Things you need to know.
– Markets await today’s NFP report.
– Futures an inch higher in anticipation of a weaker report.
– Europeans are betting on a weaker NFP report.
– The bond markets are unsure…but leaning towards stronger.
– Dollar down, gold steady and Oil down.
– Try the Halibut
My appearance with Charles Payne on Fox Business yesterday….in it we discuss today’s NFP report and what to prepare for…
https://video.foxbusiness.com/v/6338473070112
Stocks held tight to the unchanged line on Thursday – churning in place as we await today’s key NFP report which could ignite a new slide in stocks – if it’s too hot……The S&P is now hovering just above the long term trendline at 4200…. A level we got close to testing earlier this week…..and one that should be front and center for both the long term investor and the short term trader…..I have been saying for weeks now – that a test of 4200 had to happen – and a failure for buyers to defend that position has the potential to wreak havoc on the markets….Why? Because a failure to hold that level will be seen as a ‘technical break’ of the long term trendline and that will cause all of the smart logic algo’s to go into overdrive – sending wave after wave of sell orders into the market, giving buyers (who are keeping a close eye on this as well) a reason to pull their bids, creating a void in prices which will only exacerbate any move lower…. A move that has the potential to send the S&P to the 4100/4125 range – in short order. Look, the S&P was up nearly 18% thru late July…. but has since given up 8% of those gains as we moved thru August and September…. leaving us up 10% as of this morning….
During this time – The Dow gave up all of its gains and moved into negative territory – The Russell is now down 14%, the Transports are down 12% – putting both of those indexes in correction mode. The S&P and Nasdaq have shed 8% – and so investors remain antsy and concerned about what is next. At the end of the day yesterday we saw the Dow give up 10 pts, the S&P down 6, the Nasdaq lost 16, the Russell gained 3 while the Transports gave up 47 pts.
Today’s NFP report is expected to show a gain of 170k jobs…(with the whisper number just a bit higher at 185k jobs) and that could be the straw that breaks the camels back….a number that is too healthy could ignite another round of selling in the bond markets – sending yields surging again which will not be good for stocks…conversely – a weaker number will be met excitement and we could expect both stocks and bonds to rally – hard. Why? Because they are a bit oversold IF the number is weaker…. Now if the number is stronger – then no, they are not oversold (yet) and down we go…..Which is why I said yesterday in my appearance with Charles Payne – I am being patient – new money has gone into the gov’t money market fund that yields 5%….so I’m not, not doing anything, I’m earning 5% and just being cautious. I am willing to wait until I see the number and then see how ‘they’ spin it and then see how the market reacts. There is NO need to stand in front of a speeding train…. Capisce?
Now, the 30 yr. bond kissed 5% earlier this week – causing concern for investors. (5% is a big number for the 30 yr.). The last time it ticked at 5% was pre- Great Financial Crisis in August 2007 – 16 yrs. ago. But investors and the markets are also watching the 10 yr. treasury bond very closely as well because the 10 yr. is the baseline rate for which the risk of all other investments is assessed – think revolving consumer debt, mortgage rates etc.
Now, the 10 yr. ticked as high as 4.87% on Tuesday….as bond prices and stock prices sank – but eventually backed off – when they found support – and that is what partly explains why the markets settled down…..The 10 yr. yield is up 21% this year – that’s a big move in the bond market (3.87% on January 1st – 4.71% last night – do the math) while the TLH ETF is down 12% ytd. (the TLH is the 10-20 yr. bond ETF). This morning the 10 yr. bond is up 3 bps at 4.74% as the clock ticks towards 8:30 am. In any event – today’s report will decide where the 10 yr. bond goes……
Now while the markets have settled down after the recent rout, investors remain fragile – which is why today’s NFP report is key to understanding what the next move is by the FED. Fed Fund Futures markets are pricing in a 25% chance of a rate hike in 3 weeks. We’ve got multiple FED heads calling for higher rates while we have the same number calling for steady rates…We have today’s report and then next weeks’ PPI and CPI (inflation) reports….So, there is a lot to digest and a lot for the FED to consider which means there is a lot for you to consider when allocating money to your portfolio. Which is why I say – sit back – there is nothing that says you have to do something all the time. It’s ok to be patient.
Next – The dollar index – which surged this week – has backed off from that high and is now trading at 106.37. A strong NFP report has the potential to send the dollar higher again…while a weaker report will see it continue to retreat. I suspect that if it retreats it should find support in the 105.50 range…. If that fails – then the next stop would be the actual trendline – which today is trading at 104.35.
Gold remains at $1837/oz…. A weaker dollar index and a weaker NFP report will help send gold up…. while a stronger dollar and stronger NFP report will continue to put pressure on gold. Gold is in a funny spot – neither finding support nor resistance right here….so it could go either way.
