Things You Need to Know
- CPI was a bit cooler than expected and that is good!
- Bessent says that a ‘framework’ for a trade deal is in place.
- Trump “trumps’ XiXi and makes rare earth ‘side deals’ with Australia, Thailand, Malaysia and Cambodia – BAM!
- It is RISK ON for stocks and crypto and RISK OFF for bonds and Gold.
- Try the Pumpkin/Tomato Ribbon Pasta.
Investors, traders and algo’s grabbed the bull by the (-hint – 5 letters ends in s) …..HORNS – now get your head out of the gutter…. Stocks surged again on Friday after the latest CPI report suggested that inflation was NOT as sticky as the estimates…. CPI m/m came in + 0.3% when we were expecting +0.4%. y/y came in at 3% vs. the 3.1% expected – but it is important to note that while 3% was below the expectation it was greater than the 2.9% last month. Capisce? Core CPI -ex food and energy m/m came in at +0.2% – again better than the expectation of +0.3% and Core CPI y/y came in at +3% when both the expectation and last month’s read was 3.1%.
In the end – it was a good report, not great (because prices are still rising at a 3% rate), but good enough and stocks ended the day higher…The Dow added 472 pts or 1.1%, the S&P up 53 or 0.8%, the Nasdaq added 264 pts or 1.15%, the Russell up 30 pts or 1.25%, the Transports gained 33 pts or 0.25%, the Equal Weight S&P up 20 pts or 0.25% while the Mag 7 stocks added 212 pts or 0.65%.
The report — which represented the slowest inflation pace in three months — sealed the deal that the Fed will cut by 25 bps on Wednesday at 2 pm, even as they’ve been flying blind since the shutdown. Now, do I fully believe the Fed is making monetary-policy decisions in the dark? No — but that’s me. You do you.
The inflation pace from Friday sets the stage for a third cut in December — meaning we’d have 75 bps of cuts this year, taking the funds rate to roughly 3.50%-3.75%, from the 4.25%-4.50% range we started the year in.
Recall: the moves lower are directly tied to the ‘weak employment’ picture (as per JJ) something we discussed at length on Friday. While 4.3% unemployment is not weak (in fact it is considered FULL Employment) by any stretch, the idea is this rate is highly vulnerable to a sudden spike because of latent economic weaknesses, policy shocks, or external events.
Now again — the only underlying economic issues I see are positive, not negative, so that’s not our big worry. I mean think about it – Energy prices have fallen, mortgage rates have fallen, transportation costs are declining and that should help cool inflation even more. He has made deals all over the world that benefit not only the US but benefits the foreign country as well. He brought an end to the Israeli/Hamas war, he bombed the (s..t) out of Iran and he is about to put Vlad in the penalty box and over the weekend, he made Xi Xi ‘a deal he couldn’t refuse’. So, again, tell me what the negatives are?
Policy shocks? Maybe, but tariffs were supposed to be a huge policy shock and look how that played out. External events (geo-political)? That’s really the only wildcard. But to that I say: we’ve been living with external events our whole life — and in the end: they create short-term chaos, yes — but rarely long-term destruction. So, what are we worried about?
I discussed a lot of this Larry Kudlow and Pete Najarian on Larry Kudlow’s Saturday morning WABC radio show –
Here’s the link https://wabcradio.com/episode/pete-najarian-and-ken-polcari-10-25-25/
Now on Sunday – we learned that Scotty Bessent and his team have come to a ‘framework’ with China on a new trade deal. That avoids the 100% tariff on Chinese goods. It also means that Xi Xi is going to defer any ‘rare earth’ export controls – of course he is because Trump just ‘Trumped him’ with the deal that he made with Australia, Malaysia, Thailand and Cambodia to cooperate on critical minerals and trade – all in an effort to cut of Chinese control and dominance in the sector. Trump is set to meet Xi Xi on Thursday in South Korea. If this deal happens – then hold onto your hats!
