Markets hold their breath: Inflation data, Fed moves, and JJ's 'thoughts' leave investors dizzy

• Stocks consolidating just a bit – I’d like to see a bit more.

• Swaps market now pricing in a 90% chance of a rate cut.

• This AFTER JJ said – going slow would be more appropriate.

• Dollar up, Oil down, Gold up, Bonds down.

• CPI is just 24 hrs. away; PPI is 48 hours away.

• Try the Feta Shrimp - 5.

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Stocks pulled back yesterday as we await this week’s inflation data….CPI due on Wednesday and PPI due on Thursday (both expected to be a bit ‘hotter’) and this drove the action as we also await the next FED move – that comes next week Wednesday….what will JJ do now? Last week he told us point blank that there is no need to ‘rush’, that going slow would be appropriate, yet the market continues to price in an 90% chance of a 25-bps rate cut on the 18th. In fact – the chances of a rate cut were 70% when he gave us that ‘thought’ and have moved UP since he gave us that thought – which makes less and less sense to me. We discussed this yesterday on the Claman Countdown with Liz Claman and Allsprings’s Bryant Vankronkite – link is below.

The day began weaker and ended even weaker…..the Dow lost 250 pts or 0.6%, the S&P gave up 38 pts or 0.6%, the Nasdaq lost 125 pts or 0.6%, the Russell down 16 pts or 0.7%, the Transports lost 63 pts or 0.4% while the Equal Weight S&P once again gave up 35 pts or 0.5%.

Semi’s in the spotlight….

NVDA was in the spotlight – China suddenly opening a probe after they accused the chipmaker of violating ‘anti-monopoly’ laws in 2020 – this after the US raised controls on China’s access to NVDA’s semiconductors. As you can imagine, this sent the stock reeling…. down 3.7% at 11 am before ending the day down 2.55% as investors tried to price in what this probe really means to the longer term narrative. (I for one, am not selling my NVDA on that headline.)

And then BankAmerica analyst – Vivek Arya downgraded AMD citing concerns over competition vs. NVDA – suggesting that it is not an easy fight while also noting that AWS (Amazon Web Services) has a preference for MRVL and NVDA products rather than AMD products….AMD lost 5.5% while MRVL also lost 5.7% - something that doesn’t make sense, right? Why would MRVL be down on that headline? Well, it was the headline that MRVL’s CEO, Matty Murphy is being considered as the new INTC CEO – THAT drove the stock lower…. If Murph takes that new job, then who is going to drive the bus at MRVL? It’s about the ‘uncertainty’ of leadership that drove MRVL lower…. remember – investors and markets do not like when things are uncertain…. Just sayin’.

Now back to the news of the week – and what we will all learn from the CPI and PPI this week….it will also give JJ and the other FOMC members one last chance to do the right thing…..If the CPI and PPI are hotter than the prior month (as expected) that should stop the FED from making a rate cut (as I argued in the segment and have been arguing for weeks now).

I mean, look, it is expected to trend upwards – that is not the surprise….the surprise will be if the FED continues to cut rates in the face of clear signals that inflation could be ready to reignite and with a new administration taking over in less than 40 days, my gut says – sit still, there is no reason to rush….. What’s funny to me is that the odds of a rate cut have risen over the past week – AFTER JJ hinted that doing nothing might be appropriate….Again, they (FOMC members) are now in lockdown mode, so pay attention to the front page of the WSJ over the next week – Nicky T will hint at the decision and if he doesn’t – then watch for a ‘breaking’ Goldman Sach’s special report! It’s like ‘taking candy from a baby’.

Investors sold bonds forcing yields higher…. The TLT lost 0.9% while the TLH lost 0.6%. The 2 yr rose 3 bps and is now yielding 4.134% while the 10 yr rose 6 bps and is yielding 4.22%. I am still in the camp where we see 4.5% before we see 4%.

The dollar index wavered and trading as low as 105.80 and as high as 106.22. This morning the dollar index is up 0.2% at 106.35 as it is trying to figure out what the next move by the FED will be. Remember – the dollar gets stronger if the FED does nothing….so keep your eyes on this chart to see what the dollar traders think the FED will do. If it continues to tick up, that suggests that the FED does nothing…if we see the dollar plunge, then that would suggest a 25-bps cut.

