Things you need to know.
– Stocks continue to push higher. S&P pierces another century mark.
– Stargate, Crypto, a softer approach to tariffs and strong earnings are all driving stocks higher.
– Bond yields hold steady, Oil declines and Gold teases $2800.
– Try the Mozzarella in Carozza
So, I’ve been away for a couple of days – speaking to the students in the Wealth Management program at UF Gainesville – and look what happens, stocks continue to advance like there is no tomorrow…and yesterday was no different….While stocks feel like they want to retreat – just a bit – the momo guys keep pushing higher. You can confirm this by taking a look at the momo ETF – MTUM which is up 35% ytd…This ETF includes names like – AVGO, JPM, WMT, NVDA, COST, ORCL, PM – which make up 30% of this name….
All of this recent ongoing optimism clearly driven by Trump’s overall agenda, his push for lower oil prices, the recent announcement concerning ‘Stargate’ and all of the newest innovations surrounding crypto and his executive order declaring that the US to be the crypto capital of the world along with a softer approach towards the threat of tariffs – saying that he does not want to impose them on China or Europe while leaving the threat on Mexico and Canada alive and well. He is also teasing the idea of lower taxes – for companies that bring back manufacturing to the US along with the ongoing push for an extension of the Trump tax cuts approved under his first term.
All this plus the late-day rebound in technology stocks (which were under pressure most of the day) along with his latest demand presented at Davos that the FED slash (and burn) rates (which would benefit growth names) while telling other countries around the world to do the same thing…. Is what propelled the market to record highs!
The Dow up 408 pts or 0.9%, the S&P up 33 pts or 0.5% – piercing then penetrating yet another new century mark – 6100, the Nasdaq gained 45 pts or 0.25%, the Russell up 11 pts or 0.5%, the Transports adding 85 pts or 0.5% while the Equal Weighted S&P added 35 pts or 0.5%..
There were broad-based gains across all the sectors. The interesting thing is that Healthcare – XLV was the day’s winner! Up 1.4%, Industrials gained 1%, Real Estate up 0.8%, Consumer Discretionary, Basic Materials, Financials up 0.6%, Utilities and Energy up 0.5%, Energy and Consumer Staples up 0.4%. With TECH carrying up the rear only gaining 0.2% – but this was after being lower by 1% most of the day.
Bonds sold off just a bit – the TLT down 0.8% while the TLH lost 0.5% – leaving the 2-yr yielding 4.26% while the 10 yr is yielding 4.63%. Shorter duration, 3- & 6-month bills yielding 4.2% and 4.14%. 12-month CD rates on avg are returning 4.3%.
Oil does continue to push lower….and is now off 6.5% in the last week as Trump pushes for more oil….and calls for OPEC + to lower prices…. (Let’s see how that works out.) The next OPEC meeting is next month, and OPEC delegates say they will not be bullied into doing anything citing concerns over an oil surplus and already low prices!
Remember – OPEC+ wants to see $80+ oil and in fact really want to see $90+ oil – so I’m in the camp that OPEC+ led by the ‘Kingdom’ will stick to their current plans to maintain their latest production cuts with a (possible) restoration of bringing more supply to the markets in April. Delegates from the OPEC alliance that did NOT want to be identified said there was NO reason for them to deviate from their current plan. They cited ‘faltering China demand’ (which I think is baloney) and new supply coming online from the NON-OPEC producers as the reason to do nothing. NON-OPEC producers include the US, Canada, China, Brazil, & Mexico…and just FYI, it is the threat of more supply coming to market by the Non-Open producers – who make independent decisions about their oil production – that is driving prices lower.
Oil which had traded up to and kissed $80 is now trading at $75 this morning… It is now below the October high of $76. Trendline support is at $72.20, but it might find some short-term support at $74 before testing lower.
Gold is once again on the move up…..this morning it is up $20 at $2785…..driven by the ‘safe haven’ mentality amid the ongoing global uncertainty, the recent dollar weakness and the fear of brewing inflation….Gold is up 3% ytd while the dollar is down 2.6% ytd….while the 3 month annualized rate of inflation is running at +3.1% which is UP and that suggests inflationary pressures are building….all while they tell us that we have nothing to worry about….Oh boy….here we go.
