Tech leads gains, bonds rally, PPI falls and European markets face turmoil

• News Flashes all over the place.

• PPI surprises with notable ‘weakness’.

• Tech takes the S&P and Nasdaq higher – leaving the others behind.

• Bonds rally, yield decline.

• Oil churns while gold boomerangs.

• European markets lower as France is in turmoil.

• Try the Linguine Shrimp Scampi.

News flash

So, Lonnie and Texas win BIG – as TSLA +4% yesterday at $182.56 - shareholders approved his outsized pay package…. which billion) along with the move from Delaware to Texas – suggesting that he has lost zero support amid slumping sales and poor stock performance…. which is down 56% off the November 5th, 2021, high - $414.50.  Now while that sounds all very exciting – this story is not over – the money was not direct deposited into his bank account just yet….….A Delaware judge nullified this package in January – Lonnie is appealing – if unsuccessful in Delaware - then when he moves the company to Texas – he will revisit this in a state that has ‘more favorable courts’.  Capisce?   To be continued….

Another news flash

Tech continues to power markets higher…. The S&P +12 pts and Nasdaq +60 pts both measures closing once again at a new 2024 high…. The others though weren’t in the celebratory mood – which drives home the fact that this rally is being driven by anything TECH and AI. 

Broadcom – AVGO (they design, develop and supply semiconductor and infrastructure software solutions) rose +12% to $1678/sh – after announcing solid earnings and a 10:1 stock split…. (Which appears to be the thing these days! – 10:1 splits).  

ADBE – reporting after the bell – beat expectations and raised their forward guidance - easing any concerns that they are falling behind in the generative AI space.  At the 4 pm close last evening – ADBE was down $1.13 or 0.25% at $458.74, but then when they reported (after the mkt closed) the stock exploded…. traders and algo’s going into a frenzy taking it up $66.50 or +14.5% to end that session at $525.22!  This morning in the pre-mkt they continue to push the envelope – with the stock quoted at $526.25/$528.50. 

The Dow (which is not a TECH index) -65 pts, the Russell (again not a TECH index) down 18, the Transports (not a TECH index) lost 161 while the Equal Weighted S&P (they took the TECH weighting out and made all components equal) gave up 17 pts.  So, what this tells me (and you) is that while the economy appears strong, investors are concerned – tech is masking the broader underlying weakness seen across a range of industries…The market feels a bit stretched up here…something we have been discussing…and something that you should not be surprised about….

Another news flash

And then there are a lot of geo-political issues that only add to the angst – note what happened in France over the weekend.  Then there are the out-of-control spending issues (here) that pile on and then there is the election…. which is heating up faster and faster…the first Presidential debate scheduled for June 27th in Atlanta at the CNN studios. Dana Bash and Jakey Tapper to moderate.  Again, while the political ‘stuff’ does not price stocks in the long term, it can create short term chaos, something that could be viewed as very negative or as an opportunity for the savvy investors that takes advantage of the angst….Remember – a pullback would be healthy….shake the branches a bit and see who falls out….Test the commitments.  

And another new flash

The PPI (Producer Price Index) unexpectedly FELL yesterday – the most in 7 months – surprising even the most generous estimates….adding fuel to the latest narrative that inflationary pressures are subsiding – giving cover to JJ and the FED to consider an additional interest rate cut this year…..(now we are back to discussing 2 cuts before the ball drops in Times Square – even as the FOMC committee favored just one)…..

Categories used to measure the FED’s favored PCE Index coming in softer in May than they were in April….top line PPI m/m came in at NEGATIVE 0.2% (vs. the expected +0.1%), Ex food and energy 0% (vs. the expected +0.3%), while the core PPI y/y came in at +2.2% (vs. +2.5%) and Ex food and energy y/y at +2.3% (vs. the 2.5% estimate).  Now, don’t get me wrong – I think that’s great – the subsiding inflation story is a bullish story, rather than a collapsing economy story – which would not be a bullish story.

This report only kicks the door open a bit more for traders to speculate on additional cuts (rather than the one cut JJ intimated) – Some street analysts now factoring cuts in as early as July and September (which I don’t’ see) while others continue to push for the November/December (post-election) time frame - something that makes more sense given all the drama surrounding the election and what will surely be seen as ‘election interference’ if the FED moves prior to the start of ‘mail in balloting – which begins as early as September (something I still do not understand).  You see each state’s start date varies – driven by their own election laws. Just to be clear – mail in voting can start as early as 45 days prior to November 5th…which puts us on September 22nd, 4 days after the September FOMC meeting.    

One more news flash

Bonds rallied on the better-than-expected PPI report sending yields plunging…. the TLT + 1.5%, the TLH + 1.1% while the AGG gained 0.5%.  – Now the easing inflation story has certainly helped the bond market recover. The TLT is now only down 5% ytd – after being down 12.5%, the TLH down 3.5% after being down 9.5% while the AGG is down 1.45% - this after being down 4.45%.  The 2 yr. is now yielding 4.67% (down 6% from 2 weeks ago) while the 10 yr. is yielding 4.20% (down 11% from 2 weeks ago). 