Oil is trading at $82.33 – down substantially off the highs last week on the ‘higher for longer’ narrative…..You remember the story…..’uncertain demand’ and a bleak economic outlook….this was after the street (JPM for one) upped their growth targets for oil through 2025 – calling for $125 oil, this after the Saudi’s raised their growth estimates and after OPEC + (think Saudi’s and Russian’s) confirmed that they will continue production cuts thru December. Now to be fair – oil did go straight up for the month of September….so a pullback isn’t a surprise…. My sense is that it should find support right in here…
But in the end – all of the markets are reacting the exact same way…. When the sellers are anxious – buyers take control and markets fall…. When the buyers are anxious – sellers take control and markets move up. The question now is – who will be anxious today?
European markets are higher…. the UK up 0.5% while Italy is ahead by 1.2%. There are no specific macro data points today, so markets and investors are betting that the US NFP report will be better than expected – allowing the FED to pause again in November.
This morning –futures are up…… Dow futures +45, the S&P’s +5, the Nasdaq +25 and the Russell is up 4. Wednesday’s lower than expected ADP report is giving HOPE to investors today that this morning’s NFP report will be weaker as well and that is giving support to the futures. Remember – markets can do well in what is historically a normal rate environment (4% – 6%) – so why the angst? Because the move from 0% to ‘normal’ needs to be digested…and if it happened more slowly, we wouldn’t be having all of this angst – it is the speed at which rates have move up over the past 2 months that has caused all of this consternation. So, you need to manage it, you need to manage expectations so that you don’t get crushed… You need to understand your risk, the risk in the markets, time horizons and needs. As a short-term trader – you are loving all this chaos…as a long-term investor you need to take advantage of the chaos. It’s not more complicated than that.
Add some stability – raise your cash portion If you are anxious….nothing wrong with cash if they are paying you 5% to hold it – why tie it up for 2 yrs. if you can get daily liquidity – paying you 5% in your gov’t money market fund while leaving you completely liquid in the event an opportunity presents itself.
If you have a well thought out plan and portfolio all you need is a strong stomach….delete the noise, watch what happens and when stocks you own become dislocated ONLY because of anxiety (not because of a fundamental change) – then swoop in…..be strategic, put money to work….
The S&P ended the day at 4258 – down 6 pts…. We are still closer to 4200 (support) than we are 4385 (resistance). There are now are now 5 potential House Speaker Candidates…. Scalese, Jordon, Hern, McHenry and Donalds – Donny is supporting Jordan (just so we know). None of them is interested in becoming speaker IF they don’t change the rule that allowed for one member to oust the speaker… (a la Kevin McCarthy). No matter what – they are already talking about a November gov’t shutdown – of course they are…. because all they did was kick the can down the road by 45 days…. Oh boy….
And at 12 pm today – UAW President Shaun Fain is due to address the public and the auto companies once again…. This strike is now entering its 21st day…. with no end in sight…. Let’s see what plants get hit next….
Remember – eliminate the noise, stick to the plan – even when it feels uncomfortable …. And don’t panic….
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Pan Seared Halibut in a Lemon Wine Caper Sauce
For this you need: 1 pound fresh halibut, skinned and cut into two equal portions, ½ stick of butter, olive oil, kosher salt, black pepper, 3–4 slices Meyer lemons, 2 teaspoon fresh garlic, finely chopped, ¼ cup white wine, 2 tablespoons lemon juice, 2 tablespoon capers drained, 2 tablespoons fresh flat leaf parsley chopped
Salt the top of the fish with just a small sprinkle of kosher or sea salt.
Place ½ of the butter and a splash of olive oil in a medium to large skillet or sauté pan and heat over medium heat.
Swirl the butter and oil around and once it starts to slightly brown, add the fish top side down. Sprinkle the side facing up with the rest of the salt and the pepper. Cook for five minutes then gently flip.
Add the lemon slices to the pan as the fish cooks and cook the fish for about 3-5 more minutes. You want to stop the cooking just before it fully cooks – It will continue to cook outside of the pan.
Remove the fish and place on a platter along with the cooked lemon slices.
Keep the heat at medium and add the garlic and cook for one minute. Add the wine and cook to evaporate. Then add the lemon juice, capers, and parsley. Cook for a minute then remove from heat and stir in the remaining 2 tablespoons of butter and stir to make the sauce.
Put the fish back into the pan, spoon the sauce over the fish and cook for 30 seconds then remove to a platter and serve.
Serve each portion with a cooked lemon slice and some of the pan sauce. A side of mashed potatoes and mixed green salad works well with this.
Buon Appetito
