Tech masks the pain: AAPL and GOOG save the day, labor data pushes Fed cut bets

• GOOG and AAPL mask the weakness.
• JOLTS suggests a soft labor market.
• ADP today, NFP on Friday.
• Bonds up, Oil down and gold down.
• They are hinting at a larger or more rate cuts this fall.
• Try the Lemon Pork Cutlets.

It was a mixed picture….the Dow lost 24 pts, the S&P up 32 pts, the Nasdaq surged by 218 pts (thanks to AAPL and GOOG) while the Russell lost 2 pts, the Transports down 65, the Equal Weight S&P lost 14 while the Mag 7 – gained 650 pts – the clear winner on the day +2.2%.

And while it looked relatively stable – let’s be clear – if it weren’t for AAPL or GOOG the markets would have kept moving lower….Because if you really look at what happened – the bulk of the S&P 500 lost ground yesterday…..while it registered an up day – that was masked by the move in tech.

The big eco data point – JOLTS – showed a weakening labor market – a theme that has repeated itself over and over again…. Job Openings fell to 7.18 million vs. the expectation of 7.38 million and down from last month’s downwardly revised 7.35 million. Quits rate remained steady at 2% while the Layoff level surged to 1.8 mil vs. the expected 1.63 mil. Now, while this was not a disaster it continues to point to a soft labor market – and that points to an imminent cut in September.

That was amplified by the FED’s Beige Book which showed ‘little to no change’ in economic activity across the country. Everyone of the 12 regions reported rising prices and declining consumer spending as a result of ‘wages that failed to keep up with those rising prices….11 districts described little or no net change in employment levels with 1 district reporting a small decline. Durable goods and Factory Orders came in as expected.

3 of the 11 sectors in the S&P ended the day higher - Tech, Consumer Discretionary and Communications rose by 0.6%, 0.4% and 1.7% respectively.

Energy was the biggest loser down 2.2% while Industrials, Utilities, Financials, Consumer Staples, Healthcare, Basic Materials and Real Estate ended the day lower…down between 0.25% and 0.7%.

Bonds rallied hard – the TLT gained 1.1% while the TLH gained 0.8% as the bets started to heat up over the size of what the September rate cut might be…..There are the rumblings again that the FED might consider a 50 bps cut in September vs. the 25 bps cut that is currently expected. Fed Governor Chrissy Waller – a potential candidate for the BIG job – once again took to the airwaves on CNBC to tell us that the FED should start in September and make ‘multiple cuts in coming months’ vs. the 2 that are expected. – Now, while multiple is defined as ‘more than one – it is not limited to a specific number – leaving open the possibility of 3 or more – where 2 is very precise.

In any event – 10 yr yields slipped by 5 bps to end the day at 4.21% and this morning it is down another 2 pbs at 4.19% - once again bringing us back to a level that has held for 3 months now. Should this fail – then the March lows of 4.1% would be within striking distance. The 30 yr which kissed 5% on Tuesday – causing all kinds of stress on investors – failed to pierce it and is now back to yielding 4.87% - down 12 bps since Tuesday.

Oil lost ground yesterday…..the idea that OPEC+ is ‘considering’ another increase in production drove oil lower. OPEC+ is scheduled to meet on September 7^th and while NO decision has been made – the chatter is that it is on the agenda – and traders are assuming ‘where there is smoke, there is fire’. This morning oil is down .75 cts at $63.22. Now recall that on Tuesday, I said that if oil pierces the long-term trendline ($65.05) decisively, then we could see it test $70 but if it didn’t then we would see it go back to the intermediate trendline at $62.70.

Gold which has been making new heights is now backing off. Traders now taking money off the table after the most recent surge higher….in one week – we saw gold advance by 4% - meanwhile it is up 37% ytd….and so, the trader types are lightening up ahead of this weeks employment report….which is expected to show only 75k jobs created. This morning gold is down $21 at $3,537 – well above the trendline at $3,364.

Today is all about the ADP report which is expected to also show a small increase of 68k jobs (think soft) with Unit Labor Costs declining to 1.2% down from 1.6% (that’s good, less upward pressure – think inflation). Initial Jobless Claims and Cont. Claims are not expected to surprise anyone. S&P Services PMI and ISM Services PMI are both expected to remain in the expansion zone at 55.4 and 51. Recall – 50 is the neutral line…. above is expansion, while below is contraction. ISM Services Prices Paid are also expected to decline.

US futures are mixed.. … Dow -10, S&P’s up 11, Nasdaq up 60 while the Russell is up 4. The theme today? You got it…. traders upping the bets that the FED will cut rates faster than what the market is pricing in. So that whole ‘market is extended’ story – Yeah, they want to kill that…. They are now betting on 3 cuts this year, September, October and December – totaling 75 bps.. vs. the 50 that is priced in.

Just an fyi – none of the indexes are suggesting overbot ‘on the Richter scale’ – so if they start a new narrative of more aggressive cuts, there is room for the markets to advance, but I think they are trying to draw you in….Don’t do it!!!

European markets are mostly higher…. Germany in the lead – up 0.4% while France is in decline – down 0.5%.

The S&P closed at 6448 up 32 pts….Look – Tuesday saw the S&P pullback to test the trendline at 6330 – we traded as low as 6360…..My sense is that we would have fully tested it yesterday – had we not gotten that AAPL and GOOG news.

Now, they don’t want the market to go lower – thus the renewed narrative about a 50 bps cut in September or multiple cuts this year…Look, I’m still in the camp that the FED stands still – as are some members of the committee – I think cutting aggressively would be a mistake, but I am not a voting member (and the President is not putting any pressure on me).

In any event – I think we test the trendline at 6330 before we test the highs at 6508. And if we do that, the question is will it hold? A failure to hold will send the ‘sell’ algos into high gear (think technical break in the chart) and that should see stocks go a bit lower – right to that 6200 level that I have been talking about. Let’s see what the eco data tells us – because that will form the basis of the next decision.

Lemon pork cutlets

A simple dish that can be on the table in 15 mins.

For this you need boneless pork cutlets, fresh lemon juice, flour, s&p, olive oil, white wine, parsley and butter.

Begin by pounding the cutlets to make them thin,

Season with s&p and then dredge in flour.

Heat up a large sauté pan…. add the olive oil.

Now place the cutlets in the pan and cooked until browned – flip and repeat.

Now – add in the white wine (you can use chicken broth if you like) – allow the alcohol to steam away - Squeeze the fresh lemon juice into the pan. Now add in about ¼ stick of butter (depends on how many you are making) and let it melt.

Dress with fresh parsley and serve on a warm plate with your favorite veggie. Simple yet delish.