Things you need to know.

• NFP Misses BIG – Stocks Surge on the news
• Dems use it to suggest that the recovery is weak, and we need MORE money.
• Investors & Traders now assume that the taper conversation may not happen in the fall and that accommodation on all fronts is alive and well.
• And what happens to taxes?
• US 10 yr. drops to 1.49% before closing at 1.57% & the dollar gets whacked.

**You can click here to hear Saturday’s Larry Kudlow radio show – I appear with Don Luskin and John Catsimatidis in the second segment.

https://wabcradio.com/show/larry-kudlow/

And you can find my Sunday YouTube Update from the golf course here:

https://www.youtube.com/watch?v=wTnpeeHPv5Q&t=45s

8:30 am – Friday May 7…. tik, toc, tik, toc….and BAM!  The BLS (Bureau of Labor Statistics) reports that the April NFP (Non-Farm Payrolls) report was a dismal 266k new jobs created!  I say dismal, because the range was +850k – 1.2 mil new jobs were to be created in April – so the +266k was a fraction of the expectation…in fact it was just 27% of what the median expectation was….Futures which had been waiting patiently in order to react – went into a frenzy…..Dow futures fell while Nasdaq futures shot higher…..S&P’s came under pressure while the Russell hung around the flat line…..all as investors, traders, analysts and strategists tried to make sense out of what they were reading….Many asking – Wait, is this a mistake?  How could we only have created 266k new jobs when the recovery is alive and well and cities and states are re-opening?

My first reaction was that someone at the BLS cannot count because the miss was so obvious…… But Look – the number does not even make sense…it is so outside of the bell curve that you must dismiss it…. it is a one off – Period.  I mean let us be serious….266k jobs?    Now I guess you can make the argument that the number is correct – it was all the inputs that were wrong, all the inputs that every street analyst used to come to a median estimate of 1 million new jobs…In any event – it is history now, it is over – but the analysis continues…

As the clocked ticked to 9:45 am – all the indexes had turned up and ran higher from there…. Taper is clearly off the table for now and rest assured that the FED is not going anywhere…. leaving many to ask ‘OK – what happens to the tax and infrastructure conversation now that the recovery isn’t what they said it was?  Surely the ‘job creating’ infrastructure plan would move forward, but how can any administration talk of a massive increase in taxes – both personal and corporate when suddenly the narrative is not what they have been telling us….and so – here we go…. More FED stimulus, more gov’t spending, and no movement on the tax front….and that spells ‘STRONG RALLY’.  By the end of the day – the Dow Industrials gained 230 pts or 0.6%, the Transports gained 218 pts or 1.4%, the S&P added 31 pts or 0.74%, the Nasdaq added 120 pts or 0.8% and the Russell shot higher – adding 30 pts or 1.35%.

Picking it apart –

Shots across the bow by Commerce Secretary Gina Raimondi – telling us that there is ‘NO EVIDENCE’ to suggest that the enhanced unemployment benefits are allowing people to stay home and not work since they are making more money by not working all while our friend at the Minneapolis FED – Neely Khashkari tells  Face the Nation host – Margaret Brennan on Sunday morning that there ‘WAS SOME TRUTH’ to the idea that enhanced jobless benefits do create a ‘disincentive to return to work’. But his comments went onto say that.

“We are still in a deep hole and we still need to do everything we can to put those folks back to work quickly”. – Now – note Neely is not a voting member of the FOMC committee – so once again they can use him to float arguments that sit on both sides of the fence – to further confuse and complicate the conversation……In any event – this story is far from over….

Next up – there was a major cyberattack on Colonial Pipeline – a company that does exactly what its name says…. they deliver gasoline, kerosene, diesel, home heating oil, national defense fuels and other refined products via the nation’s largest pipeline that runs from Houston to New York that brought that transportation to a screeching halt. Do you see where this is going?   The ransomware attack took place late Friday and crippled the company’s operations – in an ‘ominous development for critical infrastructure’ and as of this morning the company was still not prepared to re-start the pipeline…. And this attack comes conveniently as the energy industry prepares to meet what is expected to be very strong demand from the re-opening of the country as well as the re-opening of the travel industry and the start of the summer driving season.  A prolonged disruption will see oil and gasoline spike in the days ahead – Gasoline futures shot up 4.2% in early electronic trading Sunday evening but have since settled back down to +1.56%.  Oil futures have been all over the place overnight and are now up 0.8%.  Expect to hear more from this story because cybersecurity experts have been warning about such attacks for years now…. West Texas Intermediate (WTI) is up 50 cts to $65.45/barrel.