On the back of that excitement – we saw the bond market advance – the TLT + 0.7%, the TLH + 0.7% and the AGG gained +0.5%.  Rising bond prices sent yields down (inverse relationship) – the 2 yr. is now yielding 4.75% (down from 5% only two weeks ago) while the 10 yr. is now yielding 4.30% (down from 4.77% only two weeks ago). And those lower yields only add fuel to the technology fire!

Oil continues to churn right between the trendlines…. $77.55/$78.55 – This as OPEC+ slammed the IEA for their latest report suggesting that demand is peaking leaving a major surplus in the markets.  The kingdom told the world that “it was dangerous commentary, especially for consumers, only leading to volatility on an unprecedented scale”.  Now OPEC (talking their own book) expects to see demand and consumption increase at least until the mid-21st century, although they conveniently do not discuss what the carbon emissions would ultimately do to the environment.  Just to be clear – there are many analysts that are siding with the IEA and that is not making Prince Mohammed very happy.  This morning – WTI is down 36 cts at $78.25/barrel.  So, the next move will reveal what traders think…. are they siding with the IEA or with OPEC+?  A move down thru support ($77.55) is not what the Saudi’s wanting to see…. But moving up through long term resistance at $79.62 could prove to be difficult if this story continues to gain momentum. 

Gold continues to boomerang…. up $20, down $30 and then up $20 again…– Yesterday Gold tested as low as $2318/oz and this morning it is up $20 at $2338/oz.  Remember – lower rates will send gold higher while higher rates will send gold lower…so the boomerang is because the story changes from day to day….News that sovereigns are loading up on gold will certainly help the precious metal hang in there – Remember – Gold is (or is viewed as) a safe haven asset in times of unrest and uncertainty in the global equity markets. So, I expect gold to continue to hold its current position if the markets get anxious as we move through the summer into the fall.

US futures this morning is decidedly weak……Dow futures down 340 pts, S&P’s down 30, Nasdaq -55 and the Russell is down 31. So, you ask – Why?  The economic news is positive, so why is the market down?  Hello?  We discussed this, no?  The market is a discounting mechanism…. the rally we have seen – was all about the expected good news…and now that the good news is here, we should see some profit taking as concerns simmer about what the next move is for the economy, the FED and the election.  I am not expecting a disaster, but I will say, I am rooting for a pullback – a 4% move lower would take us to the trendline – which would be the first level of support that needs to be tested….and a 4% move is hardly anything to panic about….Even a move to the intermediate term trendline is only 5.5% from here…again – well within the normal trading bands – but yes, a bit more uncomfortable – but – get comfortable with being a bit uncomfortable…it keeps you on your toes and helps you to eliminate the noise. 

European markets are all lower…France down 2.4% this morning as the political turmoil is raising all kinds of concerns that a win by Marine Le Pen’s FAR right National Rally Party will ‘usher in looser fiscal policies. Macron is fighting for his life…SNAP elections to begin on June 25th and then again on July 7th…. This recent uncertainty causing stocks to decline and forcing France to pay a premium on its debt – sending prices for bonds down and yields up.  The turmoil is wiping out most of the month’s gains and do not expect it to change anytime soon.  Elections tend to create volatility and in France for some reason they tend to be even more volatile…. (It must be the French passion….).  In any case – French weakness doesn’t change the broader strengthening EZ economy, Again, politics can and does create short term chaos…. but that doesn’t mean you panic.  

The S&P closed at 5433 up 12 pts….is now up 10% since the lows of April….10% in 2 months!  It’s up 13.5% ytd…. It is up 43% since January 2023 – so put it in perspective…. a 5% pullback is hardly anything to get worked up about….and if you are someone that is just getting in – this is where you need to exercise some patience.  Go slow – feather yourself in overtime…do NOT spend all your money on day 1.   

As I have said - while it feels good for the market to rally – it doesn’t mean it will continue to just rally.  In fact, I would argue that it has been setting up for a retreat….  Add where you see opportunities, do not chase anything…there is no reason to chase.  Remember – consider your time frame, consider your risk profile, talk to your advisor and make sure you have a plan.

Shrimp scampi over linguine

This takes all of 20 mins to prepare and serve....an easy dish that appears harder than it is....

You need only a couple of things....1 lb. of large cleaned, deveined shrimp, butter, olive oil, onion, garlic, lemon, white wine, chopped parsley, s&p....and a lb. of linguine....and of course some fresh grated parmigiana cheese.

Bring a pot of salted water to a rolling boil.

In a sauté pan - melt butter and add a splash of olive oil, add crushed/sliced garlic and sliced onion......and sauté for about 10 mins….... keep heat on med so that you do not burn the butter, garlic, or onions…

Now add the linguine to the boiling water…. stir.

Next add the shrimp to the sauté pan, season with s&p, and sauté quickly until nice and pink on both sides...no more than 5 mins.

Now add juice of one lemon, complement with some white wine...about 1/4 cup...in pan - and a glass for you - turn heat up to high and let the wine steam away...no more than 2 mins......strain pasta - reserving a mugful of water - add pasta to sauté pan and a handful of fresh grated parmigiana cheese…. - mix and serve.... You may need to add back a bit of the pasta water to keep moist -as the pasta sucks up the juice....  Serve in warmed bowls with fresh grated cheese at the table.