Things you need to know.
– Eco data is undeniable – Retail Sales are Strong.
– Initial Jobless Claims decline, Philly Fed Business Outlook Surges.
– What will JJ do now? Bond Yields tick higher.
– Gold continues to surge.
– Try the Linguine w/Shrimp, Arugula, Tomatoes and Mascarpone
**I am at the money show in Orlando today. Next week I am in NYC all week – coming to you live from the Big Apple. Reach out, say hello…. Stay focused, stick to your plan. **
So, the eco data suggests that there is absolutely NOTHING wrong…. Retail sales came in well above any of the estimates, Philly Fed Business Outlook blew the roof off, Initial Jobless Claims – weaker and that defies any explanation of a weak economy…
The data ‘defines’ undeniable strength and guess what that is going to do? It’s gonna make it harder for JJ to cut rates again in November…. you can imagine that members of the FOMC committee will surely push back – especially if the coming data is strong as well….…. the question is: How will JJ respond? Has he backed himself into a corner by promising to continue to cut rates as he told us that the labor market was weakening…something it clearly is NOT. What will the market do if he doesn’t cut rates? Will that be the catalyst for the algo’s to hit the SELL button. We don’t know yet, but we do know what the indexes did.
As the final bell rang – the Dow notched another gain…+162 pts or 0.4%, the S&P lost 1 pt, the Nasdaq added 7 pts, the Russell gave up 6 pts, the Transports lost 230 pts while the Equal Weight lost 12 pts.
Yesterday Energy was the winner up 0.5% followed, Tech and Financials +0.3% and Basic Materials +0.15% – the other 8 sectors ended lower. Utilities took it the hardest – down 0.9% and that does make some sense – It is the best performing sector of the 11 major sectors + 28.7% ytd – think investors peeling a little bit off – to reallocate….Real Estate – 0.7%, Healthcare – 0.6%, Staples and Communications both down 0.5%, Industrials – 0.3% while Consumer Discretionary ended the day flat.
Now in a complete surprise – TSMC (Taiwan Semi) reported a 3rd qtr. BEAT and raised their forward guidance….The stock surged, ending the day 10% higher…..For those of you that are unfamiliar – TSMC is a semiconductor manufacturer, they manufacture and market integrated circuits – they provide wafer manufacturing, wafer probing, assembly and testing etc.….Their circuits are used in everything we touch, computer, communication, consumer electronics, automotive and industrial equipment… In the end – the surprise is because TSMC is ASML’s largest customer…….
Recall 3 days ago – ASML missed the estimates and came out with cautious guidance – suggesting a slowdown…the whole sector got smashed and individual names punished (think herd mentality) – they crushed the stock….and the semi group…then yesterday – TSMC says – ‘we’re good’ and our outlook is strong….so which is it? In any event – ASML which was down another 6% (22% in 2 days) turned the corner and ended the day +2.5% – an 8% swing. Recall my comments on ASML in yesterday’s note.
The semi’s as a group were up 0.8% and everyone’s baby – NVDA – is now kissing new highs…that little 7% pullback on Tuesday is now a 2% gain…Again, just a confirmation that you can’t over-react if the ‘thesis’ didn’t really change…and in this case – the ‘thesis’ is intact. The TSMC results suggests that the tech growth momentum and the AI boom is REAL (Did anyone really think it wasn’t). TSMC gapped open by 16 pts closed at an all time high.
Bonds got slapped – the TLT and TLH down 1.6% and 1.2% and those sent yields surging…the 2 yr. ended the day yielding 4%, while the 10 yr. is at 4.09% after testing 4.11%…. taking us ever closer to trendline resistance now at 4.17%. Recall – I fully expect us to test it and then pierce it – taking us to 4.3% rather quickly, leaving many to ask what then? What will 4.3% rates do to investor psyche?
