It’s Good, It’s Bad, It’s Good Again; AMZN Goes on a Search & Destroy Mission – Try the Medium Shells

Stocks took a breather on Tuesday after the explosive move on Monday… which should not surprise anyone… and if it does – then let’s chat about that… but my guess is I don’t think we need to. Yesterday the focus moved from the Moderna vaccine and all of that good news… to once again the explosion in virus cases, new lockdown measures, weaker retail sales, continued political uncertainty, more election drama, policy confusion, FED/monetary confusion, weaker dollar and soaring Bitcoin, perceived negative news for HD (after their earnings blew the roof off the house) and pressure on pharma after the AMZN news that they have now launched their online pharmacy… something that everyone knew was coming – and it caused a big negative reaction in the space – CVS lost 8%, WBA -9.6%, and RAD -16%… The thinking here is – search and destroy – which is the Amazon mantra… ‘search and destroy’… and so it goes – some of the best names in the space got whacked… by the end of the day – the Dow lost 167 pts, the S&P’s gave back 18 pts, the Nasdaq gave up 25 pts and the Small Caps/Mid Cap Russell bucked the trend and gained 7 pts as the move into the small cap space finds no reason to slow…

So let’s just chat for a moment about HD… they reported earnings of $3.18/sh vs. the expected $3.06/sh, they reported revenues of $33.54 bil vs. the expected $32.04 bil, and if that is not enough – the top and bottom lines grew 23% & 24% respectively… and they put up a 24% same store sales growth… BUT they also reported that the ‘temporary employee renumeration programs’ would now become permanent wage increases – adding $1 bil of additional expenses – which the bean counters didn’t like… but I don’t see as a negative actually – I would view that as doing the right thing, thus investors should reward them for that and not punish them for that… but that’s the human side of my analysis, not the math side… capisce? But the real kick in the gut is the fact that Moderna and PFE/BioNTech may succeed in saving the world – which means that explosive growth that they reported won’t continue once everyone is allowed to go back outside and live and so the stock took it on the chin… falling 2.5%. The stock has now fallen below 2 trendlines as the re-opening trade continues – so technically it may continue to come under pressure – but it should find support at the $270 level… unless of course the total tone in the markets changes (which it could over the next month) – so don’t chase it – be patient.

And then the pharma names? Really? These names got smashed yesterday… after Amazon launched its online pharmacy – something that everyone knew was coming… OK – so now they offer ‘online pharma’ – that is not a new idea… CVS, WBA and RAD do that already. In fact, I use CVS and hardly ever go to the pharmacy there, because I can order, re-fill and have delivered any medications that I need. They accept my insurance, they know me, they reach out to me and remind me that I may need a refill (just in case I’m not paying attention) – so why the violent reaction? Well, it’s simple – the fear is that Amazon will succeed in their ‘search and destroy’ mission and that CVS, WBA and RAD will go the way of the bookstore, the grocery store or the toy store… I for one – will NOT use the AMZN pharmacy for the same reason I won’t go food shopping via AMZN – why?  Simple – I like my local CVS, I like my local grocery store because I like to cook so I like to go to the store and ‘see’ what I’m buying. I like to GO OUT, I like to breathe fresh air, I like to see people, I like to live Second – AMZN requires that you fill out a ‘profile’ so that they know even MORE about who you are, what illnesses you have, what meds you take etc… Now that does not mean I don’t use AMZN – I just don’t use it for every single thing in my life. Everything in moderation.

And this morning… US futures are higher – apparently ignoring all of the issues that they focused on yesterday – Dow up 70 pts, the S&P’s up 8 pts, the Nasdaq up 32 pts and the Russell up 8 pts. – which speaks to the confusion that investors are dealing with… When I turned on the news this morning… all I heard was every adjective under the sun that creates hysteria to explain the latest covid19 news overnight… Aggressive, threatening, attacking, invading, exploding, erupting, blowing up and the list goes on – Headlines that fuel the angst make the front pages… and calls for reimposing restrictions are building after more than 1 million more cases are reported…

 “New Lockdowns and Restrictions Sweep Across the Country as Covid19 Cases Continue to Rise”

Senate Pro-tempore – 85 yr old Chuck Grassley is the latest legislator to contract Covid – but he assures us that he is following Dr’s. orders and feels fine… He is not presenting any symptoms… but markets are not paying attention to any of this hysteria this morning… PFE is now reporting that their vaccine is 95% effective and that they too are ready to submit to the FDA for EUA (Emergency Use Approval) … and that is causing PFE to surge by another 2.5% in pre-mkt trading helping futures to focus on the vaccine once again…

