Markets surge on Strong NFP, Trump pushes for 100 bps rate cut, CPI/PPI and US-China trade

• NFP came in better than expected and it was Risk ON.
• Trump call for JJ to cut rates by 100 bps next week.
• CPI and PPI due out this week – what will it reveal?
• The FOMC meeting begins next Tuesday.
• US/China trade talks in London.
• Try the Spaghetti Amatriciana.

It was a Risk On day - Stocks surged on Friday….the Dow up 445 pts or 1%, the S&P up 61 pts or 1.05% - leaving it sitting right on 6000, the Nasdaq up 231 pts or 1.2%, the Russell up 35 pts or 1.6%, the Transports gained 237 pts or 1.6%, the Equal Weighted S&P closed up 60 pts or 0.85% and the Mag 7 was the clear winner up 529 pts or 2.06% - the gain here led by TSLA which closed up $10 or 3.8%... And the excitement is back! A Bloomberg survey is now calling for S&P 6500 by the end of the year - -an 8.5% move higher from here – and if that is true – that puts up back in the historical normal range of ~ 10% return – add in divvy’s and you are at ~12%.

It was the all-important NFP report that lit the fuse for stocks to go higher…. We were expecting 126k new jobs to be created and we got 139k new jobs created. Unemployment remained steady at 4.2%, and Avg Hourly earnings m/m and y/y were both better than expected at +0.4% and +3.9%. Now, remember what I said – 126k would have been a healthy report… in fact 100k new jobs would still have been a healthy report and enough to maintain a 4.2% unemployment rate. So, the 139k new jobs welcomed relief and investors, traders and algo’s jumped all in.

The report causes Trump to take to Truth Social – screaming for JJ to cut rates ….

“Too Late! FED is a disaster! Europe has had 10 rate cuts; we have had none. Despite him our country is doing great – Go for a FULL point – Rocket Fuel.”

Now to be fair and clear – JJ has cut rates by a FULL point - 100 bps in 2024. 50 bps in Sept (pre-election) and then 25 bps in Nov and Dec. But I guess, that doesn’t count – Jo Jo was President then!

Every one of the 11 S&P sectors were higher……Energy up 1.9%, Consumer Discretionary up 1.3%, Financials +1.25%, Communications up 1.25%, Tech up 0.95%, Healthcare +0.95%, Industrials +0.85%, Utilities +0.45%, Basic Materials + 0.3% and Real Estate gained 0.3%.

Down the chain – Retail +1%, Airlines +2.9%, Disruptive Tech +8.5%, the Value Trade +1%, the Growth Trade +1%, Cybersecurity + 0.25%, Quantum +15.8%, Exploration & Production + 2.4%, Big Pharma + 1%, Aerospace & Defense + 1.9% while Emerging Markets gained 0.3% and the list goes on…I think the only sector that saw weakness was the Homebuilders – they lost 0.8%. And clearly the contra trades were all negative as well. The DOG -1%, PSQ – 1%, SH – 1%, VIXY – 4.3% and the SPXS – 3.2%.

Just a side note – YTD performances for some sectors reveals the opportunities that exist even as the broader indexes are struggling around the flat line. - Industrials are now up 10%, Utilities & Communications +7.2%, Financials +6.1%, Basic Materials +4.25%, Consumer Staples + 4%, Disruptive Tech +8%, Cybersecurity + 15.8%, even Emerging Markets are up 12%. – these sectors all beating the indexes hands down. Now to be clear – there are plenty of sectors that are still negative on the year – which speaks directly to the need to have a well-designed and balanced portfolio.

Bonds were weak – the TLT down 1.3% and the TLH down 1.15% - sending yields up – as traders are trimming their bets on what the FED’s next move will be – Hint: Not Down! The 2-yr closed at 4.02%, the 10-yr yielded 4.47% and the 30 yr is yielding 4.96%. 30 yr mortgages are now churning around 6.85% with a 20% downpayment and a FICO score of between 700 – 740. A score greater than that gets you a bit of a break. Maybe 6.5%.

