, CAC 40 -0.33%, DAX +0.07%, EUROSTOXX -0.09%, SPAIN -0.7% and ITALY -0.56%.

Oil is fine and holding steady at $41.53… So – no need to panic… We remain in the $35/$45 range.

So – the S&P filled the gap created during the February collapse… Yesterday I asked – Can it do it? And I said that “my guess is that it will… but then fail as it regroups in the days ahead in order to blast up to test the high created on February 19th at 3386”. And now what we see is that it did fill it, it did close higher and now – it appears as if – it is going to fail and pull back as it consolidates.

We still have not heard from Biden or the Democrats – which is concerning because last week – we were promised that this week – they would announce… so the market – in my opinion – has not factored that into current prices. So – will the delay be seen as a positive or is the country tiring of the tease? Again, how will the markets perceive the choice? Will she be seen as a center moderate – which would be a positive (I guess) or a left progressive (less positive) as investors will have to decide what that means for the sectors identified by the far left as well as what it means for the broader tone of the market.

Take good care – have a great weekend.  Stay safe and wear your mask.

Kp


risotto

Brocolli & Fava Bean Risotto

When you are making a vegetable risotto – you can really choose any vegetable you prefer – this way it is always different and always exciting. Sometimes you can make the risotto to reflect the time of year. In the summer it might be today’s dish, Fall – could be butternut squash or corn, Winter might be a winter beet and spring may bring a spring pea risotto. Either way – you get to create as you go.

For this you need: broccoli florets (cut into small pieces) stems separate and also cut in small pieces. Fava beans, s&p, olive oil, chopped scallions, chopped shallot, Arborio rice, dry white wine, vegetable stock (about 7 cups), butter, fresh grated Parmegiana or Grana Padano Cheese.

Steam the florets for 1 minute – remove, steam the stems until very tender, about 4 minutes. Keep the water… do not toss. Put the stems (only) in the food processor, and process until smooth. You may have to add some of the water to make a smooth mixture. Scrape out the puree into a small bowl and set the florets and puree aside.

Heat the olive oil in a heavy pot over med heat, add the scallions and shallots and sauté until translucent – maybe 5 mins.

Nest add the rice and stir to coat with the oil. Continue to cook so that rice begins to become translucent.  Maybe 2 or 3 min).  Pour in the wine – do not overdo… maybe like ½ cup and stir until evaporated. Add a ladle of the hot stock – stir.  Stirring constantly, until all of the stock has been absorbed.

Continue to add hot stock one ladle at a time – just enough to completely moisten the rice—and cook until each successive batch has been absorbed. After the risotto has cooked for 15 minutes, add the broccoli purée and the fava beans. Stir to mix well. About 3 minutes after that, stir in the broccoli florets. Stir constantly and adjust the level of heat to medium/med low so the rice is just simmering while adding the stock, continue until the rice mixture is creamy but al dente. This should be no longer than 20 mins from the first ladle.

Remove the pot from the heat. Add the butter, until melted, then the grated cheese. Adjust the seasoning with salt, if necessary, and pepper. Serve immediately, ladled into warm bowls.

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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