Things you need to know

• Stocks fell? No way…
• Eco data was weaker than expected and HD and WMT beat estimates but disappoint the trader types
• VIXY and SH – two ways to help hedge your portfolio
• Try the Rib-Eye Pizzaiola

Stocks FELL!!!  No, that is not a typo…. Stocks FELL…. quick someone call the police – How could that be?  By the end of the day – the Dow gave back 280 pts or 0.8%, the S&P’s down 42 pts or 0.9%, the Nasdaq down 138 pts or 0.9%, the Russell down 31 pts or 1.4% and the Transports down 161 pts or 1%.

Well, the concern yesterday was that the delta variant is now going to cause the recovery to stall….and those further shutdowns will be required to contain the spread…. Wait…. how come no one was concerned about this two weeks ago? Or 2 months ago when investors were taking stocks to new highs?  I mean, it’s not like the variant is a surprise….and it’s not like we didn’t know that the unvaccinated pose the biggest risk to themselves and to the rest of us….so while I agree it is a problem – I am not in the camp that yesterday’s weakness is because of the variant.  It’s a convenient way to explain the weakness but let’s be honest…..

Stocks are way overdue for a correction, yes delta cases are spiking (but that was projected – so it is not new news), zero tolerance in China causing port shutdowns and more supply chain issues, increasing Chinese tech regulation also putting pressure on the tech sector, economic data that is beginning to show stress, talk of more lockdowns around the world, talk of building inflation, speculation over recent FED statements and the recent takeover of Afghanistan by the Taliban are all reasons for the market to back off…..so to say that it was the variant that caused the retreat is a bit short-sighted.

In the end, it doesn’t really matter what the reason is…. stocks were weaker, investors have decided to lock in some profits ahead of what we have detailed for weeks now, IS a seasonally weak period.

Eco data yesterday, was much weaker than expected and that did not help the story…much weaker advanced retail sales only adding pressure to an already weak morning….and btw – those weak retails sales numbers are illogical….they make no sense vs. the plethora of strong data we are getting on a range of other data points….Earnings which have been out of control spoke directly to the health of the consumer so to say now that the consumer is in retreat is a bit misguided.  They have already started the push for the holiday shopping season – with news stories warning that if you don’t buy toys and presents now, you won’t get them later…. which I think is complete BS…. but whatever.

And then we got blockbuster earnings from both WMT and HD, yet the trader types threw a hissy fit…. HD beat on the top and bottom lines…EPS of $4.53/sh vs. the $4.02 estimate.  Net Sales up 8.1% to $41.1 billion vs. the expected $40.66 billion. Comparable sales up 4.5% vs. the expected 5.6% and there is the issue…. while sales were up, they weren’t up enough and so the tantrum starts…. HD was down 4.5%.

WMT reports $1.78 vs. $1.56, Online sales up 6% but down from last year, same store sales up 5.2% – beating the +3.1% estimate…yet they couldn’t help themselves….and so it goes…they sold it hard after the opening and then as the day wore on it rallied back as more investors decided to buy the dip leaving WMT essentially unchanged on the day.

But look – if you have been paying attention and you have been heeding my warnings…then you must have bought some protection….to protect you against a downside move….and last week I spoke about the VIXY – which is the Proshares Short term Futures ETF that corresponds to the VIX….as the VIX surges so goes the VIXY and if you bought some VIXY you would have seen it surge by more than 8% yesterday before closing up 3.7% at 4 pm.  So, as the stocks in your portfolio got whacked, you would have somewhat hedged yourself with this product.  Just sayin’ You could also have used the Proshares Short S&P ETF – SH – now while this rose also, it did not surge as much as the VIXY…. but it still would have provided some protection. It ended the day up 0.75%.  (Just fyi – both of those are short term protective plays – you don’t buy VIXY or SH and hold it for the long term….)

And then Fed Chair Jay Powell made some news yesterday when he spoke to a town hall of educators and students – where he revealed that while the Fed is a powerful central bank – and has access to ‘powerful tools’ those tools have limitations – which is interesting because every time Jay addresses the media or his press conferences he makes sure to tell us that the FED has plenty of tools in the toolbox, so there is absolutely nothing to worry about.  So, which is it?  I’m sure he thought no one was paying attention to that speech…. In any event – the taper is set to begin but that we are still in this holding pattern just in case something changes…. And we may find out more today at 2 pm when the FED releases the latest minutes from the FOMC meeting last month.