Target – just reported earnings…and guess what? Yup – Blew the wheels off the bus… Earnings of $2.79 vs. the exp of $1.60, Revenues up 21%, Same store sales up 10%, Digital sales up 150%, blah, blah, blah… and the stock is doing what? Up $3 or 2.1% in pre-mkt trading… and Lowes misses on EPS (by 1 ct) but beats on revenues… that stock like HD yesterday is getting slammed – down $6 or 10% in early trading… the theme? A vaccine – if successful – will hurt them in 2021. Oh boy…

And Bitcoin – that has soared (quietly for the most part – until now…) It is up 300% since the March lows… going from $4k/coin to $18,200/coin today… Once again – it is in the news… everyone under the sun now becoming a Bitcoin expert trader… Look – it is the perfect storm, the virus, the lockdown, the massive printing of fiat currencies, weakening dollar, massive debt etc… all contributing to the drama. It is an asset class at the moment and not a currency, and depending on who you are, it should have some place in your portfolio… not huge necessarily, but something to get your toes wet… study it, learn more, because it is not going away anytime soon… if anything it will take on more significance as the world begins to really adopt it and that feels like what is happening… 2 or 3% of your portfolio is not gonna be enough to blow you up but it is enough to tickle you.

And as expected – as Bitcoin surges the dollar declines… It is now down 10% from the March highs… breaking all trendline supports… but it feels like it is trying to bottom out here… and find support at 92 level – a price not seen since April 2018.

Eco data today includes Mortgage Apps, Housing Starts – exp of +3.2%, Building Permits +1.4%. None of which will drive the action at all…

European markets are up this morning as the focus goes from worried to excited. There were no eco data points to drive the action so investors will go from the virus to the vaccine, to the politics, to policy and more stimulus. At 7 am – the FTSE +0.33%, CAC 40 +0.55%, DAX +0.43%, EUROSTOXX +0.47%, SPAIN +0.60% and ITALY+0.72%.

Oil continues to surge… up another 80 cts to $42.19/barrel on hopes of a virus and on hopes that OPEC and its allies will delay any production increases… the Saudi’s calling all members of OPEC plus the Russian’s appealing to them to ‘be flexible’ and this is causing the trader types to go Risk On… As discussed here before -we are now in the $40/$50 range expecting to find some resistance at $45.

The S&P closed at 3609 down 18 pts… Today’s action could test the Monday high of 3645 if the news concentrates on the positives causing the algo’s to go into buy mode… Look – you know how I feel… I think we are a bit stretched; I think there is some volatility on the horizon so no need to chase anything… If you’re invested, then you’re participating – so don’t worry… and if you are just starting – get going… do not chase but you have to start somewhere – in any event – keep some cash available in case of a selloff… I still think we should see some pullback and consolidation in the markets as it prepares for the next event… which in this case will be the finality of the election and the makeup of the Senate. Sit tight and stick to the plan.

Take good care.

Kp

Medium Shells w/ Sweet Sausage, Pancetta and Cannelloni Beans

This is a great dish for a cold night… Light the fire, curl up on the couch…

For this you need: 2 cans of cannelloni beans, garlic, thick-cut pancetta, cut into small cubes, sweet Italian sausage, removed from casing, large sliced onion, olive oil, vegetable broth (I like to use chicken broth), water, s&p, finely chopped parsley, fresh grated Parmegiana, and a box of medium shells.

In a saucepan over med hi heat – add some olive oil and the sliced garlic – sauté for 3 or 4 mins… now add the sliced onions and sauté until soft and translucent – careful not  to burn the onion… When ready… add in the pancetta and sausage and allow to brown up nicely. Using your wooden spoon – break up the sausage as it cooks.

Now add in the 2 cans of Cannelloni beans – juice and all and mix, allowing the beans to marry the other ingredients. Next add the broth and the water at a 2:1 ratio… (2 c broth, 1 c water or 4 c broth, 2 c water… see the pattern?). Let this simmer on the stove for 15 mins… stirring occasionally. Now bring it to a boil (adding more water if you need to remembering that the pasta grows and sucks up the liquid) – toss in the shells  – you don’t need a whole pound here… the pasta grows and sucks up the broth – so maybe like a half pound depending on how much you are making and cook until al dente – maybe 8 mins or so – adjust for taste and serve in warmed bowls – adorn with the parsley and if you like a drizzle of olive oil. Have plenty of fresh grated parmegiana cheese on the table for your guests.

You can serve this with toasted garlic bread – traditional “Pane di Casa” is the perfect texture

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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