Things You Need to Know
- I was away – celebrating my anniversary!
- What did I miss??? Oh boy – China trade tensions ignite a pullback.
- Rare earths – if you don’t know them, you do now.
- Gov’t still shutdown – day 16 – so no eco data to speak of.
- Earnings season gets off to a bright start…. Banks are killing it.
- Bonds surge, yields collapse, Oil breaks $60 and gold pushes higher.
- Try the Garlic, Parm Gnocchi
Ok – so for those of you who have reached out to me because you have not gotten a post lately – I say thank you for your concern. I was away celebrating my 40th wedding anniversary – Napa Valley – which was just beautiful. We enjoyed our time – stayed at the Napa Valley Resort and visited Trident Vineyards, David Arthur Vineyards, Barnett Vineyards, Amizetta Vineyards (by far my favorite), Far Niente Vineyards and finally the Cliff Lede Vineyards.
On my way home I stopped over in NYC –and attended a pediatric cancer fundraiser on behalf of Memorial Sloan Kettering to take on the role of auctioneer – where we raised $1 million dollars to benefit research for rare childhood brain cancers.
And now I’m back – in Jupiter, Florida ready to go….and what a week to be away! Mamma Mia!
Stocks have been all over the place -up, down, up and then down again – None of the action driven by economic data since we aren’t really getting any due to the gov’t shutdown, bank earnings (which have been great) or even the release of the hostages accompanied by a (fragile) ceasefire between Hamas and the world…..
No, the drama is all over the headline between the US and China and what it means for trade and more specifically the AI trade….…the latest drama driven by news that China wants to make rare earths (almost) impossible to get without Xi Xi’s approval….China just lit a fire under the global supply chain again. They’re tightening the screws on rare earth minerals — the stuff that makes our world spin. Think EVs, missiles, smartphones, data centers — all of it.
Beijing just slapped new export controls on seven key rare earths — plus the technologies used to refine and process them. They lit a fire under the global supply chain (again). You can’t ship, mine, or melt this stuff now without a special license from the Chinese government. It’s all wrapped in the language of “national security,” but let’s not kid ourselves… this is Xi Xi grabbing Trump by the (…..) — a straight-up flex of economic muscle meant to counter Trump’s aggressive tariff push.
Enter Trump — never one to back down — threatening 100% tariffs on Chinese imports and calling the move “hostile.” The market didn’t take it well. Friday’s selloff turned ugly, fueled by out-of-control algos, leveraged ETFs, and a flood of margin calls. Remember — these so-called “smart” algorithms aren’t actually smart; they just scrape headlines — print, social, even talk radio — and then react, with zero nuance, no logic, and no price discipline. If you didn’t see that in action on Friday, go back and look again.
By the weekend, both sides were back at the table — hammering out a framework to reopen rare-earth access and cool things down. The result? A temporary truce — but not before investors got a sharp reminder of just how fragile global relationships are… and how quickly “leverage” can turn into “liability.”
Prices for the metals shot higher, stocks fell out of bed, Bitcoin got slammed all because if or when China — which controls roughly 70% of global rare-earth supply — turns off the tap, the rest of the world feels it immediately. Note – the rest of the world, not just the United States.
In any event that is the backdrop to what has been happening in the markets since this latest shot across the bow….On Monday – after Bessent said it was all under control – stocks rallied – taking back some of Friday’s losses as investors, traders and algo’s tried to look thru the drama – but in the end – the market action is being driven by every headline concerning trade with China. So, what’s the takeaway? It’s simple – control the inputs and you control the game and our dependence on China is our own fault.
By the end of the day yesterday we saw the Dow down 17 pts, the S&P up 27, the Nasdaq up 150, the Russell gained 24 pts or 1% (the best performer), the Transports ended the day flat, the Equal Weight S&P up 13, while the Mag 7 gained 250 pts or 0.8%.
In the end – stocks will remain volatile as it appears we are headed for a trade war with China as investors consider risk. With little to no eco data being announced, that only heightens the anxiety around how aggressive (in either direction) investors, traders and algo’s will be.
Now right before I left for my anniversary the VIX was teasing trendline resistance at 16.80 and my comment was that if we pierced it then we should expect the VIX to test long term resistance at 19.30 – which would cause investors to hit the sell button and that is exactly what happened (think Friday). The recent China headlines has caused the VIX to surge by 30% – trading as high as 22.90 and that caused that swift 3.5% retreat. Now, as Bessent tries to soothe the situation – by proposing a longer pause on those 100% tariffs if Xi Xi backs off on tightening limits on rare earths, we have seen the VIX retreat just a bit as stocks try to recover….
