Things you need to know ~
- Elon takes control of TWTR
- Tech continues to wreck the Nasdaq….but is there opportunity?
- PCE Deflator is out today – what will that say about inflation?
- XOM and CVX smash estimates – both stocks UP in the pre-mkt
- We await next week’s FED meeting and then the Mid-terms
- Try the Greek Style Filet of Sole
*** Lonnie now owns Twitter….change is about to come….the 3 top executives let go….banishment/cancellation is no longer the rule.***
The split continues…the Dow gained 195 pts or 0.6%, while the S&P lost 24 pts or 0.6%, the Nasdaq lost 179 pts or 1.6%, the Russell eked out a gain of 2 pts while the Transports lost 58 or 0.4%. Tech has taken it on the chin….with all of the big boys – getting slashed….META -25% yesterday alone, MSFT -2%, APPL -2.2%, AMZN -3.6%, GOOG – 2.3% – $8 billion of value gone and this is what took both the S&P and Nasdaq lower, The Dow advance was helped by better earnings from CAT +7.7%.
This as 3rd qtr. GDP revealed that the US economy ‘returned’ to growth – coming in at +2.6% – vs. the 1st and 2nd qtrs. of negative growth, but when you look at it, it wasn’t as strong as the media suggested. Gov’t spending is 17% of the index and was up 2.4% – which is a 3rd qtr. phenomenon – that will go away, Net Exports contributed 2.8% – the most since the 3rd qtr. of 1980 and that isn’t likely to persist as a positive driver….….but let’s not quibble about that now.
Other Eco data included Durable Good ex transports – 0.5%, Capital Good ordered and Capital Good shipped both lower by 0.7% and 0.5% respectively. And what is going on in Kansas City? Not much as the Kansas City FED survey came in at -7 vs. the expectation of -2.
The tech names are now in focus….and all battling a host of challenges….but they are different companies…while Apple, Microsoft and Amazon disappointed and are under pressure they are not META or GOOG…and don’t have the same issues. I think for people looking for the opportunity to jump into the mega-cap tech space – let’s be honest – are you going with Apple, Amazon and Microsoft or META and GOOGLE. For anyone that has a long term horizon – you can buy Apple down 23%, AMZN down 35% and MSFT down 32% and while there might be some more weakness ahead for the sector and the broader market due to the economy – as a long term investor – time is on your side. Pick away at them – build your position over time – take advantage of DCA (dollar cost averaging).
The mid-terms are only 12 days away and while expectations are for a split congress the market always does better 12 months out post the mid-terms…….because we will once again have some clarity on policy and we can be sure that the Dems will no longer be driving the bus alone…..a split congress will force cooperation, it will force both sides to come to the middle, it will eliminate the fringes on both sides which will be viewed as longer term positive.
Today brings the favored FED inflation report – the PCE (Personal Consumer Expenditure) and it is expected to be slightly higher than last month…which would fall in line with what we saw from the CPI and the PPI….the PCE Core Deflator y/y is expected to +5.2% up from +4.9% last month. So the question will be – what will a stronger PCE report due to the FED thinking now? Well nothing for the November meeting – that is locked and loaded at 75 bps, but will it do anything to suggest what will happen in December? Too early, I think….I’m waiting for the November CPI and PPI reports before I make that bet….you can expect 50 bps for sure, but my sense is that 75 is still very much on the table.
Speculation about the FED easing that was reported last week in the WSJ has caused the Dow to rally 8%, the S&P 5.5%, Nasdaq +1.4% (was 7% before the tech wreck), the Russell +6% and the Transports +7%. What will be important now is not what they do next week at the FOMC meeting but what they say about future hikes….
Remember what JJ told us – Inflation is key and the FED was not going to push on the brakes until they say a significant decline in the pace and rate of inflation. So, in my mind, it will be very hard for him to justify a slowing down if we see inflation continuing to move up….Now if the November CPI and PPI does in fact show some easing then yes, I could see how he will position it…but let’s not speculate just yet. What will be important now is not what they do next week at the FOMC meeting but what they say about future hikes….
