Things You Need to Know
- Is the S&P exhausted yet???
- Still no action on the shutdown. Eco data limited.
- Earnings continue to surprise – TSLA and IBM after the bell.
- Gold shed a few lbs.! – Don’t tell me you are surprised.
- Try the Halibut with Leeks, Mushrooms and Clams.
The S&P trades up to 6,752 – just 10 points below its all-time intraday high before wavering and closing just a bit lower…. signs of exhaustion appearing on the horizon…… While the Dow closed 218 pts higher , the S&P ended the day flat, the Nasdaq lost ground falling 37 pts, the Russell lost ground down 10 pts, the Transports added 123 pts, the Equal Weight S&P rose by 36 pts while the Mag 7 gave up 100.
Now look – no one should be surprised if we start to see stocks struggle and consolidate. I mean, we have been talking about this since August, no? (I thought it was going to happen a month ago!) Recently, the gov’t shutdown has left an economic vacuum, trade tensions with China only adding to the angst, leaving investors to focus on earnings (which so far have been very good) and the expected FED action – which is a 25 bps rate cut next Wednesday.
Next week – we have the October FED meeting…. But before that – we will get the September CPI on Friday (that was due out last week) – Estimates call for –it to show inflation remains sticky. CPI m/m up 0.4% while CPI y/y is expected to tick at +3.1% up from 2.9%. Core CPI (ex-food and energy) m/m is expected to be up 0.3% and up 3.1% y/y. The surprise will be if it is weaker than the expectation…. Only time will tell. A weaker number will force the 50-bps cut conversation again – while a hotter number will require us to ask – why are we cutting at all?
Now, while we have had some pullbacks, they can hardly be described as a pullback – when the market sells of 2% and everyone runs in – and takes it right back up – how is that a pullback? It isn’t it’s just action…A pullback would be more like 6-8% while a really good pullback would be 10 – 12%…. That would shake the branches….and that would take us right down thru the short, the intermediate trendlines leaving us sitting right atop the long term trendline (200 dma) support at 6100.
Now, while I do not thing that is happening any time soon – I can dream can’t I?
Of the 17 companies that reported before the bell yesterday – only 2 missed – which means 89% of the reports surprised to the upside and that confirms what we have been seeing…..more companies are reporting better results and investors are rewarding them nicely. Take KO they beat, and the stock ended 4% higher, HAL beat, and they took that one 11.5% higher…GM +14%, RTX +7.6%, MMM +7.6%, NDAQ +1.6%. Now the ones that beat but offered cautious guidance got slapped…. LMT – 3.25%, PM – 3.8%.
After the bell – we heard from NFLX, MAT and TXN and all 3 missed. This morning, they are all down. -7%, -5.5% and -8.25% respectively.
We are going to get another 15 companies this morning….GEV, MCO, CLX, BSX, HLT, T, TMO, APH, CME etc. and these companies represent Electrical Power Equipment, ‘Other’ Financial Services, Home Products, Medical Devices, Hotels & Lodging, Wireless Communications, Life Sciences & Diagnostics, Electrical Components, Securities & Commodity Exchanges. Let’s see if we get the same kind of results.
Tonight though, after the market closes and the bell rings we will hear from RJF, BANC, AA, LRCX, LUV, and this represent Wealth Management, Banks, Base Metals, Semi’s and Airlines, but the two that everyone is wasting for tonight will be TSLA and IBM – because both at the heart of the ‘tech revolution’.
TSLA is classified as an ‘auto’ company – something I think investors might challenge. I consider it a ‘Technology and Energy’ company while IBM is considered an IT company. I look at IBM as more than that – it is an Enterprise-Level Tech Solutions, think Cloud Computing, AI, Quantum Computing, along with IT services like Consulting and Managed Infrastructure. *Full disclosure I own IBM (at much lower prices!)
The other names in the Mag 7 report next week with NVDA the holdout until November 19th.
Of the 11 S&P sectors – Consumer Discretionary was yesterday’s winner – up 1.25%, the Industrials +0.9%, Communications +0.35%, Healthcare + 0.25%.
Utilities were the biggest losers – down 1%, Consumer Staples down 0.5%, Basic Materials -0.35%, Real Estate down 0.3%, Energy -0.2% while Financials lost 0.1%.
Bonds were up – the TLT and TLH both gaining 0.5%, and that sent the 10 yr yield a bit lower at 3.96%. The 30-yr yield is now 4.54%.
Oil is bouncing around the $57–$58 level — after selling off about 13% since the September highs. Gasoline prices are now below $3 a gallon in many parts of the country, and lower energy costs should help ease manufacturing and transportation expenses in the months ahead. That, in turn, should help tame inflation. It should start to show up in the data this month and for sure next.
