Things You Need to Know
- Soft Labor + Soft Manufacturing = FED RATE CUT!
- Markets Rally Despite the Negatives.
- Robotics have BIG win at the White House
- Feast of the 7 Fishes #3 –Try the Stuffed Calamari
ADP reported that we LOST 32k jobs – worse than the +10k that were expected and a far cry from last months +42k jobs created. Sounds negative to me (fits their narrative).
On the other hand – S&P and ISM reported that SERVICES PMIs were both in and remain in the expansion zone and that is important because we are a 75% services economy – so that’s a positive.
Industrial Production was in line while Capacity Utilization came in a bit weaker than expected at 75.9% vs. 77.2%. And that’s another negative. Understand that Capacity Utilization measures how much of America’s industrial “muscle” is being used — factories, mines, utilities, machines, production lines.
Now this is interesting – and may be the canary in the coal mine for further rate cuts. It’s one of the cleanest read-throughs we have for demand, production, hiring, recession signals, inflation pressures. This report coupled with the weak ADP report have now ‘sealed the deal’ on a rate cut next week.
It’s reported as a percentage.
82%–85% → Hot economy / inflation risk
78%–81% → Healthy, balanced
Below ~77% → Weakness / excess capacity – think Factories aren’t busy. Demand is soft. Companies cut shifts or stop investing. Hiring slows. (here’s the ADP connection).
This level signals economic slowing or outright recession risk if it persists.
Below 75% → Historically recessionary. Plenty of idle machines. Companies cancel capex, Unemployment tends to drift higher.
Currently – we think unemployment is 4.4% – but remember we haven’t gotten a full report in 2 months, so you have to ask yourself what are the chances that the next NFP report will show higher unemployment? I think the probability is high. (like 100%).
But you say – we are a services economy not a manufacturing economy to which I would say Capacity Utilization tells you how busy the industrial engine is. When that engine slows, the rest of the economy eventually catches up — and that’s why the Fed cares.
The next question is – how will this data influence his forward guidance commentary. Is a January cut on the table or is he willing to wait until March for another cut? Currently Fed Fund Futures are giving a January cut only a 28% chance of happening –while a March cut has a 36% chance of happening. Let’s see if those numbers change on Wednesday afternoon.
Now what is interesting is – no one was discussing this data point – the day focused on the ADP report and what that means. In my mind – both are important to consider, and both are pointing to potential trouble ahead. Yet – markets moved higher – the Dow gained 410 pts or 0.9%, the S&P rose by 20 pts or 0.3%, the Nasdaq gained 40 pts or 0.2%, the Russell rose by 47 pts or 1.9%, the Transports up 335 pts or 2%, the Equal Weight S&P rose 56 pts or 0.7% while the Mag 7 gained 43 pts or 0.1%.
The message? Broad market strength… tech lagged. And there were mixed headlines out of tech, and that explains the underperformance:
Jensen Huang openly questioned whether Xi would even allow NVDA to ship H200 chips to China if U.S. restrictions were eased. → Negative
MSFT signaled softer demand for certain AI tools. → Negative. Yet — they did not cut their AI sales quota. → Hmm… interesting (softness, but confidence?)
Then the big one:
The White House rolled out a major new robotics initiative, aiming to make robotics and advanced manufacturing central to America’s reshoring push, domestic production capabilities, and global competitiveness. Call it what it is: a structural positive for automation, robotics, industrial tech, and U.S. manufacturing.
So, the day was a genuine push-pull: Weak labor data (negative), Weak manufacturing utilization (negative), Tech-specific concerns (negative), But a massive, long-duration robotics initiative (positive). And a market still expecting a rate cut next week (positive). In the end, the positives won the day, but the macro undercurrents are shifting — and investors would be foolish not to pay attention.
Bonds did next to nothing…. TLT and TLH both rose by 0.25%. The 10-year yield is 4.07% while the 30-year yield remains steady at 4.73%.
Oil recovered some of Tuesday’s losses — rising 0.8% to close at $59.11. The bounce was driven by reports that Ukraine launched attacks on Russian energy infrastructure, raising concerns that some supply may come off the market. That headline gave oil a lift, but let’s be honest — it’s not nearly enough to offset the very real supply glut that continues to weigh on prices through the 1st quarter of 2026.
