Things you need to know ~
- Stocks surge on another Bear Mkt Rally that could see S&P 4000
- Earning continue to beat – and the algo’s go all in
- Oil – backs off a bit – Joey to release 14 million more barrels
- Is UK PM Truss a lame duck after only 6 weeks?
- Try the French Roasted Chicken Parts
And the action never ceases…..recent moves in the markets have been nothing but stunning…..indexes swinging in 5+% moves on what seems like the new norm as economic data tells one story and earnings news telling another story…..….Stocks under pressure early last week, then rallied hard on Thursday October 13th, only to give it all back on Friday October 14th – allowing investors to take a breath as the weekend approached…and then yesterday – stocks surged higher, taking back ALL of the losses on Friday and then taking more…. By the end of the day the Dow gained 550 pts or 1.86%, the S&P rose 95 pts or 2.6%, the Nasdaq rose 355 pts or 3.4%, the Russell gained 55 pts or 3.2% and the Transports added 300 pts or 2.4%.
Earnings are now being given the credit for the excitement….the banks – leading the charge…..Every single one of them ‘beating’ on the bottom line…..Not one miss, now there may be some concern over parts of the businesses, but in the end – beats across the bottom line have helped to change the psyche – at least for now….In the end – investors and the algo’s have been pleasantly surprised – and why exactly? Because they lowered the bar for companies to beat and boom…..it’s all very exciting….especially when the broader market has been in such an oversold condition…..all you need is even a small catalyst to set the place on fire….and that is exactly what is happening……The S&P has gained 5% off the Friday low, the Dow up 6%, the Nasdaq up 5%, the Russell up 4.5% and the Transports are up 5.6% and heading higher again today.
The massive swings in the market underscore how anxious investor remain over the recession, the pace and size of future rate increases, geopolitical concerns, energy concerns and the coming US mid-term elections that are now only 21 days away….The recent economic data proving that inflation is becoming more entrenched making it that much more difficult for the FED to control leaving many to expect continued aggressive hikes….Currently the markets are expecting a 75 bps hike on November 2nd and at least a 50 bps hike on December 14th. Understand that we are going to get 5 more reads on inflation before the end of the year….and that could change the December hike….and if inflation shows continued strength in November and again in December – you can bet that they will be forced to reconsider that 50-bps hike….
Now – the rumor yesterday that was being ‘whispered’ across the street is that Joey is pressuring JJ to ‘go slow on rate hikes in November’ to help trigger a ‘massive bounce’ in the markets ahead of the election…something that I think is bogus, why? Because it is clear – inflation is the issue….and if JJ keeps his promise that his focus is to tame inflation – then he has no choice but to raise rates as expected. In my view – IF the FED pivots at the November meeting AFTER the recent inflation data we have seen, then I would expect the markets to sell off – big….Because it would once again send a very mixed message to investors and the markets and investors….Let’s be clear – the market is pricing in a 75 bps hike in two weeks….they have made it clear…….so any change to that narrative now – would be seen as nothing but political and would not help the markets at all.
Treasury yields yesterday did back off a bit – but remain elevated and inverted….the 2 yr. yielding 4.45%, the 5 yr. 4.24% and the 10 yr. yielding 4.01%……This has been a breaking point for investors…the 10 yr. above 4%….and will be a level to watch in the days ahead…..30 yr. rates (think mortgages) are now north of 7% and are only headed higher after the November and December rate hikes….This week – we are getting data on Housing….and it isn’t going to look pretty…..Housing Starts – expected to be down 7%, Building Permits expected to be down 1%, Existing Home Sales – down 2% and those are the expectations…..reality is likely different…..so let’s see.
Energy is the next issue – after surging 25% since the end of September – on the expectation of an OPEC cut – which was quantified last week – oil has since given back about 9% on the idea that the coming recession will destroy demand. In addition is the news that Joey will release another 14 million barrels of oil from the SPR (Strategic Petroleum Reserve) to help bring down the price of gas and energy ahead of the midterms….The recent move lower has now taken oil back down and thru all 3 trendline supports….putting it back in the $80/$86 trading range.
This morning oil is down 13 cts at $85.31 barrel. My sense is that once we get thru the election- Joey will not be able to control the price of energy and it will begin its ascent once again….
