Quarles adds to the Fed confusion, drama on Capitol Hill

• More FedSpeak leaving investors confused – Quarles the latest.

• Drama on Capitol Hill as Lizzy goes after Jamie.

• More testimony today by the big banks about how they handled covid.

• Bitcoin, Ethereum, Oil, Treasuries, Gold, VIX all quiet.

• Try the Short Rib Burgers – So delicious.

FED Vice Chair – Randy Quarles was on the wire at 3 pm – speaking at the Brookings Institution….

“If my expectations about economic growth, employment, and inflation over the coming months are borne out, it will become important for the FOMC to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings…”

And in the same breath – he said, “but the time for hiking rates is still far off….”

So he is covering all of the bases…..so no matter which way you challenge him – he has an answer…..because tapering is not the same as hiking rates….so I guess we can assume that they are determined to keep rates at zero…..for as long as they can…..yet they may want to begin to taper asset purchases to get investors and the markets ready for a policy change in the future..

Now we discussed this – it called FedSpeak or Jawboning…. recall that jawboning is defined as ‘the attempt to persuade or pressure by forces of one’s position or authority’ – Capisce?  So, Harker, Kaplan, Rosengren, Clarida, Bostic, Daly & Quarles – all members of the FED – are all jawboning the markets…. all attempting to ready the markets, to calm the markets ahead of an eventual conversation about the start of tapering…. that at this point looks like it should begin in the fall…. Just sayin’

June 15th – June 16th is the next FED meeting…. now while NO ONE expects a change in rates or the start of any taper – they are clearly getting us ready for the conversation…. even though the keep telling us that there are no imminent plans to change policy….so strap in.

Once again, we are seeing the value trade lead…… cyclicals/recovery/industrials/ small and mid-caps (SMIDS)….…. Financials (XLF +0.3%), Consumer Staples (XLY + 1%), Energy (XLE + 0.9%), SMID ETF (IWM + 1.9%) supported by Retail (XRT + 2.8%), Home Builders (XHB +0.9%), Airlines (JETS +2.1%) and Disruptive Tech (ARKK +1.8%) while traditional Tech lost ground and healthcare lost ground. 

At the end of the day, we saw the Dow was gain 10 pts, the S&P’s rose 7 pts, the Nasdaq gained 80 pts while the Russell was the outperformer – gaining 44 pts or 1.9%. 
10 yr. Treasuries yielding 1.58% Dollar index remains at 90, Gold settled just below $1900 while Bitcoin ended the day at $39k and Ethereum at $2,800.  WTI crude closed at $66.20/barrel.

Overall, it was a quiet session with little of note in the headlines. Continued discussion about how market is in a holding pattern as we wait for more macro data and next months FED meeting.  Remember the data remains strong overall and corporate commentary continues to support the reopening theme. 

In DC we are seeing multiple reports that point to a ~$1T infrastructure stimulus counteroffer from Senate Republicans on today.   There were reports yesterday a bipartisan group of senators is working on a backup plan focused on traditional infrastructure – we will see about that…. Schumer has said that the Senate will move on Biden's infrastructure agenda in July, with or without GOP support and Bloomberg reported that Joey is under pressure to replace Randy Quarles at the Fed and we know that there are others that want him to replace Jay as well….

US futures are down this morning – …Dow futures are - 26 pts, S&P’s -10 pts, the Nasdaq -58 pts, and the Russell - 5 pts.  The 10 yr. treasury is yielding 1.58% and the VIX ended the day a bit lower…. I continue to think the market will remain in a holding pattern defined by 4087/4230 until the next FED meeting on June 15th-16th….

Eco data today includes:  Durable Good – exp of +0.8%, Cap Good Ordered – exp of +1%, Cap Good Shipped – exp of +0.8%, Initial Jobless Claims of 425k, Continuing Claims of 3.68 mil and one that many will be paying attention to is the 1st revision to 1st qtr. GDP – exp of 6.5%. Finally, we have Pending Home Sales of +0.5%.

Much of the recent focus has been on the Fed's continued pushback against inflation/overheating concerns, while at the same time acknowledging that it may be time to start talking about tapering in the next few months. That has seemed to dampen some of the worries about a policy mistake. Inflation/overheating concerns also dampened by some negative US economic surprise momentum. However, data remain strong overall and corporate commentary continues to support the reopening theme.

European markets are all mixed…. There are no macro data reports to drive the action, so it is just more digestion as investors remain calm…waiting on US data. At 6:30 am - the FTSE -0.14%, CAC 40 +0.46%, DAX -0.34%, EUROSTOXX -0.05%, SPAIN +0.16% and ITALY +0.45%. 

Bitcoin is trading at $39,000, Ethereum is at $2,800 and Doggey Coin is at 34 cts.
The S&P closed at 4195 – after attempting to pierce up and thru $4200 – where it found resistance and where I think it will continue to find resistance for now. Much of the recent focus on the Fed's continued pushback against inflation/overheating concerns, while at the same time acknowledging that it may be time to start talking about tapering in the next few months will continue to cause confusion for investors and the algo’s.

I am still in the camp that the volatility is NOT over so take advantage of any price moves to trim and rebalance into names that have underperformed.

Short Rib Burgers

These are crazy good.... they are a bit of work - but if you have the time and you really want to impress - go for it.

Refer to the Short Rib recipe below.   Make 1/2 dozen ribs - the night before......cool and then shred the meat off the bone.... Now when ready.... bring the shredded meat to room temp and then mix the cooked short rib meat with the ground chuck (now use real ground chuck - not lean hamburger meat...you want it to have the fat for flavor) season with s&p and form the burgers.  Light the grill and let it get nice and hot and cook.  Top with sautéed onions and Monterey jack to complete this burger.

While this is cooking - butter the Brioche buns and toast either on the grill or in a frying pan......Then place the cooked burger on your bun - with fresh lettuce and the sautéed onions.  Mayo and Ketchup on the side.  Outstanding.  

Braised Short Ribs.

Begin with 6 / 8 beef short ribs.  season with s&p and then brown in a frying pan with a bit of Olive oil.  Make sure to brown all sides being careful not to burn the meat.  After you have browned them - place them in a large/deep baking pan.  Lining them up on their sides.

Next - large Chop - 2 lg White Spanish Onions, 1 bunch of celery stalk, 1 bag of carrots.  Smash 4 /5 cloves of garlic and add to the meat - making sure you disperse the garlic all around.  Next add the chopped veggies right on top.

In the frying pan that you used to brown the meat - add:  1 can beef broth, 1 can tomato paste, and 1/4 bottle of red wine.  mix well and let the broth come to a boil for a couple of mins as you steam away some of the alcohol in the wine.   Bathe the short ribs in this mixture and cover tightly.   Place the baking dish in the oven - preheated to 350 degrees. Let cook for 4 hours - tightly covered.