Oil rose yesterday up 1.4% to end the day at $68.16 on the China ‘loose monetary policy news’ and the Syria news….Fears that a new middle-east conflict is brewing is now the focus….…..Iran suffering a major blow with the fall of Assad….as it impacts their geo-political position and strategy in the region… First it is the loss of an ally that provided a land corridor to Hezbollah in Lebanon – a key Iranian proxy. Two it disrupts what is known as the ‘Shia Cresent’ – which is Iran’s strategy of forcing sharia law across the region. It puts supply lines at risk and leaves Iran isolated…. allowing the Saudi’s and Israel to capitalize on Iran’s weakened position. I could go on, but you get the picture, no?

This morning though, Oil is retreating just a bit, as the conflict has not erupted (yet)…. but it remains well within the recent trading band of $67/$69. I suspect oil to remain volatile until this new situation in the middle east becomes a little clearer. In the end – it appears that Iran is becoming more and more isolated and that is not a bad thing.

Gold which rose yesterday is up $9 again today, trading at $2694/oz which is resistance….Yes it is the China buying gold story and it is the Syria ‘safe haven’ story – but it is also a FED expectation story….and the CPI and PPI data are front and center for Gold traders as well. I guess the issue is – what headline will drive the action in Gold? The geo-political stuff or the rate policy stuff? We are about to find out…. If gold pierces the trendline – then we could see it trade up to $2750 in short order, if not – then a retest of trendline support at $2628 is the next move.

US futures are flattish…. Dow futures are down 2, S&P’s +3, Nasdaq +28, while the Russell is +6. ORCL is in the news this morning after underwhelming investors with 2nd qtr. results…. the stock is down 7.5% in the pre-mkt – trading at $175.60. They posted what some call disappointing growth metrics which missed the ‘high expectations’ the street had hoped for. So listen, revenue increased 9%, sales for their cloud business jumped 52% to $2.4 billion but that still was not enough for the trader types…or is it just the fact that the stock is up 80% ytd and is up 36% in this last quarter – think some profit taking – especially if you think there is more volatility ahead….In my mind – yesterday’s report was not a disappointment –a 52% increase in their cloud infrastructure business is not a reason to hit the sell button but stretched valuations (created by the same traders that are now hitting the sell button) might be.

European markets are flattish…. Yesterday it was Germany, Spain and Italy that were lower while Euro Stoxx, UK and France are a bit higher. Today, they flipped that on its head and Germany, Spain and Italy are up while the Euro Stoxx, UK and France are down. Investors continue to monitor the newest turmoil in the middle east as they await the latest US inflation data to figure what’s next for US rates and what that might mean for ECB and BoE policies.

The S&P ended the day down 38 pts at 6052. It appears or at least I hope it appears that the mkt is going to digest the ‘election day’ rally that took the S&P to 6100. I would not be surprised to see us retest 6000 – not a move that should concern anyone. If it fails to hold that then we could see it test trendline support at 5880 – again – that would not be a disaster at all (down 2.8%), but it would allow the market to settle down a bit.

Again, at this point, I would let the portfolio ride only making last-minute changes due to tax planning issues. New money should be sitting in a gov’t mm fund earning 4.25% while we wait for the new year – where I fully expect (or hope for) some early weakness to take the froth out. In the end – patience is a virtue.

Feast of the seven fishes - five feta shrimp

Feta Shrimp - This one is easy and can be served several ways. Either in a large bowl with toasted garlic bread or over a pasta - maybe like an Orecchiette or over white rice….

For this you will need: 2 lbs. of large cleaned and deveined shrimp, sliced garlic (a lot), thin sliced plum tomatoes, feta cheese, butter, s&p, olive oil & Madeira wine. * You can prepare all of this ahead of time and place in bowls to have ready for you when you are ready to cook. The thing about this dish is – you must make it and serve it right away….

Begin by heating up ½ stick of butter and some olive oil on med high heat. Add a handful of sliced garlic and sauté for 4 mins or so…do not burn. Next add in enough shrimp so that you cover the bottom of the pan – do not pile them on top of each other…. When they turn pink – flip them over.

Now add enough Madeira wine to “bathe” the shrimp – (do not drown or cover them in wine) – Turn heat to hi…. season with s&p, place sliced plum tomatoes all over and then top with crumbled feta cheese. Cover and allow the steam to soften the tomatoes and soften the cheese. No more than 3 mins. Remove and place in a large serving bowl. Repeat process until you have cooked all the shrimp. When serving – make sure that you have enough garlic bread for your guests.

*If you are putting over pasta - then boil the pasta - strain and mix adding extra feta cheese to the hot pasta to help make it creamy and delicious.