And all of this anxiety has only caused Stevey Miran (newest FED member) to demand that FED official’s lower rates quickly – saying –
“There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy.”
Remember – the next Fed meeting is on October 28th/29th and the market is pricing in a 97% chance of a 25-bps cut.
3rd qtr. earnings have gotten off to a bright start – the big banks are having a ball – all of them beating on both top and bottom lines…but again this should not be a surprise… remember – earnings are history what is important is the guidance – because the positive guidance is self – reinforcing for the investor psyche. Earnings today include: MMC, BK, SCHW, USB & KEY.
Economic data? Forget it — the screens are dark. PPI and Retail Sales aren’t being released, so there’s no fresh macro guidance to trade off today. The risk, of course, is that when the numbers do hit, they could tell a very different story than the one investors are pricing in now leaving investors to ask – Will they confirm the “soft landing” narrative, or throw cold water on it?
Bonds have rallied hard in the week I was away – The TLT gained 2.8% while the TLH is up 2% and that has caused yields to plunge…the 10 yr once again tested 4% (and holding) down from 4.16% while the 30 yr is yielding 4.61%, down from 4.75% last week.
Oil also plummeted – piercing $60 to trade as low as $57.68. Talk of an oil glut into early 2026 behind the move – but again – we discussed this. And remember – lower oil prices are good for the economy (think transport costs) and the consumer (think lower gas prices).
And Gold? Oh boy – that continues to shoot higher – not even looking back…this morning it is up another $30 – trading at $4,237…. up $200 from when I left on Oct 9th. It’s the same story – momo guys taking it up, central bank buying and investors jumping on board for fear of missing out. Just fyi – gold is now up 63% ytd…. something that makes almost no sense to me, but hey, I’m not complaining.
At 6 am – US futures are higher again…all while the VIX is down 2.4% – sitting atop what is now trendline support. Dow futures are +155, S&P’s up 22, the Nasdaq is up 116 and the Russell is up 9. The move this morning being credited to the start of a strong earnings season. After the bell last night – we heard from JB Hunt Transportation – they beat across the board and this morning that stock is up 13% or $17/sh at $156.75. CRM is up 5% in the pre-mkt after giving a very strong forecast at their ‘Dreamforce Conference’ in San Francisco.
This morning, we heard from TSM (Taiwan Semi) and guess what? Profits surged on a record earnings beat! They raised their outlook in a ‘vote of confidence for the AI megatrend’ and that is firing up the markets this morning! The stock is up 1.7% or $5/sh at $309.75.
European markets are mixed…. France in the lead up 0.8%. It’s the same story – earnings season off to a good start!.
The S&P closed at 6,671 up 26 points. Over the past week – we have seen the S&P back off and test trendline support at 6,550 and hold. We are now in the 6,550/6,760 trading range. And while earnings are creating excitement – all we need is one negative headline to cause chaos…that was clear last week. So tread lightly and talk to your advisor.
Here’s your new countdown:
13 days until the next Fed decision.
43 days until Black Friday.
And only 70 days until Christmas.
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
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.
Garlic, Parmegiana Gnocchi
This is a simple yet delicious dish…
For this you need: Fresh made Gnocchi, Olive oil, Shallots – diced, 4 garlic cloves – minced, white wine, heavy cream, fresh grated parmegiana, s&p, fresh thyme, and chopped parsley.
Begin by bringing a pot of salted water to a rolling boil.
In a large sauté pan on med high – add the olive oil, and diced shallots – sauté for 3 mins…now add the minced garlic – stir to mix.
After a couple of minutes, add in about ¼ c of dry white wine, (you can use chicken stock if you do not want to use wine), Allow to simmer to burn off the alcohol. Turn heat down to low.
Now add 1 c of heavy cream, s&p and 1 tsp of fresh thyme. Stir to mix.
Add the fresh grated Parmegiana – maybe ½ cup.
Add the gnocchi to the water – when they float to the top, they are done and if you use freshly made, they will cook fast.
Add the gnocchi to the sauté pan and mix to coat. Add a bit of the pasta water to keep moist and creamy.
Serve immediately – making sure to have extra cheese on the table.
Buon Appetito!