Things You Need to Know
- Cooler Heads Prevail! Bernie, Lizzie and AOC are apoplectic over a Senate deal to end the shutdown.
- The House threatens to ‘kill it’.
- Consumer Sentiment slips. CPI and PPI due out later this week.
- Fed Fund Futures are zeroing in on a December rate cut.
- Try the Baked Thighs – delish!
Futures are rallying…. Dow futures + 200, S&P’s up 67, Nasdaq up 390 pts and the Russell is up 30 pts!
If you haven’t heard yet – It’s all about ‘Accentuating the Positive (today)/and Eliminating the Negative’ as there was a break in the Senate Democrats over the weekend – the FAA chaos clearly adding pressure to the process. 8 Democrats joined in with the Republicans on a procedural vote to try and end the shutdown – House Democrats are not happy with their colleagues across the hall and vow to fight on and vote it down.
The 8 Democratic Senators include Catherine Cortez, NE, Dicky Durbin, IL, John Fetterman, PA, Maggie Hasan, NH, Timmy Kaine, VA, Angus King, ME, Jackie Rosen, NE and Jeanne Shaheen – NH – Now, while this is good news, I guess we can expect the left to now threaten to primary all of them – except 6 of them are not up for re-election and two – Shaheen and Durbin are retiring at the end of their terms. How’s that working?
In any event – stocks are higher this morning – building on the late day gains that we saw on Friday – as it was rumored to be happening – suddenly the technology valuation pressures that were plaguing the markets were swept aside as stocks got a late day burst of buying and ended mostly higher…Dow up 75 pts, the S&P up 8, the Nasdaq lost 50, the Russell gained 14, the Transports added 252, the Equal Weight S&P added 67 while the Mag 7 lost 320 pts.
Now – to be clear – it is not done yet – this has to go to the House and Jeffries (along with a host of others) have said that it is DEAD ON ARRIVAL….and so the drama continues, but the markets are expecting that while we might have more drama – this issue is about to be resolved – and so now, we can put this behind us (as far as the market is concerned.)
In the end – the shutdown does nothing but create further risk for American’s and the markets – and the longer it continues the more risk there is.
And while we have not gotten any official gov’t macro data – we did get the U of Michigan consumer sentiment data and that came in weaker than expected at 50.3 – down from 53.6 and below the expectation of 53 and that suggests that consumers are frustrated – and we can attribute that (mostly) to the gov’t shutdown. Remember – analysts were all suggesting that the stock market would suffer deeper losses the longer this shutdown went on.
And that concern over tech valuations? I think it was good, it took some of the froth out and reminded everyone that just maybe the valuations were stretched and needed to shake the branches to see who fell out.
Now – while we did not get another month of NFP data – investors are using the private payroll data – and that is starting to show a bit of a slowdown -which continues to keep the FED’s rate cut plan on schedule. Fed Fund futures are now pricing in a 65% chance of a December cut – and it will most likely inch higher as we move closer to the FOMC meeting…which is now just 4 weeks away on December 10th.
Speaking of Eco data – IF the gov’t does in fact reopen today – then we should start getting official macro data and this week is all about inflation… Thursday should be the October CPI report, and it is ‘expected’ to remain unchanged over the prior read. If it is correct then top line CPI m/m is expected to be up 0.2%, Core CPI m/m up 0.3% – while y/y results are expected to be up 3% across both readings. And that suggests that price pressures appear to be waning.
Friday brings us the latest PPI report and that is inflation at the producer level and that is also expected to remain benign. Friday also brings us Retail Sales – which are expected to be -0.2% m/m, Ex autos and gas of +0.3%.
Bonds continue to churn…. the TLT lost 0.2% while the TLH gave up 0.15%. The 10-yr yield is now 4.12% while the 30 yr is yielding 4.72%. And the markets are ok with this – the issue is going to be if we suddenly see yields spike higher – something I do not see right now.
Oil was all over the place trading as high as $60.48 and as low as $59.32 before settling at $59.84. This morning – oil is up 7 cts at $59.91. We have been discussing this – oil is in the $55/$62 range and now that we have breached $60 – a test of $55 should not be that far off.
Gold – is up $88 this morning trading at $4,088. The move this morning a result of the potential end to the shutdown – that allows gold traders to now refocus on the next rate cut. Lower rates are good for gold….and the gold market is telling you that they believe rates are going lower in December!
The VIX which has spiked higher on Friday – causing stocks to sell off – is now settling down on the back of the latest news out of DC. A cooling off of the VIX will keep futures moving higher and then stocks moving higher as well. This morning the VIX is down 2 pts or 0.45% – trading below the trendline.
This morning US futures are higher….and those VALUATION CONCERNS are no longer a concern! The focus now will be on the re-opening of the gov’t and getting gov’t employees back to work and back to getting paid. Let’s hope the FAA and TSA workers are ready to go!
European markets are celebrating as well…. markets across the zone are all higher…. up by better than 1%. Apparently the Europeans are happy about the end of the shutdown too. Tech and Pharma names getting all the love.
The S&P closed at 6,728 – up 8 pts after piercing trendline support at 6670 to test as low as 6631…So, when we pierced support the algo’s went into overdrive and sold stocks lower (as discussed on Friday). It was only the news that a potential deal was in the works that reversed the trend. So this does raise a question about the next move.
Now that we pierced it – we can expect that we may most likely test it again to see if they defend the position….So, today’s excitement – while exciting does not suggest at all – that another test lower is out of the question, because once this euphoria ends, investors will focus once again on the economy and why exactly the FED will continue to cut rates. And all that means is – remain disciplined – no need to chase – just stick to the plan. Talk to your advisor if you are concerned.
Call me at 561-931-0190 – to give you a no obligation review of your portfolio. It’s all about risk management – let me help you assess the risk of the portfolio vs. the risk you are willing to take.
Countdown
18 days until Official Black Friday
45 days until Christmas
51 days until the ball drops in Times Square
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Baked Chicken Thighs.
These are so good, because the thighs are ‘juicy’.
For this you need: Boneless Thighs, seasoned breadcrumbs, Eggs, Flour, Olive Oil, butter and chicken stocks.
Begin by rinsing off the thighs and patting dry with a paper towel.
Make the assembly line – in one bowl put the flour, the second one – the beaten eggs and the third one – the seasoned breadcrumbs.
Preheat your oven to 350 degrees.
Heat up a large sauté pan with olive oil and a dollop of butter.
Now – dredge the thigh in flour, dip in the egg wash and then cover with the breadcrumbs.
Fry the thighs in the sauté pan to brown the breadcrumbs. – Transfer to a baking dish. Once done, add a bit of chicken stock and another dollop of butter to the pan and swirl around to scrape up all the bits. Now pour this over the thighs in the baking dish and cover tightly with foil.
Place it in the oven and cook for 30 mins. Remove and serve with roasted potatoes and a mixed green salad.
Buon Appetito!