After the pullback that saw gold trade down from the November high of $2825 to $2600 – traders and investors have jumped back in for the reasons cited above and Gold is now about to test that November high again…. Where I think it will find some resistance, but that also depends on what we hear from the FED next week.
Remember – next Tuesday the January FOMC meeting begins with the decision on Wednesday at 2 pm. While no one expects them to cut rates, the path forward is a bit unclear as to what is next. Some are still pricing a July cut while others are calling for the FED to hold rates steady. In fact, I think the risk is that rates will go UP later this year. Let’s see how Donny’s latest demands play out……The FED, remember, IS an independent body…they are not supposed to be bullied by the Executive branch. And btw – there is no reason, no data that supports a rate cut any time soon….and while Donny makes it clear that the prior administration has put us in a pickle by wasting trillions of dollars, his declaration for lower rates falls on deaf ears…This is now Scotty’s problem….(Scotty Bessent – the new Treasury Secretary). He has to try and clean up the mess that Janet and Joey left.
Eco data today includes the S&P manufacturing PMI which is expected to come in at 49.8 – leaving it ‘officially’ in the contraction zone but just kissing the expansion zone. We will also get the S&P Services PMI and that is solidly in the expansion zone and is expected to push further into it with a 56.5 read. And all that suggests is the economy is just fine with the risk of overheating…. which does NOT call for lower rates, thus the conundrum…. Capisce?
US futures are just a bit lower this morning…. but that is not because of any negative headline, it is just because it’s tired, let’s see if the momo guys are tired too. At 7 am- Dow futures are down 60, S&P’s down 7, Nasdaq down 18, while Russell is down 3. You know how I feel, while I love the idea that stocks rally because I am invested and my clients are as well, I still think that investors need to brace themselves for continued market volatility, with the upcoming FOMC rate decision and guidance along with tech earnings as KEY catalysts.
My caution though does not suggest a breakdown and I would view any drawdown of +7% in the indexes or 15%+ in individual large cap, mega cap names as buying opportunities. So far earnings have not disappointed (as a whole), and we are running at a 90% rate – which is great. We do, though, still have 3 weeks of earnings ahead of us, so expect that beat rate to change. Overall, revenue and profit growth momentum along with expectations of pro-growth policies for the economy are fueling optimism for further market advances, understanding that bouts of volatility remain very likely in the near term.
Bitcoin – is trading at $105k, Ethereum is at $3400 and XRP is trading at $3.20.
European markets are mixed as investors across the pond react to the latest comments out of the boondoggle in Davos, known as the World Economic Forum and the ongoing earnings season.
The S&P ended at 6118 – up 33 pts. On Monday I said that we were on the verge of testing the December highs of 6100! And that the concern over tariffs is overdone – that he is using it as leverage to negotiate. Well, we pierced 6100 and he is making it clear that the tariff threat is not the big bad boogeyman that many have made it out to be. Again though, I would not be chasing names at all, I would be a buyer on weakness. Keep your cash – that you want to invest in a govt’ money market fund that is earning 4.5% while you wait and remember you are invested on the balance, so as the market rallies, you are participating and when (not if) it declines – you have cash to put to work.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
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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Mozzarella in Carozza
This is a great appetizer dish – not fancy, just good.
For this you need – Fresh mozz, white bread, trim the edges, eggs, flour, seasoned breadcrumbs with plenty of parmegiana cheese, vegetable oil.
Fill a pot with enough of the oil to deepen fry.
Slice the mozz and trim the bread.
Next – make a mozz sandwich – place slices of mozz between 2 pieces of the bread. Slice the bread into triangles.
Put some flour on a plate, beat 5 or 6 eggs in a bowl to make an egg wash and then put the seasoned breadcrumbs on another plate and make a production line.
Dredge the bread in flour, then dip in the egg wash and then place in the breadcrumbs on both sides. When done – heat the oil so that it gets nice and hot.
When ready – place the triangles in the hot oil and fry until nice and golden – making sure to flip so that it cooks on both sides.
Serve as an appetizer when still warm. The kids will love this simple treat.
Buon Appetito