The move yesterday pushed oil right up to kiss trendline resistance at $59.75, where it promptly stalled and pulled back. This morning, crude is up another 0.5% at $59.25, but once again it appears unable to push through that resistance level.
Bottom line: We remain stuck in the $57.50 – $59.75 trading range, and until the fundamental oversupply narrative changes, that range should hold.
Gold –churned all day yesterday trading at $4200 in the morning and ending the day at $4,203. This morning it is trading unchanged as it awaits next week’s FED decision. A cut and dovish commentary will send gold higher.
Bitcoin is trading at $92,500 while Ethereum is trading at $3,200.
The VIX remains below all trendlines – suggesting that ‘there is nothing to see here’.
Eco data today includes Challenger Job Cuts – survey says it is expecting to see a 48% increase in cuts y/y. We will also get Initial Jobless Claims which are expected to remain stable at 220k, while Continuing Claims are expected to be 1.96 mil unchanged over last week. We will also get Factory Orders and Durable Goods orders – and this will be interesting based on yesterday’s Capacity Utilization report.
This morning, US futures are flat. The Dow +40, S&P +1, Nasdaq -10, and the Russell is down 6.
European markets are all pushing higher. Germany in the lead up 0.75% while Italy carries up the rear at +0.1%.
The S&P closed at 6,849, up 20 points, as we continue to see this market grind higher. Expect plenty of churn over the next few weeks — remember, asset managers are laser-focused on protecting gains into December 31st. It’s the end of the marking period, and no one wants to blow up a great year in the final lap.
As we move past next week’s FED meeting, economic data becomes less relevant — markets shift into holiday mode, liquidity thins out, and the algos take control.
Technically, we’re now back above the short-term trendline, and we remain firmly inside the 6,730 / 6,930 trading range.
Call me at 561-931-0190 – to give you a no obligation portfolio review. Let me help you assess the risk of the portfolio vs. the risk you are willing to take.
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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Feast of the 7 Fishes – #3 – Stuffed Calamari in Tomato Sauce
This is outstanding…you have to like Calamari’s because this one is a bit of work…. but the result – to die for.
For this you need: Calamari bodies for stuffing – so you want the big ones…(you don’t need or use the tentacles so just specify “bodies for stuffing”) , homemade Italian style breadcrumbs (recipe below), wine, olive oil, toothpicks, homemade marina sauce (same as the lobster sauce w/out the lobster. – recipe below) s&p.
So here is the deal – you order the calamari from the fish store – “cleaned”. This means that they trim the tentacles, and take out the membrane from the inside…..but here is reality…..you still to make sure that they are clean – so when you get home – you need to wash them and confirm that the membrane was in fact taken out. If not – you have to turn the calamari inside out – and then rinse well and then turn it back again – this is the trick…you have to be very careful as you do not want to rip the body otherwise you cannot stuff him. Capisce?
Now take a bowl of breadcrumbs – add enough olive oil to make them moist but not “wet”, now add a splash of your favorite white wine – not a chardonnay. Mix well. Can you make a ball with the breadcrumbs? Do they hold in place? Perfect.
Now – carefully stuff the calamari using a teaspoon and your index finger…. careful not to overstuff as they will explode in the sauce when you cook them. You need stuff them just enough so that you can pin them closed with a toothpick… Repeat until you have stuffed all of the calamari’s … (I usually cook about 6 lbs. of them on Christmas Eve, so it takes a couple of hours to clean, stuff and cook).
Once you have stuffed them – drop them into the marinara sauce that you have prepared and turn the heat to simmer – DO NOT BOIL the calamari! They will begin to plump up and turn white then take on the color of the sauce. They will cook in all of about 30 mins (max). Turn heat off and let rest.
Again – you should make this the day before and let it sit overnight. The next day – take it out of fridge and let warm up to room temp and then heat up on simmer. When you are ready to eat them – serve them in a large bowl with plenty of tomato sauce. You can also make this and serve it over linguine if you prefer. The other option – if you make both the lobster and calamari sauce – then mix a couple of ladles of each and serve that over the linguine…..
Buon Appetito!