Things you need to know.
– Wow! Stocks retreat? Are the Transports sending us a message?
– Today’s NFP report is THE focus.
– Keep your eyes on ‘wages and the Unemployment number.
– Bonds flat, Oil lower and Gold steady.
– Try the Mussel Posilliopo – Feast of the 7 Fishes #3.
Stocks went into reverse yesterday – the Dow lost 250 pts or 0.6%. the S&P gave back 12 pts or 0.2%, the Nasdaq lost 35 pts or 0.2%, the Russell also lost 30 pts or 1.25%, the Transports gave up another 190 pts – now down 870 pts or 4.8% in the last 7 days while the Equal Weighted S&P ended the day down 37 pts – which again tells us that the broader S&P is coming under some pressure…..The most recent part of this rally is beginning to look a tiny bit ‘frothy’ causing some of the trader types to hit the sell button and lock in some dramatic short term gains ahead of today’s NFP report.
Longer term investors that have more money to put to work and newer investors that are just starting out – are fearful of missing out on the party and they continue to hit the buy button – paying less attention to the froth and more attention to the idea that they are ‘in’. Do not discount the idea that some portfolio managers that had been expecting a pull back in the fall (that never came) – and kept building piles of cash – have been in a position to have to play ‘catch up’ forcing them to buy names (put money to work) so that they can show them in the portfolio when the quarter/year-end statements go out in just 3 weeks. And the shorts that also never got the pullback they expected have been throwing in the towel too, running to cover their positions and lick their wounds. All of this fuel for the fire that have sent stocks surging.
Yesterday’s eco data showed that Initial jobless claims rose by 10k while Continuing Claims fell by 33k – nothing really to see, so do not look to that for a reason for yesterday’s weak performance. The cautiousness is a direct result of today’s NFP report and that is expected to show a 215k increase in jobs created vs. last month’s 12k jobs…. which was – in my opinion – a huge outlier and should be ignored. Keep in mind – the range of opinions for today’s report go from 170k to 250k – 215k is consensus.
In addition to the ‘job creation’ part of the report – look for unemployment to remain at 4.1% and for wages to rise by 3.9% y/y and 0.3% m/m. The issue here is that ‘service wages’ inflation continues to be stronger than what the FED might like and that may indicate that labor market inflationary pressures remain a ‘key’ part of today’s report. Remember – the US is a 75% services economy, so services wages are important. Upward pressure on wages will ultimately force businesses to raise prices on products they sell to you and me leading to that ‘wage/price spiral inflation’. Just something to consider for those of you that have never lived through wage/price spiral inflation…. Again – go ahead and ask your favorite Baby Boomer (1946-1964) or anyone that is still alive from the Silent Generation (1928/1946).
Bonds did very little causing yields to remain steady at 4.14% for the 2 yr and 4.18% for the 10 yr.
Oil prices continued thrashing around – ending the day lower – even after OPEC+ decided to maintain the current production cuts as they try to control supply. The production increases that were originally scheduled for October and then put off to December have now been put off until somewhere in the 2nd quarter of 2025.
Analysts are selling this as a ‘decision that shows the group wants to continue to focus on its pre-cautious, proactive and pre-emptive stance’ – I think it’s the realization that the Non-Opec producers are flooding the market with oil – taking supply control away from the Saudi’s. This morning – oil is trading down 55 cts at $67.77 leaving it well below the trendlines but just above the most recent lows of $66.50/$66.80. A breach here would see oil trade to the September lows of $64.50.
Gold held steady ahead of today’s report…. churning within trendline support at $2624 and resistance at $2700 – this morning it is up $8 at $2656/oz. If today’s NFP report is benign – then expect a rate cut to be signed, sealed and delivered, but if it is stronger and wages are up more than the 0.3% m/m, or 3.9% y/y then don’t be so sure that the cut is coming. A stronger report should see gold come under pressure while a weaker report should see it rise. In the end – everyone will have their own interpretation – depending on what ‘they hear’.