The dollar index continues to trade in a tight range….112/113.50…. leaving it up 17% on the year…the trendline drawn from the low in August thru today – suggests that the dollar should find support right here at 112.
Gold is holding steady at $1660/oz – leaving us in the $1600/$1700 range.
On the earnings front we already heard from Truist Bank, Signature Bank, JNJ, & GS and all 4 have managed to beat the expectation….and all 4 are quoted higher…. expect to hear more about these results in addition to reports from HAS, LMT and STT….
Every sector was higher yesterday…with Consumer Discretionary (XLY)taking the lead up 4% – which makes sense as it was down 35% ytd…. Real Estate (XLRE) up 3. &% and Tech (XLK) up 3% – again both sectors are down more than 30% ytd…so when there is a ‘rally’ where does the fast money go? It goes to where it views the short term opportunity……Disruptive Tech (ARKK) rose by 7% – it was down 68% ytd…..Cybersecurity (CIBR) rose 4% – it was down 31% ytd, Semi-conductors (SOXX) up 2.2% on top of the 4% last week…leaves it down 44% ytd….Homebuilders (XHB) rose 2.5% – leaving it down 35% ytd….the underperformer was Consumer Staples (XLP) only up 1.1% leaving it down 12% ytd…but that makes sense – it isn’t an exciting sector to be sure…..
US futures are up again this morning….and they are up big…. Dow futures are +380 pts, S&P’s +55, the Nasdaq up 190 pts and the Russell is ahead by 25. The eco data today includes Industrial Production of +0.1%, Capacity Util at 80% – which is right on the cusp of inflationary….., but the focus will be on better earnings and the excitement of the ongoing bear market rally….which we have seen before…..If the trend of lower highs and lower lows holds up – we could see this rally take us to S&P 4000 – which would be an 8% move up from here…..before we hit resistance…..and yesterday – MS Strategist Mikey Wilson – who has been very cautious – did say that he sees a short term rally that could take us to 4150 ish…..before it stalls….and that is helping the overall mood.
European stocks are also enjoying an UP day – with markets there up about 1% across the board….word that UK PM Truss is struggling to hold onto her position after only 6 weeks is top of mind….as she threw out Kwasi and installed a new finance minister – Jeremy Hunt – and he will be the one to watch now…as he announced a complete rebuke of the economic plan that Truss and Kwasi had announced…..Truss apologized for her ‘mistakes’ but is left severely wounded…many suggesting that she has lost support from within her own party leaving her in a ‘lame duck’ position……Hunt is the one to watch now as the strength behind the current political situation……On that news – the British Pound rose and bond yields fell as the markets appear to stabilize. For the rest of Europe – the focus is also on earnings season….
The S&P closed at 3677 up 95 pts….and if futures are any indication we should bust up and thru 3700 on the opening….Again – do not be surprised by this surge higher….as it appears to be more of a bounce rather than a change in psyche….the PCE – which is a FED favorite inflation indicator is due out next week and is expected to show ongoing inflationary pressure which only supports the move to raise rates by 75 bps in November and possibly December….
Sit tight as a long-term investor – stick to the plan…. take advantage of dollar cost averaging (DCA) and dividend reinvestment programs. Overweight the big boring names – buy the stuff that people need (STPN).
Take Good care
Chief Market Strategist
kpolcari@slatestone.com
Roasted French Country Chicken
You need: 6 lg. potatoes – sliced in half and then sliced in qtrs. Lengthwise, Chicken pieces, legs, thighs, s&p, like 5 crush garlic cloves, herbs de Provence, fresh chopped Italian parsley, dry white wine (you can use chicken broth if you prefer), olive oil.
Preheat oven to 425 degrees. Add enough olive oil to cover bottom of roasting pan…let heat up.
Combine – the garlic, oregano, parsley, and white wine (or broth) in a small bowl – set aside.
Season the chicken pieces with s&p…toss in a bit of olive oil. (Just enough to give it a glisten). Now add to roasting pan – skin side down. Bake for 15 mins…then turn, bake for 15 more mins…. juices should be running clear now…if not – then cook for another 5 mins or so……Now pour the garlic/wine mix over the chicken and cook for an add ’l 10 mins. Remove and serve on a family style platter with a large mixed salad dressed in a simple oil/vinegar dressing.
Buon Appetito.
