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Stocks Surge and Goldy Suggests OIL Demand is Strong! – Try the Dover Sole

January 20th… Trump out, Biden in and stocks soared! All 4 indexes making new highs as the sun set and Joey and his family made the traditional walk to the White House from the corner of Pennsylvania Ave and 15th St after a full day of pomp and circumstance. It was a time in history that produced many firsts – Oldest President, youngest poet laureate, first female VP, and it was the end of one era and the beginning of another that has a real sense of ‘ renewal’  – and investors loved it… while all eyes were glued to the TV all day long as we witnessed the peaceful transfer of power from one administration to the next – stocks surged… futures pointed higher and once the 9:30 am opening bell rang – investors/traders and algo’s took it even higher… there was no looking back… by the end of the day – the Dow added 257 pts or +0.83%, the S&P’s up 53 pts or 1.4%, the Nasdaq up 260 pts or 1.97% and the Russell up 10 pts or 0.44%.

Communication stocks stealing the show… XLC + 3.14%, while the individual participants did OK too.   NFLX up 16% was the clear winner in the group… FB +2.4%, GOOG +5.3%, TMUS +1.9%, TWTR +3.6%. Homebuilders – XHB – built upon the gains from Tuesday advancing another 2.6%. Technology not far behind up 1.98%, Work From Home (WFH) names also rising by 1.4%. In fact, everything advanced – Utes, Industrials, Consumer Discretionary and Staples, Energy, Healthcare and Basic Materials. Growth +2.3% way outperformed Value +0.45% but still lags for the year.

The loser in the crowd? Financials! XLF down 0.42%. After Morgan Stanley wrapped up the earnings season – reporting better than expected (as did the others) ‘blowing away expectations’ – which sounds good, but when you pull the covers back – you realize that so much of the outperformance is due to credit – which many analysts don’t regard as being a solid source of upside potential… BK – 7.25% and USB -5.2% reported and while they met or beat – both disappointed on future guidance only adding salt to the wound. All of this just gave the trader types a reason to hit the sell button and re-allocate the funds. Something that I think is a bit premature – but that is what traders do – and when they sell it – it creates opportunity for the longer-term investor… Bring it on! JPM, BAC, BLK.

Now look – the excitement is all about the new administration, the dozen or so executive orders that he was going to sign last night fulfilling campaign promises, the vaccines, the beginning of a decline in infections in parts of the US and the promise of not only the $1.9 trillion in stimulus, but another trillion before the end of the qtr that is expected to go directly to individuals and small businesses. And while Wall St is telling us one story, Main St is telling another – thus the disconnect – which reminds us of the risk as valuations continue to get stretched which is why you need to go slow.  And while rates are low right now (helping to fuel this advance) the sense is that rates are on the rise…the 10 treasury sits at 1.1%, with many expecting us to see 1.3% – 1.5% by year end while inflation is expected to surge as well… rising above 2% (but to be fair – we have been expecting inflation to surge for years now…) …and that will cause some to pause… Not saying get out, just saying understand the dynamics.

As of 6:15- Dow futures are UP (surprise!) 32 pts, the S&P’s are ahead by 7 pts, the Nasdaq is up 53 pts and the Russell is +2 pts.  Look – whatever you believe – the fact is – the market keeps moving up allowing investors/traders to lighten up on the outperformers and re-allocate to the underperformers… (exactly what they should do…) In the end – with all of the global stimulus and now 3 vaccines – soon to be 4, improving demand for oil, and improving macro and micro data points around the world – you can make the argument to go all in… which is exactly when you should become more vigilant.

Earnings today include BHI, UNP, INTC, IBM, CSX…

Eco data today includes: Housing Starts – exp of +0.8%, Building Permits -1.7%, Philly Fed Survey of 11.8, Initial Jobless Claims of 935k and Continuing Claims of 5.3 mil.

European markets are trending higher on the back of the Biden Presidency… European Commission President Ursula von der Leyen tweeting out

“The United States is back and Europe stands ready”

UK PM Bojo also saying that the Brits are looking forward to ‘strengthening the partnership between our countries’.

On monetary policy – they await the latest ECB (European Central Bank) announcement about what’s next for rates… and while no one expects any change in policy – it COULD happen… (unlikely)… At 6:30 am – the FTSE +0.03%, CAC 40 -0.12%, DAX +0.45%, EUROSTOXX +0.43%, SPAIN +0.14% and ITALY +0.06%.

OIL rebounded yesterday and is off a bit today… currently down 37 cts at $52.94… data – from the API (American Petroleum Institute) showing a surprise build in inventories being blamed for the weakness… blah, blah, blah… last week’s surprise Saudi announcement of an additional production cut is expected to blunt that concern.  Now, I have been screaming about how excited I have been for the oil markets for months now – started at the October lows… and expect them to outperform this year… and overnight it appears that Goldy agrees – calling for $65 oil by the summer. So I guess I’m in ‘good company’!

Bitcoin is off another $2500 this morning trading at $32,500… in a move that could see it test trendline support at $27,800. No reason to analyze it to much – you are either in or out, you either believe the story or you don’t. It’s that simple… just use your head… don’t be foolish.

The S&P closed at 3851 – a new high!!! And while I think it is a bit tired and most of this good news has been priced in – it can remain irrational longer than you prefer… and I say irrational only because the move up has been parabolic and feels disconnected… but like the saying goes – ‘You can’t fight the FED’… We remain in a broad channel – 3780/4100… my sense is that we test 3780 first… but let’s see…

So stick to the plan, create a well-balanced and defined portfolio… trim where necessary, call your advisor and focus forward…

Take good care

Kp

Dover Sole Francese

For this you need: 1 lb Dover sole, flour, eggs, parmegiana cheese, pepper, olive oil, butter, fresh lemon juice, marsala wine, garlic and some flour.

Preheat oven to 300 degrees.

In a bowl – mix 3 eggs and a handful of parmegiana cheese and some pepper – beat well – set aside.

In a large sauté pan – heat up the butter and oil…

Now – dredge the sole in flour and then dip in the egg mixture

Place in the hot sauté pan – do not crowd…

Cook the sole until nicely golden browned (maybe 2 mins max?) – now flip over and repeat – remove from pan – and place on an over proof dish and put in the over to keep warm until you finish all the pieces of sole.

Now – in the same sauté pan – add in some chopped garlic, fresh lemon juice (squeezed) and maybe 1/2 c of the marsala wine and 1 tbsp of corn starch (to thicken).  Stir until you have a nice thick sauce.

Serve the sole on a bed of herb flavored rice pilaf and pour the ‘sauce’ over the fish. Serve immediately.

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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