Moscow is knocking on the door of Kvyv, global markets mixed

• Another day of pain for stocks.

• Markets break down - slicing through the January 24th low to create a new 2022 low of 4114…… adding fuel to the fire.

• 10-year Treasuries rise and then fall as yields go from 1.95% to 1.85% to end the day yielding 1.96%.

• Commodities all surge higher…oil, gold, silver, wheat, corn…etc.

• Try the Giambotta (throw everything in!).

Headlines say it all.

“Russians Close in on Kyiv” - wsj.

“Russia Pounds Ukraine as US and European Sanctions Mount” - cnbc.

And then:

“Taiwan Warns Chinese Aircraft Flying in Air Defense Zone – Day of Russia Ukraine Invasion” -Fox.

“Is Taiwan Vulnerable After Putin’s Ukraine Invasion” -The Atlantic.

US stocks gyrated wildly yesterday  - the Dow falling nearly 850 pts only to end the day up 93 pts…..or a round trip of 997 pts from hi to low….The S&P swung 181 pts ending up 64 pts, the Nasdaq swung 900 pts from low to high and ended up 436 pts, the Russell 102 pts and ended up 52 pts while the Transports had a 730 pt. round trip only to end the day up 303 pts.

Gold, silver, corn, wheat, oil and natural gas all surged on the news…. sending shivers down the spines of central bankers as rising inflation is expected to cause more headaches for monetary policy makers.

The 10 yr. treasury yield was all over the place as well…. falling to a 1.85% yield as money poured into bonds only to end the day yielding 1.96% as money moved back out.

Biden and global leaders all voicing their displeasure with Vlad while imposing even harsher sanctions – causing Vlad to turn up the heat even more. Joey telling us that.

“Putin’s aggression in Ukraine will end up costing Russia dearly, economically and strategically.”

Interestingly – global leaders all remained mum on Xi Xi…. who by the way has been curiously quiet during all of this – other than to come down hard on the US – basically telling the world that this event is a direct result of US antagonization and hype….and those foreign countries need to stay out of Russia’s business? (And by default, China’s business).  Now the Chinese foreign ministry had this to say after Chinese war planes flew into Taiwan airspace.

“Taiwan in not Ukraine and has always been an inalienable part of China”.

Which just sets up the tone for what’s next…. leaving investment analysts and strategists trying to handicap what a move on Taiwan would mean not only for stocks and investors, but what it will mean for the balance of power…And again – a move on Taiwan will make this look like a skirmish.  What we need to understand and consider is what will the world do if China moves to take Taiwan? 

OK – so look – I had been looking for the S&P to find support at the January 24th low of 4222 - while we settled right there on Wednesday evening……Vlad made his move – and that sent the S&P (and global markets)  into a tailspin……causing the S&P to put in a new low for 2022…… 4114  and that is now the level to watch…..  It was ugly and it did feel a bit like capitulation – but then it wasn’t……buyers came in and suddenly – the tone changed, and stocks ended up on the day…. All this as the invasion continued.

Economic data yesterday was a non-event, but you should know that 4Q GDP came in at 7% (as expected), New Home Sales fell 4.5% as the cost of mortgage money rises and the Kansas City Fed Survey was 29 (better than expected).

Today’s eco data includes Personal Income and Personal Spending of -0.3% and +1.6% respectively.  The FED’s preferred inflation gauge – the PCE Deflator is also due out at 8:30 am and that is expected to show a gain of 0.6% (up from 0.4%) m/m and 6% (up from 5.8%) y/y….and this just confirms that inflation is NOT slowing down – and that will bring up the FED conundrum as we move into the March FOMC meeting….on the 15th and 16th.   Talk of a 50-bps move had become more common and many expected that the market had priced that in…. but after the most recent events – many are now calling for the FED to act ‘more responsibly’ and move by only 25 bps……
OK – here is the rub…..at this point it is what it is…the FED has clearly mismanaged the end of stimulus and the beginning of a rate rise…….something that should have started in July 2021 (and something I have been saying since then) – So now, they have to try and manage a change in monetary policy during an even more anxious time for investors and the markets.  So, this is not the time to go on vacation…. between the FED, Moscow, Kvyv, DC, Berlin, Paris, Beijing and Taipei – expect the level of angst and the level of volatility to remain high – which will create both stress and opportunity.