Oil had an interesting day…. Trading in a 2-pts range…. $69.45/$71.11 – to end the day at $70.76 as it too looks to stabilize in the $69.50/$71.50 trading range. Now look – oil continues to sit and trade on the rising trendline – what it does from here will determine whether we it collapses or finds strength…. And we will know that relatively soon…..By now you know – Israel killed the Hamas leader (by a chance encounter) – but just another notch in their belt – causing celebrations across Israel – JoJo and Kammy calling for a cease-fire….to end this war…..Benny telling Palestinians to put down their arms and join the fight against terrorism….all while Iran has vowed to fight on…. So, it does not appear to be over yet and that will keep oil on the edge…. The ball is back in Iran’s court…. what’s next? We’re about to find out…. I don’t see how oil can decline from here right now…. based on the global geo-political climate.
Remember – My gut tells me that the ongoing wars in the middle-east and Russia/Ukraine as well as massive demands for energy and electrification along with a US and global economy that appears to be firing on all cylinders will continue to support oil and energy prices in the years ahead….Fossil fuels are not going anywhere…Just sayin….
Gold – We entered the new century on Wednesday and continue to push higher on Thursday and are pushing higher again this morning…UP $20 at $2727/oz…. edging closer to the target I identified 2 weeks ago – $2750ish…. The gold bugs can’t get enough…. many just moving money into the precious metal as nothing more than a safety trade going into the election…. The fear is what happens on the day after? If she wins, what will the right do and if he wins, what will the left do? It is very unsettling…thus the move to safety. And if Iran does something even more dramatic and dangerous – then gold will surge even higher….
This morning US futures are up again…. Dow futures are +6, S&P’s + 10, Nasdaq up 75 pts and the Russell is +9 pts… This even as traders rolled back any expectations of more interest cuts in the face of the strong eco data.
Earnings today include CMA (beat), RF (beat), ALK, SLB, AXP and PG.
Eco data is all about construction…Housing starts and Building Permits – both expected to be down substantially at -0.4% and -0.7% respectively.
European markets are mixed – this after the ECB cut rates by 25 bps yesterday – the 3rd time this year……as inflation eased. News out of Europe suggesting that the FED will cut rates inline with what the ECB is doing is causing some excitement – because that means we can continue to expect the FED to cut rates next month. They defined it as ‘fairly synchronized’. Remember – the ECB has now cut rates by 75 bps (3 – 25 bps cuts), the Fed has cut by 50 bps (in 1 move), so another 25 bps would ‘synchronize’ the banks. Capisce?
The S&P closed at 5841 – down 1 pt. Watch for 2 FED heads to speak today…. Fed Governor Chrissy Waller and Minneapolis’s Neely Kashkari. I expect more churn today….
In the end though, as a long-term investor – have a plan, be diversified, and have some cash on the side to take advantage of any weakness – and then don’t panic…be patient…
Successful investing is a marathon not a sprint. Click on the link to send me a message – I’m happy to discuss.
https://slatestone.com/contact-us/
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Linguine w/Shrimp, Tarragon & Arugula
For the dish you need: Olive oil, shallots – sliced, garlic – sliced, 1 pound of cleaned large shrimp, s&p, 6 roma tomatoes (chopped), white wine, chicken stock, fresh chopped tarragon and fresh chopped arugula and mascarpone cheese.
Bring a pot of salted water to a rolling boil.
Heat some oil over medium-high heat in a large sauté pan. Add the shallots and garlic and cook, stirring frequently, until soft.
Season the shrimp with salt and pepper and add them to the skillet. Cook until the shrimp are pink and cooked through about 3 to 4 minutes. Remove the shrimp – Set aside.
Add the pasta to the pot – cook for 8 mins.
In the same skillet, add the chopped tomatoes and season with salt and pepper, to taste. Cook over medium-high heat until the tomatoes start to soften, about 4 minutes. Turn the heat to high. Add ¼ cup of wine and scrape up the brown bits that cling to the bottom of the pan with a wooden spoon. Cook for 2 minutes. Stir in a ¼ cup of the stock and cook until most of the liquid has evaporated, about 2 minutes.
Remove the pan from the heat and add the tarragon, arugula, mascarpone cheese, and shrimp. Stir until the mixture is creamy. Season with salt and pepper, to taste.
The pasta should be done now…. Using tongs – take the pasta and mix with the shrimp and tomato mixture – Add ½ a ladle of the pasta water to help keep it moist.
Serve immediately – I would also have fresh grated Parmegiana cheese available – you know me – I can never have enough cheese.
Buon Appetito