Oil pierced trendline resistance last week at $62.47 and has managed to remain above it. It closed on Friday at $64.58 and this morning it is holding steady. Now oil is up 17% off of the May low $54.95 – even as OPEC+ announced production increases that should raise supply around the world. So you ask, if that is true and there is more supply than demand – why is oil going up? A couple of reasons – Easing US/China tensions, easing inflationary pressures – suggesting stronger economic activity which would suggest higher demand in the future. And then there is the idea that current market fundamentals are tight – global inventories are below the 5-yr average at a time when demand is rising (summer). And so, even as OPEC + raises supply – the market is telling you that demand is strong – something I have been saying for years…. oil demand is not going away right now.

Gold continues to bounce around between $3325/$3425. Last week’s high was $3427 and this morning it is trading at $3,340. Trendline support is $3,292 – a level that appears to have plenty of support. The recent easing a direct result of ongoing discussions around a US / China trade deal and easing inflationary pressure. If JJ cuts rates next week – June 18^th – because of strong economic activity and lower inflation – then we will see gold test trendline support as investors move out of gold and into stocks. But if JJ cuts rates next week – saying that he is concerned about a weakening economy – then gold will move higher. Now, I don’t see how he can use THAT argument – the eco data does NOT support a weakening economy.

Eco data this week is all about inflation…..the CPI is due on Wednesday – top line CPI m/m of +0.3% and y/y of +2.5% - both 0.1% higher – but not a disaster by any stretch. Core CPI (ex-food and energy) m/m of +0.3% and y/y of +2.9% is also up about 0.1% vs. last month – but is not expected to be an issue. The issue will be if it ticks up more than that expectation.

PPI is due on Thursday – and that is expected to tick slightly higher as well – but by no means at a level that is an issue. m/m rates of +0.3% and y/y of +2.5% top line and +2.9% on Core – Ex food and energy.

This morning - US futures are mixed. Dow futures are up 24, S&P’s up 4, Nasdaq down 7, while the Russell is up 14 pts. The US and China are meeting in London this week to discuss trade…the focus on advanced technologies and rare earth elements. They want more tech, and we want more rare earth elements. Kevin Hasset told Margaret Brennan on Face the Nation that.

“We want the rare earths, the magnets that are crucial for cell phones and everything else to flow just as they did before the beginning of April and we don’t want any technical details slowing that down and that’s clear to them.”

Now while this is good that they are talking, the issues are complex and the tariffs only make it more difficult – so, while Trump says that he ‘expects’ the meeting to go ‘very well’ – I would caution your excitement.

European markets are all trading a bit lower…… It is London Tech Week – and guess who is giving the keynote speech today? Jensen Huang! (NVDA). So, expect the focus to be on tech across Europe…there are no economic data points or earnings to drive the action. Markets across the zone are down between 0.25% - 0.5%.

The Apple Worldwide Developers Conference kicks off today. – AAPL is down 18% ytd.

The S&P closed at 6000 up 61 pts – this after testing as high as 6016. Ok, so now we kissed it – what happens next? Is it a false alarm? I still think we are a bit overbot – the RSI confirms that – but we know that we can remain overbot if investors are expecting even more and better news….so, watch for what the CPI and PPI says about inflation and watch for any development on US/China trade. My gut says sit back – no need to rush to do anything. You are invested and your cash in earning 4.25% risk free. Let your portfolio work for you.

Spaghetti Amatriciana

This is a classic Italian dish. Simple and delish..

For this you need – Olive oil, 1 can of plum tomatoes, guanciale, pecorino Romano cheese, shallots, s&p and spaghetti.

Begin by dicing up the guanciale and the shallots. Set aside.

Hand crushes the plum tomatoes and place those in a bowl.

Bring a pot of salt water to a rolling boil.

Now – in a sauté pan – cook the guanciale and shallots until the guanciale is nice and crispy. – Remove half of the guanciale and place in a bowl. Now add the plum tomatoes to the sauté pan with the balance of the guanciale. Season with s&p, bring to a boil and then turn down to simmer.

Boil the pasta – leaving it aldente. (this is important) cook it for no more than 8 mins…. but test it to make sure.

Now place the pasta directly into the sauce and mix well. Add plenty of the Pecorino Romano cheese (freshly grated if possible) and then toss to mix.

Serve immediately. Top with the crispy guanciale.