If the S&P retests 4114 – and fails - then 3850 is NOT out of the question at all. The S&P (and the others) is below all 3 trendlines….and have a lot of work to do to re-establish stability.  The S&P is now in the 4114/4450 trading range…. yesterday’s low on the downside and its 200 dma trendline on the upside.  The Nasdaq trading range is defined by 12,590 and 14,730. 

Yesterday’s sector action saw Tech gain 3.4%, Communications gain 2.8% and Consumer Discretionary gain 2.3%. – all sectors down double digits year to date.  The cyber-security ETF’s that I spoke about yesterday – IHAK, BUG, CIBR, and HACK – all gained more than 6% on the back of the Russian/Ukrainian battle that is expected to go ‘cyber’ at some point…..Recall how I told you that these names had been under pressure for some time and how that made zero sense to me, considering what is happening all around us. 

US futures are under pressure this morning as Vlad is on the verge of taking Kvyv – it’s only a matter of hours now as the capital is being hit by ‘horrific Russian rocket strikes’…. At 6:30 we see Dow futures down 300 pts, the S&Ps off 40 pts, the Nasdaq down 120 pts and the Russell is off 20 pts.  And this makes sense…. the market has sustained some real damage and as a result will thrash around as it recovers…. But in this mess, there is plenty of long-term opportunities.  Names like MSFT – which is down about 18% from its high, AAPL down 16%, JNJ is off 10% and has a solid 3% dividend yield.  JPM down 16% and yields 2.7%, IBM is down 14% and yields nearly 5.5%, AMZN is down 25% from the November highs, taking us back to prices last seen in May/June 2020.  I could go on, but you get the picture…. these are all mega cap, US multinationals that help to create a solid foundation for your portfolio.  The action yesterday only making these names that much more attractive.  As I have been saying – I am in the value camp for 2022 – so I like consumer staples, financials.  Energy has gotten a bit over done for me, so I am not chasing it here.  I am though starting to look at big tech (again) as some of them have become more attractive…. (As noted above). 

European markets are higher even as Russian troops appear on the edge of Kvyv…. Remember – what we discussed – geo-political issues do affect markets in the short term…but nearly never in the long term…. this is still new – so expect global markets to continue to thrash around as the headlines hit the tape. As of 6:30 – markets across the region are up between 1.2% - 2%.

Crypto’s have proven NOT to be the safe haven/inflation hedge that so many of their supporters have been telling us. Bitcoin is trading below 40k at $38,600 down more than 50% off the late November highs when all we were talking about was inflation…the Russia issue now adds the ‘safe haven’ element to the conversation….and it’s not working…. nor is Ethereum- trading at 2600…. Down 53% from the November highs.

The S&P closed at 4288 – an amazing performance for sure…. It also made a new low and one that is key now.  It is the weekend – and don’t be surprised to see a risk off mood as we tick closer to the 4 pm bell.  Don’t make emotional rash decisions…. remain strong in an anxious time and stay focused on the end goal.  Markets under pressure don’t mean that you sell good stocks – it means you buy more of those good stocks that you own.   

4114 is a level last seen between April – June 2021…I expect that we will test it again….and a failure there could see the S&P trade down to the 3850 range which would represent a 20% move off the all-time highs….the reasons we move that low – if we do - are not yet apparent…but might become some in the weeks ahead.

Giambotta 

The traditional recipe for Giambotta calls for onions, garlic, potatoes, eggplant, bell pepper, tomatoes, tomato paste and vegetable broth and seasoning. It is really up to you... you can add or delete any veggie you want as it is open to interpretation. Although the dish is mostly vegetarian, feel free to add in beef stew meat, sweet sausage or even cut up chicken pieces.

Preheat a heavy bottom pot - add olive oil and crushed garlic - sauté. Next add chopped onions and cook over med temp... Prepare the other veggies... cut up the potatoes, eggplant, zucchini and peppers... add to pot and season with s&p... cover and cook.

Now add in a can of crushed tomatoes and the veggie stock (if you want it thicker then add in the small can of tomato paste) - bring to a boil and then turn to simmer... If you are adding meat (stew sized cubes) - quickly brown the meat in a frying pan - season with s&p and then add to the pot… toss in some fresh basil and let simmer for 20 mins.

When ready you can serve this as a side dish or if you put it over rice (or even pasta – Rigatoni) you can make it a meal. Make sure to have plenty of fresh grated parmigiana cheese on the table.