Things you need to know ~

• It’s a shortened day….Don’t stress
• Try the Butternut Squash Soup
• I’ll be on Varney and Co at 10 am and then again at 11:50.

Stocks moved higher on Wednesday ahead of thanksgiving which isn’t really a surprise (happens every year). We have a weak Monday and then stocks rally into the rest of the week as the official start of the holiday season kicks off. Eco data on Wednesday – revealed a couple of things. US Manufacturing and US services PMI’s were both weaker – now solidly in contraction territory – with Manufacturing coming in at 47.6 and Services hitting allow of 46.1. (Remember – 50 is the dividing line). In addition the FOMC mins revealed what we already know – the FED is prepared to slow down the increment of interest rate increases but not the pace of them (yet)….so the sense is that 50 bps is now the expected increase in rates in December and that 50 more is likely to come in the late January meeting….the December minutes which will come out in January will reveal beyond that. Currently investors are expecting a 25 bps increase at the March meeting and if the coming economic data continues to be soft – then those minutes just might reveal a ‘pause’ after the March meeting…..

Let’s be clear though, a pause is just that – a pause. It is not a pivot – which would mean a reversal in policy…..defined by an interest rate CUT – that is not happening anytime soon – in my opinion. The FED needs to see inflation make a real and significant move lower before the idea of a pivot becomes a reality. Recall that the FED target is 2% and current inflation trends are still running near 40 yr. highs at 7.8%.

By the end of the day – the Dow gained 95 pts, the S&P gained 23 pts putting it ow solidly in the 4000 century as we move into the final weeks of trading for 2022. The Nasdaq added 110 pts, the Russell gained 3 pts while the Transports added 45 pts.

Oil continues to come under pressure as the G7 is now considering a higher price cap on Russian oil – somewhere in the $60/$70 range vs. the $50/$60 range. In addition – the EIA (Energy Information Administration) revealed that gasoline and distillate inventories both rose more than expected. Both of these developments easing supply concerns. On a side note – CVX is supposed to get US approval to increase oil production in Venezuela – yeah, Venezuela. US officials are supposed to meet Venezuelan authorities in Mexico for discussion that would ‘pave the way’ for easing US sanctions on that nation. And China continues to lock down whole cities on the back of rising covid cases – hurting the demand story which only reinforces my argument that we must move away from China and source from other places that have successfully tackled the covid issue. The ongoing China issue – conveniently continues to put pressure on oil prices and with winter coming we can expect that Xi Xi will continue to mismanage it. This morning WTI is trading at $79.40/barrel.

US treasuries remain stable with the 2 yr. yielding 4.4%, the 5 yr. yielding 3.9% and the 10 yr. yielding 3.7% – clearly still inverted….now in its 23rd week.

The dollar index – has been beaten up a bit – with traders sending it down again to retest trendline support at 105.33. This morning the index is trading at 106.60 – down 7% off the September high. The falling dollar index does help commodity prices in general – as they are all priced in dollars…so a falling dollar should help support commodity prices. The BCOM (Bloomberg Commodity Index) is up 6% during this same time period. This index contains an array of commodities and not just oil and gold. Think lumber, cattle, wheat, soybeans, live hogs, coffee, sugar in addition to precious metals and oil. And it is the food prices that are seeing the gains offsetting any weakness in some of the non-food commodities

Gold has seen some support as a result of the decline in the dollar index and is trading at $1776/oz – up 7% off the September lows. Gold remains in the $1740/$1830 trading range.
US futures are UP – Dow +40, S&P’s +4, Nasdaq flat and the Russell +5. There is no eco data and the markets close at 1 pm.

The official holiday season is now in high gear……We are seeing all kinds of SALES being offered to consumers as we go into the weekend….Black Friday, Cyber Monday, Small Business Tuesday and more sales in the weeks ahead…..Retailers have made it clear – they’ve got inventory and they need you to buy it…..and the only way to make that happen is to slash prices….but don’t be fooled – those slashed prices are still higher than they were one year ago…..30% off of a price tag that is up 60% from one year ago isn’t really a sale at all and with inflation eating away at you paycheck – they will have to cut prices even more to stimulate demand….so let’s see….it’s all about the marketing….

The S&P closed at 4027 on Wednesday…. – leaving us solidly in the 3793/4073 trading range. Remember this is a holiday shortened day – moves can be exaggerated as so many are away from their desks. The one outlier here is the looming railroad strike……Is it all just smoke and mirrors to create drama? Will they push until the final the hour and then suddenly reach ‘the agreement’ that they want? Think the debt ceiling drama…..they make it all very dramatic and then at the last minute they suddenly ‘have a deal’….Crisis averted! Markets rally!

Take good care,

Chief Market Strategist
kpolcari@slatestone.com

Butternut squash soup

This is simple and so good – especially when you have overeaten on the turkey….
You need – 2 packages of cubed butternut squash, chicken stock, butter and some half and half. Season lightly with s&p.

Steam the squash in the chicken stock Keeping a lid on the pan so that the steam doesn’t escape. After 20 mins or so….put the squash in a food processor (or blender) with some of the chicken stock. Add a dollop of butter and about ¼ cup of half and half. Blend….If it’s too thick – add a bit more of the chicken stock. Simple, yet so good for you.