• Fed stays on hold.

  • Donny not happy.

  • MSFT & META beat, TSLA misses – AAPL out tonight.

  • Oil down, Gold up, Bonds steady.

  • Try the Spaghetti w/Garlic Confit, Caccio & Pepe,

BAM, BAM & BOOM……Stocks were weak all day, and got weaker into the announcement – then they rallied at the start of the presser, thinking that he was going to tell us that we can expect multiple rate cuts this year, but when it was clear that was not the intent – the algo’s stamped their feet and stocks ended the day lower…The Dow lost 136 pts or 0.3%, the S&P down 30 pts or 0.5%, the Nasdaq lost 100 pts or 0.5%, the Russell gave up 6 pts or 0.25%, the Transports gave back 36 pts or 0.25%, the Equal Weight S&P lost 25 pts or 0.35% while the Mag 7 lost 265 pts or 1%.

While JJ did not make any surprise announcements, he did poo poo the idea that inflation is readying to reignite. He also made it very clear that he has NOT spoken to President Trump and that the FED is an independent body, one that is not told what to do by the President – allaying any concerns that he will be ‘told what to do’. He did though make it clear that we ‘are MEANINGFULLY above the neutral rate’ and that suggests that he still sees rates declining this year and stocks started to rally on that as it suggests a more dovish tone…. But……

While the vote to keep rates steady was unanimous, the committee is still concerned that inflation remains ‘somewhat elevated’ but he also said that with “interest rates now significantly less restrictive than they were…..we do not need to be in a hurry to adjust our policy stance”…..and that was the sentence that the algo’s did not like….that is a more ‘hawkish’ sounding tone and apparently negates the dovish tone….and stocks did a 180 and ended lower… I mean you know what happened - the algo’s wanted to hear that the FED is prepared to cut rates multiple times this year and when they didn’t hear it, they stamped their feet….

He finished it up by saying that “we need to see REAL PROGRESS ON INFLATION or unexpected weakness in the labor market before considering further rate reductions”. And to me that suggests that the labor market is just fine, the idea – in September – that the labor market was weak – allowing them to slash rates by 50 bps – just 5 weeks ahead of the election was a head fake…the labor market was never in distress, leaving many of us to openly call JJ out for cutting rates aggressively at that time….I mean, come on…..can it be any clearer what they tried to do?

In the end – my sense is that we are not getting any cuts this year because the data is not supporting it (right now), but traders are still pricing in a 90% chance of a cut at the July meeting (29th-30th). Apparently, they must know that the data is going to weaken by then – let’s see.

Donny was not happy with the announcement – saying that the FED ‘failed to stop a problem they created’ – which is true – remember how JJ let inflation soar while telling all of us that there was nothing to worry about? For 8 months – beginning in the spring of 2021 – inflation ripped higher – going from 1.6% to 9.4% and they told us it was our imagination…..the current issue is that JJ should not have cut rates last fall – they should have been held steady and by now inflation would have subsided and he could have started cutting them now, but he (they) were premature in cutting rates, so now we have to see what happens as inflation remains in simmer mode….….

So, Donny pledges to fix the problem himself by ‘unleashing American energy production, slashing regs, rebalancing international trade and reigniting American manufacturing’. Just to be clear – Treasury Secretary Scotty Bessent – does not agree with Donny, he is not in the camp that the FED needs to cut rates (right now), he just needs to tell him that.

All this happened while traders, investors and the waited for the start of the megacap earnings season. MSFT, TSLA & META all reported after the bell…. MSFT and META beat while TSLA missed….and what is funny, MSFT sold off in the after-hours session while META and TSLA gained!

The issue with MSFT (I own it) is that while top line revs beat and EPS beat, revs from Azure missed by a teeny weeny bit – notwithstanding the fact that Azure services grew by 157% driven by commitments from OpenAI …and that sent the algo’s into a tailspin (which I think is dumb)….the cloud growth being constrained by data center storage…CapEx spending on data centers coming in at $22.6 billion with promises of spending $80 billion this year! All the more reason to look at stocks like DLR, PLD & EQIX…. (Data center REITs). MSFT CEO Nadella also reiterating its multibillion-dollar investment in AI, regardless of China’s claim of ‘training a groundbreaking research model for $8 billion….”

TSLA missed but promised to make up with Robotaxi’s while META rallies Marky’s bullish AI comments predicting a ‘really big year’. Marky also settled the lawsuit filed by Donny over the suspension of his account after the January 6th event and agreed to pay Donny $25 million. $22 million to go towards the Trump Presidential Library and $3 million to the other 4 defendants in the suit. I don’t own either one of these, so let’s move on. This morning in the pre-mkt – MSFT is down 3%, META is up 1.5% while TSLA is up 2.6%.

Eco data yesterday was a bit cautious, with weaker wholesale inventories, weaker retail inventories and weaker mortgage apps. Today’s eco data includes 4th qtr. GDP – expectations of 2.6% - which is down from 3.1%, Personal Consumption of +3.2% and Pending Home Sales y/y of +4.2% - down from 5.6%.

