One warm day does not a summer make

Stocks rallied for a seventh straight session yesterday on hopes that the Fed is done bullying your retirement savings account. Corporate earnings continue to show signs of health, but firms and analysts remain cautious in their hopes.

Summer loving. This is the morning, folks. I rolled in last night long after dark had fallen over my NYC suburb. I was tired, hungry, and eager to spend a few minutes with my wife and laugh away my day’s travails. So, when I walked up to my door, it escaped me. But it couldn’t hide for too long. This morning, as I quietly (not-so-quietly) walked down the stairs, trying not to wake Eloise (the dog that rules over my house from time to time), something looked odd. As I crept past my front door, I could see the shimmer of the streetlight through its frosted glass… but wait… something was missing. I turned about rather abruptly to have a closer look. I squinted hoping that it was just my tired eyes. I needed confirmation. I walked with purpose towards the back of my house and looked onto my patio. It was pitch dark but there was enough light to confirm it. Summer was officially, OFFICIALLY over.

How did I know? If you are a longtime reader, you may have guessed already. My gardener had come yesterday and sheered my beloved fescue grass that demarks the end of my cozy patio. All summer long, it graces the space with a sense of calm. The shhshhshhs noise that it gives off when the warm wind runs through it continues to bring me happiness year after year. My wife planted it years ago to remind us of the beach, and it does just that. But alas, now it is gone, shorn down like a boot camp soldier’s crew cut. That could only mean that the palm fronds which welcome guests (mainly the Amazon delivery person) on my front porch have been removed to make way for the mums of early winter. Folks, summer is really over, and there is no turning back, once the palms and long grass retreat. But didn’t it go so fast?

Everything happens in cycles. The seasons, the days, life, and indeed the economy and markets. If we were to stick with the seasons theme, I think it safe to say last year was a cold, dark, unrelenting winter. Earlier this year, springtime seduced us into believing warmth and rebirth was afoot, but it has been a long and cold spring with lots of rain, hasn’t it. Last week, I thought that I heard the summer song of a bird, returned north, when I listened to Chairman Powell speak, and I was not the only one. The markets have rallied since, in a fashion not seen since… 2021. 2021 was a great summer.

Today, we will hear from a number of Fed speakers, chief among them, Fed Chief Jerome Powell. Yesterday, Fed speakers did their level best to signal to the markets to lay off its hopes of rate cuts anytime soon. Higher treasury yields that pleased the Fed last week are now lower by around a half percentage point, and stocks have, well, taken wing. Powells message to the markets last week may not have been intentional, and today he will have an opportunity to clarify that message. Unfortunately, the market seems to have made up its mind that rate hikes are over, and that inflation is no longer a problem. This can be a problem for the Fed bankers which are banking on a further pullback.

I acknowledge that the palms on my front porch overstayed their welcome this year, but I was happy to have them to remind me of summer for as long as possible. What is the message in all this? Hope for a return to the bull market days needs to be carefully managed. We are not there yet, nor will we be until we see some markable downward movement in inflation. Additionally, hints and implications will not suffice, but rather an outright admission of a dovish shift will be necessary to confirm these recent moves. Those will indeed come, and when they do, it is important to remember that not all stocks will emerge the same way as they were in 2021. Listen closely to Powell this morning and remember that warm days feel warmer after cold ones… and vice versa. Now I will apply myself to enjoy the fruits of fall and spring, which have their merit, but I am already counting the days until I see those first green shoots of fescue. They will come, they always do. Be patient, stay limber.

WHAT’S GROWING IN THE PREMARKET

NXP Semiconductor NV (NXPI) shares are lower by -2.26% after Citi lowered its rating to SELL from NEUTRAL. Citi cut its target price to $150 from $216 as it believes that challenges lie ahead for the company despite its recent strong earnings release. In the past month, 62% of analysts have modified their targets 1 up, 17 down, and 11 unchanged. Dividend yield: 2.18%. Potential average analyst target upside: +18.9%.

eBay Inc (EBAY) shares are lower by -6.79% in the premarket after it announced that it beat EPS estimates. The company lowered its current quarter guidance which came in below analysts' expectations. 14 out of 23 analysts have lowered their 12-month price targets in the past 30 days. Dividend yield: 2.45%. Potential average analyst target upside: +13.3%.

YESTERDAY’S MARKETS

NEXT UP

• No economic releases today.
• Fed speakers: Cook, Williams, Barr, and Jefferson will speak today. Their boss, Chairman Jerome Powell will speak at 9:15 AM Wall Street Time. Pay attention .
• After the closing bell earnings: Lyft, Twilio, Duolingo, MGM Resorts, Disney, Envestnet, Corteva, Beyond Meat, HubSpot, AMC Entertainment, and Jazz Pharmaceuticals.