Look, this is a much larger problem than just this oil pipeline….it is a statement about vulnerabilities created by technology in our energy infrastructure – think electric, natural gas never minds vulnerabilities across a range of other industries. (think financials).
US futures were up overnight and are now mixed as the Colonial Story unfolds and the week gets started.  At 5 am – Dow futures were up 77 pts, the S&P’s up 1, the Nasdaq down 40 and the Russell is down 10 pts.  In addition to this oil story – it is a big week for bond auctions and economic data….

3, 10 and 30 yr. bonds will be auctioned on Wednesday with a range of bills auctioned off today and Thursday.  Investors will be watching the 10’s and 30’s intently to see how well (or not) they are received. Currently the 10 yr. is yielding 1.6% and the 30 yr. is yielding 2.3%.

Eco data – ok – brace yourself…. Wednesday is the day to watch…. CPI (Consumer Price Index) is set to be released by the BLS at 8:30 Wednesday morning.  Now – remember – we have been talking about this….and the expectation is for a jump in the CPI at some point near.  This month we are expecting CPI m/m of +0.2% (not alarming), Ex food and energy of +0.3% (not alarming) while CPI y/y is expected to jump to 3.6% (somewhat alarming) and ex food and energy of +2.3% (somewhat alarming).   Now the question is after last weeks’ dismal NFP report – could there be an upside surprise that no one saw?

Then on Thursday we will get the PPI (Producer Price Index) and expectations are +0.3% m/m, ex food and energy of +0.4% m/m while y/y expectations call for +5.8% (alarming) and ex food and energy of +3.7%.  Friday brings us Retail Sales of +1%, ex autos and gas of +0.3%, Capacity Util of 75.1% and Industrial Production of 1%.

European stocks are mixed – though none of them really diverging much from the flat line.  There is no eco data to report and like here – earnings season is all but over so the focus returns to the broader fundamental data.    Friday’s job report reiterating the need for interest rates to remain lower for longer are also suggesting that the ECB (European Central Bank) is on the same path. Recall the Christine Lagarde commentary last month.    At 6:30 the FTSE +0.02%, CAC 40 -0.19%, DAX -0.16%, EUROSTOXX -0.34%, SPAIN +0.25% and ITALY +0.56%.

DXY – got whacked on Friday after the news hit the tape….and closed the day at 90.23 slicing its way through 90.50.   This morning – the dollar index is off another 6 cts at 90.17 on its way to 89/90.

Oil is trading up at $65.22 or + 0.45% as the day dawns…the Colonial Pipeline story is going to add another dimension to the oil price story so pay attention…. if it drags on beyond today – then look for oil to continue to push higher.  A successful re-opening should see oil retreat just a bit – but do not expect it to collapse…the season has just begun, and demand is strong.

Bitcoin is trading at $58,500, Ethereum is at $4,100 and Doggy Coin is trading at .51 cts – apparently all the SNL excitement is over after its surge to .84 cts last Friday.

The S&P closed at 4232!  It blew right up and thru 4218 – the most recent high…creating yet another new high in 2021….as investors ate up the dismal payroll report.  Look – it is anyone’s game right now…. I expected to see some exhaustion but then the gov’t comes out with non-sensical numbers so that throws the theory into a tailspin…. the only think I can say with confidence is that the channel drawn on the chart still suggests 4400 is the upside – so we are still well within the channel…and as I told you last week – Tommy Lee of Fundstrat is also predicting 4400.  So, I am in good company….

And if this morning’s action is any indication – we will see the S&P churn…. And with tech weaker again this morning – expect to see the S&P under a little pressure.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you.  You can now get a video version of this note on my YouTube Channel.  KennyPolcari or my Instagram – @kennyp1961.
Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Chicken Thighs/Breasts in a Honey Garlic Glaze

For this you need 6 chicken thighs, bone in and skin on, s&p, garlic powder, plus garlic cloves, honey, chicken broth, 2 tbls on rice wine vinegar and 1 tbls soy sauce.  **Now again you can use chicken breasts as well, but they will not have the same flavor…just sayin….

Season chicken with s&p and garlic powder.  Set aside.

Heat a big skillet over med high heat, sear the chicken thighs on both sides until golden brown, then turn heat to med and continue cooking  – making sure to keep turning them so that they do not burn.

When the chicken is done cooking – – make sure you turn them all skin side up and get ready to make the sauce.

Take the crushed garlic cloves – 3 and spread around the skillet and let it sauté for about 1 min.  Now add 1/3 c of Honey, ¼ c of chicken broth, the rice vinegar and soy sauce.  Turn the heat up to med high and cook until the sauce reduces a bit and thickens up.  Maybe 5 mins.

When serving – you can make a bed of brown rice and place the chicken on top – and serve with a large mixed green salad.

Buon Appetito.