Now, I heard that we ‘are not in a hurry to cut rates’, I think JJ was very clear the other day – I think he was trying to get everyone to ‘fall in line’ as I expect the FED to do nothing at this meeting – clearly I am bucking the trend as the market is pricing in a 70% chance of a cut. But let’s see – remember – we still have another CPI and PPI report due out next week….and right now both inflation reports are expected to tick ‘higher’…. Hmmmm? What does that mean?
And US futures are resting (again) as the algo’s and trader types remain cautious….……Dow futures are down 36, S&P’s – 7, Nasdaq -15, while the Russell is flat. At this point – most of the asset managers have stepped aside, trying not to make any moves that could disrupt their yrs performance. They won’t be trading just to trade, but many have placed GTC (good til cancelled) buy orders below the current market levels just in case there is some kind of negative reaction and stocks have a swift move lower – you know how that goes, right? Remember what happened on August 5th? January is only 3 weeks away when everyone gets to start over, so the only moves we will get now are last minute tax sales and some fine tuning for the year end statement. Volumes will start to subside in trading here and around the world.
If you have money to put to work, I would say – do nothing until the new year, Why? Because I think all of this euphoria will come under pressure early in the new year, not because there is anything ‘wrong’ but because they won’t let it correct this late in the year. Once the new year starts it’s a new ball game.
European markets are mostly higher – Investors digesting the very defiant speech delivered Manny Macron after the Wednesday ‘no confidence’ vote that toppled the gov’t. PM Michel Barnier is out and while others want to see Manny out as well, he has insisted that he will ‘live out’ his term that ends in early 2027. There is no eco data to speak of and Europe like the US is starting to wind down as we move into the final weeks of 2024.
The S&P closed at 6075 down 12 pts…. I would not be surprised if we saw the S&P test the 6000 level sometime next week…. just to see who is hanging around. What happens next is anyone’s call, but I would not be making any major life changing portfolio decisions during the last 3 weeks of the year… I am sitting back – enjoying my gains for the year. I am NOT chasing, nor am I selling. Like I said, new money is sitting in my gov’t mm fund earning 4.25% while I wait…. In the end – patience is a virtue.
Click on this link https://slatestone.com/contact-us/
Put ‘KP’ in the message box and I will be happy to reach out to discuss creating a long-term wealth-building portfolio that will serve you and your family well in the years ahead. Remember – it’s a marathon, not a sprint.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
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.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Feast of the 7 Fishes – #3 Mussels Posillipo
This recipe comes to us from the suburbs of Naples – Posillipo is a well to do suburb of Naples; it was built during the 19th century by the very affluent – high on a bluff with a view of that famous Bay of Naples. Posillipo is a recipe that you can use for both clams and mussels – I suggest that you use the mussels for Christmas Eve dinner.
You need: Mussels….3 doz… thoroughly washed of any sand. White wine, Clam juice, garlic, olive oil, s&p, 1 28 oz can have imported Italian Plum tomatoes – (Not in Puree), Fresh Basil
In a pot – heat the olive oil and sauté the garlic – until lightly browned – do not burn.
Add 1 1/2 c of dry white wine – nothing fruity – stir and let come to a boil – after about 2 mins…rough crush the tomatoes and add to pot with the juice.
(When you rough crush – you literally crush them in your hand – over a bowl to catch the juice. – you can also use the blender – but do it quick – do not puree) Add enough of the tomatoes to give it some substance and color – you do not need to add the whole can if you are not serving it over linguine.
Add a small bottle of clam juice and fresh basil leaves. Season with s&p. Turn heat down to simmer and cook for about 15 mins or so. Now add the mussels to the pot and cover tightly. Cook until the shells open – should be maybe 8 to 10 mins more…. Discard any mussel that refuses to open.
Present this dish in a large bowl with the mussels bathing in the Posillipo sauce. This dish demands toasted garlic bread to dip in the sauce.
Buon Appetito