Now 4 of the 11 S&P sectors ended higher (if only slightly), Utilities, Consumer Staples, Healthcare and Real Estate all the other sectors got beaten up.  Consumer Discretionary – XLY getting hit the worst – falling 2.4%, Basic Materials – XLB down 1.15%, Industrials – XLI down 1%, Energy – XLE down 1%, Technology – XLK down 0.8% and Communications – XLC down 0.8%, and Financials – XLF down 0.7%.

The 10 yr. treasury yield ended the day yielding 1.26%, the Dollar index rose again, Gold was unchanged all while Oil fell another 70 cts or 1% to end the day at $66.59…. below its intermediate trendline even if only slightly…. but this is important – what it does next will determine whether we test $63 or take back $70….….

US futures are a bit weaker this morning….as investors continue to mull over the latest data points and covid cases.  At 4:45 am – Dow futures are down 54 pts, S&Ps off 5, the Nasdaq down 12 and the Russell down 5 pts.

Asian markets ended the day in the green while European markets are all lower – it’s the same story…. covid, inflation, recovery, earnings, and the geo-political fallout.  At 4:45 am – European markets are all down about 0.4% as they too await the latest FED minutes.

Eco data today includes is about Housing Starts expected to be -2.6%, Building permits +1%, and the FOMC mins that I spoke about yesterday…But we already know the answer about this….the fact that the FED announced that they are nearing a consensus to begin the taper is exactly what the mins should show….if the minutes are different then this may cause some chatter, but the fact is, if the consensus inside wasn’t to move on the taper, then they wouldn’t have announced that taper – so I think it is a moot point.

Bitcoin is trading at $46,500 and Ethereum is at $$3,250.

The S&P ended the day at 4448. This morning’s action does suggest that a test lower is in order, but there is no panic at all, it’s just a test….  The action today will be driven by the eco data.   News that both China and Russia are cozying up the Taliban is also causing some angst….and the fact that the Taliban has access to ‘all’ social media sites is also causing an uproar…FB, TWTR, What’s App all giving access to the new leadership – which raises the question – what is Zuckerberg and Dorsey even thinking?  They are banning various Americans because they don’t like what say, yet they open the doors to terrorist organizations….  Now that’s a conversation I want to see happen on Capitol Hill live streamed…

Remember – Stick to the plan…. don’t rush, if you are a long-term investor building a portfolio, you are not missing anything…. investing is dynamic, not static…. talk to your advisor.

Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.
You can follow me on Twitter @kennypolcari and on IG @kennyp1961.

You can also find my daily videos on my YouTube channel – Kennypolcarimedia – My URL address here:  https://www.youtube.com/user/kennypolcarimedia

Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Rib Eye Pizzaiola

This is a very hearty dish as it features a nice rib eye braised in onions, peppers, tomato sauce and a splash or so of your favorite red wine.
 
For this you will need a couple of things:  A nice rib eye – (about 3/4″ thick), Olive oil, Oregano, garlic, onions, red and green bell peppers, can have crushed tomatoes (not puree), some red wine, salt and pepper…. **crushed red pepper flakes (optional).

Preheat the grill –

In a saucepan – heat olive oil and add crushed/sliced garlic and move it around for a couple of mins until it is nice and golden…. add a sliced white onion and julienned bell peppers – turn heat to medium and cover.  When the onions and peppers are soft (about 5 mins) add the crushed tomatoes, oregano and *red pepper flakes.  Turn heat up and bring to a quick boil then reduce heat to medium.  Add red wine (about 1/2 cup) salt and pepper and let simmer and thicken up…. about 10 / 12 mins.

Next – rub steaks with olive oil, salt, and pepper – do not drown the steak in oil – just enough to massage the steaks and prepare them for the grill.  Sear for about 3 mins then turn over and continue cooking for another 3 mins.  Remove from the grill and add to the tomato sauce/pepper/onion mixture.  Cover and turn heat to simmer and cook for another 5-7 mins.  This should give you a nice medium steak – If you prefer you can let simmer longer for more well done.

When done – remove steaks from skillet – slice into thick strips and arrange on plate.  This should be enough to feed 4 adults.  Next – stir the sauce in the skillet – making sure to scrap the pan for any bits left behind.   Spoon sauce over the steak and serve immediately.  Present this meal with a large mixed salad of Arugula, Boston Bib & Romaine topped with tomatoes, red onions, cucumbers – dressed in a red wine vinaigrette.  For wine – enjoy a nice Brunello di Montalcino.

Buon Appetito.