In addition – we will get Pending Home Sales that are expected to be down 4%, my guess is it will be higher….30 yr. mortgage rates are now solidly in the 7% range and going higher making it more costly to finance and buy a home. And finally we will get the U of Mich Sentiment report – exp of 59.6 and U of Mich 1 yr. inflation expectation of 5.1%.
Today also brings a bunch of earnings including both CVX and XOM earnings. CVX just reported and killed it….$5.56 vs $4.93….the stock is up $4.5/sh or 2.5%. XOM just reported $4.45 vs $3.79 – Revs down a bit…..but up 50% y/y… they have $22 billion in FCF (free cash flow) and are raising their quarterly dividend by 4 cts to 91 ct’s per share – bringing their yield to 3.4%, the stock is trading up by 2.25% in the pre-market. Can you imagine what Joey, Bernie, Lizzy, Nancy and Chucky will have to say about that? Expect to hear more about windfall taxes….
Treasury yields which have fallen back a bit are up this morning….the 2 yr. yielding 4.36%, the 5 yr. 4.16% and the 10 yr. 4.005% respectively.
Oil is trading at $88.20/ barrel down 90 cts after kissing resistance at $89.75 yesterday… The dollar strength being credited for the small pullback. – but let’s not kid ourselves…..there are rising concerns about supply issues as we come into the winter and Europe cuts off Russian imports on Dec 5th. We remain in the $85.75/$89.75 trading range. A push up and thru resistance will see oil challenge the early October highs of $95/barrel. A break lower thru support ($85.75) would see oil test the October lows of $82 barrel. I am betting higher before lower.
US futures are under pressure this morning…Dow futures down 50 pts, S&P down 25 pts, the Nasdaq down 125 pts and the Russell is flat. The tech wreck and rising yields being blamed for today’s weakness. The larger Dow names all doing just fine….BUT forward guidance is mixed and the expectation is for the recession to hit us sometime in the new year……Continued rate hikes putting even more pressure on corporate earnings and that will take it’s toll at some point.
European stocks are lower….The ECB announced another 75 bp rate hike yesterday BUT dropped the language about pushing rates higher for ‘several more meetings’ which suggests that they don’t have the stomach either to tackle inflation…Germany’s economy grew in the 3rd qtr. which was a bit unexpected but that is not helping the mood. Mixed earnings appear to be the driver in today’s action…at 6:45 – stocks across the continent are down by about 0.7%,
The S&P closed at 3807 down 23 pts……. Besides earnings, the focus will be on the PCE report and what that says about inflation and what that then says about what we might hear from the FED next week. I’m still waiting for Goldman to confirm what the WSJ reported last week (FED slowdown) – because you know Goldman is the other ‘canary in the coal mine’…..if they suddenly publish a report that supports this new narrative – then you know that the narrative is not only being discussed, but has been decided.
I still expect a retest of the October low (3490) before this is over…
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 and buy the stuff that people need (STPN). Consumer Staples, Utilities, Healthcare, Energy…. while underweighting (not eliminating) Tech, Basic Materials, and Communications right now.
Take Good care
Chief Market Strategist
kpolcari@slatestone.com
Greek Style Filet of Sole
This is a simple yet delicious dish to make. Takes no more than 30 mins – start to finish.
You need: fresh squeezed lemon juice, plus one thinly sliced lemon rounds, olive oil, butter, shallots – thinly sliced, capers, s&p, garlic powder, 2 lbs. of filet of sole – (10 – 12 pieces), scallions – trimmed and sliced in half lengthwise, and chopped fresh dill.
Preheat your over to 375 degrees.
Now in one bowl – mix the lemon juice, olive oil, melted butter. Stir in the shallots, garlic and capers.
In another bowl – mix the s&p, and garlic powder – now rub the filets with this dry mix
Next – place the filets on a lightly oiled baking dish. Using a pastry brush – rub the juice mixture on both sides of the fish and then pour the balance on the fish. Take the sliced scallions and sliced lemon rounds and place on top of the fish pieces.
Place in the oven and cook for 10 mins – maybe 15 mins max – but do not overcook. Remove and present on warmed plates – garnish with the chopped dill. Serve with roasted potatoes and a tossed mixed salad – dressed in fresh lemon juice, olive oil, s&p and oregano.
Buon Appetito.