That’s all you need to know today…US futures are surging this morning – on the back of this headline. At 4 am – (yes I’m up early) futures are substantially higher…Dow futures are up 315 pts, the S&P’s up 60, the Nasdaq up 290 and the Russell is up 25 pts.
It is FED week – the rate cut announcement is on Wednesday at 2 pm…. Is the market really going to react? Isn’t it already priced in? Yes it is, but the market will react to what and how JJ sets it up for December and beyond.
Add in another big week of earnings – TECH will be the focus – and you have a recipe for higher prices….
While we will get a lot of earnings this week – let’s not kid ourselves – everyone is waiting for GOOG, META & MSFT on Wednesday after the bell and then AAPL and AMZN on Thursday after the bell.
This morning we will hear from WHR (Household Appliances), BBBY (online Marketplace), KDP (Non-Alcoholic Beverages), NUE (steel producers), METC (coal mining), BMRN (Biotech), CAR (Auto Retailers), ARE (Health Care REIT), WM (Waste Management) and more.
Bonds are lower this morning in what is going to be a RISK ON day – which means they will sell bonds and buy stocks and Crypto. (Yes, Bitcoin is up $2500 or 2.2% while Ethereum is up $150 or 3.8%) This morning the 10 yr is yielding 4.03% (up from 4.02%) while the 30 yr is yielding 4.62% (up from 4.59%)
Oil remains just above the short term trendline at $61.90 – up 40 cts this morning. The recent move higher credited to the new sanctions on Russia – which is expected to remove supply from the markets. OPEC+ though has committed to continue with their oil production increases until such time that it prompts them to pivot and that would happen when BRENT reaches the low to mid $50’s…for an extended period of time. (that is straight out of OPEC).
Now just to be clear for BRENT to be in the low to mid $50’s that means that WTI would have to be in the high $40’s representing a 20+% decline from here….and if that happens – oil would have declined by ~32% off it’s January high. Remember – the industry is pricing in an ‘oil glut’ into 2026 – which is what will put the pressure on oil prices. (think oversupply).
Gold is down $32 at $4,081 this morning (It closed at $4,113 on Friday) …. Recall on Friday I said that IF CPI came in as or better than expected that gold would continue to consolidate and that is what we are seeing this morning. Now add in the trade progress seen over the weekend (see below) and you have RISK ON for stocks and RISK OFF for gold. Again – I would look for gold to retest $4000.
Asian markets all ended the day higher and European markets are poised to open higher as well.
The S&P closed at 6,791 up 53 points – this after kissing and penetrating 6800 on Friday – and if futures hold steady, we will blast right thru that and test 6850 before the bell stops ringing.
Here is your countdown.
3 days until the FED announcement.
27 Days until Official Black Friday.
59 Day until Christmas
65 Days until the ball drops in Times Square.
Let’s review your plan. Call me for a complimentary, no-obligation portfolio analysis: 561-931-0190.
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.
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.
Pumpkin/Tomato Pasta
Another simple, delicious meal for you. And Fall is the perfect season for it.
You need – Ribbon Pasta (Malfadine), 1 can of kitchen ready crushed tomatoes, s&p, red onion the pumpkin and of course the fresh grated Parmegiana.
Start by cutting open the pumpkin – remove seeds and the hard outer shell. Now cut the pumpkin into small cubes. Set aside.
In a large pot – add in some olive oil and the sliced red onion – sauté it for 5 mins, now add in the cubed pumpkin. Stir to coat, season with s&p. Let it cook for 10 mins.
Next add in the tomatoes – season again with s&p – add ½ can of water. Cover and let cook on low for 30 mins.
When done – put the sauce thru a food processor or blender to combine. Return to the pot.
Now – boil your pasta until aldente. Using tongs – add the pasta directly to the sauce and coat well. Add in a ladle of pasta water to make it creamy.
Serve in warm bowls and have the cheese on the table for your guests.
Buon Appetito!