Now look — plenty on the left are still screaming about “high prices” and how they haven’t come down. Pssst… here’s a clue: prices rose dramatically under the Biden administration. Remember when CPI hit 9.4%? and that set a higher floor for prices across the board.
Now, while the rate of inflation has come down — it’s now hovering near 3% — but that doesn’t mean prices are falling. It just means they’re rising more slowly. Prices only truly fall in a full-blown recession — and unless that happens, get used to this level because THIS is the new normal.
So yes, lower energy costs should help a little — especially in manufacturing and transportation — but only a full-blown recession will bring real price relief. Capisce?
Gold – OMG – it crashed yesterday –Gold lost $230 or 5.3% – What did I say yesterday? 6%? And overnight Gold was weaker again and at exactly 8 pm last night it KISSED $4000 (ok it was $4004 – but I’ll take the win!)
Flashback – “this morning, it’s under pressure again — down $95 at $4,261. It finally feels like the gold bugs are taking profits after months of relentless buying that pushed it deep into overbought territory. Late last week, its RSI was 87 – remember, 70 suggests overbought — so it was only a matter of time before the trader types locked in some gains. Look, it’s a crowded trade, so I wouldn’t be surprised to see it test the $4,000 range — a 6% reset. And keep this in mind: gold is still up 59% year-to-date, so there’s no reason to get anxious over a little pullback”.
This morning Gold is trading at $4,093 up from the lows overnight but down $30 from yesterday’s close and its RSI is now 57.38!
Now – golds weakness didn’t just happen overnight. The Dollar Index, which had been in a free fall from January through July — down about 12%, helped push gold higher, up roughly 30% over that same stretch. Then gold surged again for all the other reasons — massive central-bank buying, its role as an inflation hedge, and its reputation as the ultimate safe haven — especially as trade tensions and the threat of a government shutdown added more angst to the mix. That pushed gold up another 30%.
But in the end, the trade got stretched. The momo guys kept pressing it higher — until they didn’t. And when they finally stopped, they pushed the other way…It’s funny really, they trip over each other trying to ‘get in’ and then they trip over each other trying to ‘get out’!
This morning US futures are consolidating. Dow futures are down 25 pts, S&Ps are flat, Nasdaq is down 42 pts while the Russell is down 3. Expect much of the chatter today to be about how NFLX disappointed.
The VIX which shot up on Friday morning before settling down has now backed off a bit more and is back cuddling between the trendlines…but still higher than where it was during the July /Sept time frame. This morning it is not ringing any alarm bells, so I suspect the market will churn.
European markets are mixed. Today it is the UK in the lead up 0.7% while Italy is the biggest loser down 0.6%. L’Oreal is down 6% on sluggish sales in North America along with the agita caused by the tariffs. Inflation in the UK came in unchanged.
The S&P closed at 6,735 up less than 1 point. We are just 28 pts away from the 2025 all-time high (6762) and it does not feel like we are testing that today….. Other than earnings and speculation around the FED, the only data point we’ll get is Mortgage Apps and since we are coming into the holiday season – you can expect them to be weak – because who wants to move at this time of year?
Here’s your new countdown:
7 days until the next Fed decision.
33 days until Black Friday.
And only 53 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
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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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Halibut w/Mushrooms, Leeks and Clams
This is easy and delicious. It makes you feel like you are on the beach with the sand between your toes…..Enjoy.
You need – if you can get it – Pacific Halibut – because the Pacific Ocean is colder year-round vs the Atlantic and the fish does not fall prey to some of the parasites that exist in warmer waters. Atlantic Halibut is best eaten in the colder months when the water is at its coldest….
Ingredients: Halibut, mushrooms (preferable oyster mushrooms), butter, 3 lg leeks, s&p, chicken broth, 2 doz littleneck clams and chopped Italian parsley.
Season the Halibut with s&p. Set aside.
Start by melting the butter in a sauté pan over med heat – do not burn the butter – add sliced mushrooms – like 2 cups and the sliced leeks. (Trim the leeks and use only the white and light green part of the stalk – discard the rest). Season with s&p and reduce heat to med low and cook for about 10 mins or until the leeks are soft. Now add about 3 cups of the chicken broth and raise the heat to med hi – let it come to a boil.
Now add the fish and clams to the sauté pan – wait for it to re-boil and then reduce heat to low and cover. Cook for about 6 or 7 mins…make sure all of the clams have opened. Any unopened clams should be thrown out.
Serve this dish in a full-size bowl (shallow is best) bathing in the clams and broth topped with the mushroom and leeks. Sprinkle with the chopped Italian parsley at the end. Enjoy this with crisp, chilled white wine.
Buon Appetito!