Treasuries sold off a bit, but yields continue to hold steady. The 2 yr is yielding 4.2% while the 10 yr is yielding 4.50%.

Oil traded lower yesterday on the latest API & EIA reports which showed an increase in crude inventories. OPEC+ is due to meet next week, and the impression is that they will hold on to their production cuts through March, even though Donny tries to pressure them to increase output to bring down the price of oil. OPEC citing ‘uncertain demand from China’ as the reason to do nothing…. which I think is laughable…but I’m not driving that bus…. Last week we tested trendline support at $72.12 (it held) and overnight we tested it again (and it held again). Currently – WTI is trading at $72.60. I suspect – we will test trendline support again – if we fail to hold, then we could see it trade down to $71.25/$71.50 in short order.

Gold, as discussed, was waiting for JJ before making its move. It is also expecting those tariffs on Mexico and Canada to take place on February 1st and so the move into gold took hold….Gold, which had been hugging $2800, backed off to $2770 on Tuesday as it waited….Yesterday it rallied just a bit and this morning it is all sinking in….Gold is up $24 at $2816… The chart now suggesting a move to the November high of $2845 is well within reach. Trendline support is way down at $2710, so if the tone changes, hold onto your hats!

This morning- US futures are UP…. Dow futures + 130 pts, S&P’s up 25, Nasdaq + 140 and the Russell is ahead by 25. The focus is on last night’s earnings and today’s earnings reports. We will get more than 30 before the bell, and already 15 of them have beaten while 3 have missed…. but the BIGGIE will be AAPL – which is also due after the bell. EPS are expected to be $2.30…. AAPL is trading down 0.3% in pre-mkt…. let’s see what they say about AI and how AAPL is incorporating it into the future.

Now AAPL had given back 16% off the December high – trading down to $219 which was long term support, and it held. It has taken back 9% in the last week ahead of the report….trading up and thru intermediate resistance and is now kissing short term resistance at $239…..All those ‘people’ who sold their AAPL on the China weakness story are all trying to get back in….which is why – as a long term investor you have your positions, you keep your positions (as long as the theses has NOT changed) and you add to your positions when the opportunity presents itself….down 16% was an opportunity…the same it was for the semi stocks 3 days ago….don’t’ even get me started on the DeepSeek thing. Here was my appearance on The Big Money Show on Tuesday when we discussed this.

European markets are all higher…. The ECB is expected to announce another 25-bps rate cut, taking their rates down to 2.75% - making this the 5th time since June. This as Eurozone inflation ticks UP while Manufacturing and Services sectors remain a bit subdued. France and Germany reporting weak economic data in the 4th quarter causing the Eurozone to stagnate. At 7:30 all mkt centers are up between 0.4% and 0.75%.

The S&P closed at 6039 down 30 pts. My sense is that we will continue to churn…. There was some damage to the markets on Monday, so they need to churn in line and repair the damage before moving significantly higher.

I am still in the camp that the market needs to consolidate (pullback), so I remain patient – making sure not to chase names that I think are expensive. Which doesn’t mean I am not putting money to work, I am, in sectors where I see value – think Healthcare, Financials, Consumer Staples and the value trade – SPYV.

Diversification is key as you get older…. (Younger investors can take more risks). Yesterday earnings are setting the tone for tech – AAPL will further that tone……sit back and let it happen. Long term investors should take advantage of any weakness in those high-quality names if they come under pressure.

Spaghetti with confit garlic, caccio and pepe

This is so simple yet so delicious.

For this you need: Fresh made spaghetti (you can use box spaghetti, but I just like the fresh for this dish), 10 cloves of garlic, Romano cheese, a squirt of fresh lemon juice, and black pepper.

Begin by placing the garlic cloves in an overproof small pot, cover with olive oil and bake until soft and browned. 375 degrees for 30 – 40 mins.

Now bring a pot of salted water to a rolling boil on the back burner.

Grate the Romano cheese and place it in a bowl. When the garlic is done, remove and let cool…. then crush the garlic with a mortar and pestle. Add the cheese and mix to form a paste. Now place it back in the bowl.

In a large sauté pan, toast the peppercorns and then crush in the mortar and pestle. Add back to the sauté pan.

Add the pasta to the pot. Then use a ladle of pasta water and add to the cheese/garlic paste to moisten and a ladle for the pepper.

When the pasta is done, using tongs, add the pasta to the sauté pan, toss with the pepper, now add the garlic/cheese mix and toss with the pasta. Add a bit more pasta water only if needed. Serve in warm bowls.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.

UNLESS OTHERWISE NOTED, INDEX RETURNS REFLECT THE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS, IF ANY, BUT DO NOT REFLECT FEES, BROKERAGE COMMISSIONS OR OTHER EXPENSES OF INVESTING. INVESTORS CAN NOT MAKE DIRECT INVESTMENTS INTO ANY INDEX.

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