Things you need to know.

• Mamma Mia – What a rally! Lots of buyers and lots of Short Covering
• Stocks up, bonds up, gold up, dollar down, yields down.
• But lower yields result in ‘looser policy’ – Is that what JJ really wants?
• House avoids a Shutdown…. (As if that was really going to happen)
• Try the Stuffed Cubanelle Peppers on your Thanksgiving Table.

Stocks RIPPED higher, Bonds RIPPED higher, and investor excitement RIPPED higher…..This as the gov’t told us that inflation is cooling – prices were flat m/m and they fell more than expected y/y – key metrics – lower car prices and lower airfares….that’s great….lower prices for things we don’t use every day…..Housing remains an issue but to be fair – the growth in the cost of housing is slowing, but it is not declining….Energy has backed off a bit and that is a plus  – although many still believe that another surge in oil prices is coming. Remember – yesterday OPEC raised its forecast for global demand growth and India and China are importing oil at RECORD rates all while the Saudi’s control production to attempt to hold prices here if not push them higher….….Food – remains a daily issue for everyday Americans – cereals, meats, chicken and fish continue to push higher while we are seeing some relief in eggs, milk and butter….No matter what the guts of the report said – the headline numbers were enough to ignite a rip roaring rally.

The Dow gained 490 pts or 1.4%,  the S&P added 85 pts or 1.9%, the Nasdaq jumped by 325 pts or 2.4%,  the Russell soared higher…..adding 93 pts or 5.4% (taking that index back into positive territory ytd) – the IJT – Small Cap 600 Growth and the IJJ – midcap 400 Value – both rallied hard…up 4.4% and 5.3% respectively…… the thinking here is that this was a heavily shorted group, so the good news on CPI forced a run to cover….thus the outsized move.  The Transports gained 476 pts or 3.3%……..And the equal weighted S&P? That index (SPW) added 161 pts or 2.8% – putting it in positive territory for the year as well. (You can add the equal weighted S&P 500 ETF to your portfolio (if you want) with the Invesco RSP product).

The 20 yr. bond etf – TLT – rose by 2.3% and the 10 – 20 yr. bond etf – TLH gained 2% – leaving both down on the year but well off the lows we saw one month ago. Yields on the 2 yr. dropped by 18 bps to end the day at 4.844%, the 10 yr. yield dropped by 18 bps as well leaving it at 4.45% down a stunning 11% off the October 19th high of 5.02% and the 30 yr. yield declined by 12 bps to end the day at 4.63%.

Of the broad 11 S&P sectors – Real Estate – XLRE was the clear winner – rising by 5.4% in one day…. Utilities – which have also been under pressure at the prospect of ongoing rate hikes was also a leader yesterday…the XLU (which is the very definition of boring) rose 4%! Consumer Discretionary – XLY +3.4%, Basic Materials – XLB added 2.9%, Industrials – XLI +2%, Tech – XLK +2%, Financials -XLF +1.9%, Communications – XLC +1.6%, Consumer Staples – XLP + 1%, Energy – XLE gained 0.9% while Healthcare – XLV added 0.7%.

Following real estate – the Home Builders – XHB added 5%, Retail – XRT +5%, Airlines – JETS +4.7%, Disruptive Tech – ARKK + 5.1%, Semi’s SOXX + 3.7%, Cybersecurity – CIBR +3.7%, Coal Stocks +7% (AMR was a name I gave to Stuart Varney last week), AI +7%, Aerospace and Defense – ITA + 0.8% and is up only 3.8% ytd…..  which is a bit odd to me – considering what is going on in the world…but there is a sense that investors are rejecting this group because they don’t support the wars going on in the world, so they aren’t finding any value in this sector….OK, that’s fair, everyone makes their own choices. I mean it was hard to find anything in the red – unless of course it was any of your contra trades….and remember – unlike stocks in a long-term account – contra trades are NOT long-term holdings, they are strategic purchases/sales and should not be a permanent part of a long-term plan.

The line has been drawn in the sand…..The December FOMC meeting will see another pause, but before you throw a party – understand one thing…..easing bond yields results in ‘looser financial conditions’ which is counter to what the FED wants….He wants to hold rates higher for longer (remain restrictive) in order to convince us that they killed the inflation monster, while the market and investors are already planning on 2024 rate CUTS – something that JJ will most likely continue to fight.  ….The tightening that higher yields represented fades if we get a substantial bond rally that will send yields down and that only further complicates JJ’s job… Lower yields results in lower rates….which is stimulative, creating demand and then you know what’s next…….the inflation monster is reborn and it’s off to the races…So, while I do agree that we are in pause mode now….I remain in the camp that the FED is not cutting rates as the market expects….but that’s me….You do you…..

Now – again, I would say – that that is not a reason to not be in the market…remember, it is time in the market and not timing the market…. which is why I say – talk to your advisor, build you plan and then stick to it. Tweak as necessary but make sure you have a core foundation of large/mega cap names in the industries you are in. Look – I love to see the market go higher, and I would love to see us avoid a recession…..and while I am not convinced that that is going to happen – the market should continue to enjoy higher prices as it digests the fact that we are most likely at the peak…..and even if we stay here – the market can advance….Remember – 4%-6% rates are NORMAL – anything substantially below or above is abnormal…….

Today – it’s all about the Producer and what they are paying for raw materials to produce the stuff that we buy…. will today’s report also suggest falling prices for raw materials? The bet is yes…. the expectations are for lower numbers and that will give more fuel to yesterday’s fire…   At 7 am – we got mortgage apps and they rose by 2.8% – the highest level in 5 weeks…. – think a slight decline in 30 yr. money…. At 8:30 – we will get that PPI number….so sit tight and strap in….it could be another rip-roaring day…

US futures are UP – Dow futures up 115, S&P’s up 20, the Nasdaq is up 100 pts, and the Russell is up 11.

Gold found support at the trendline – $1939, A level that was either going to hold or not….and with yesterday’s better than expected report – buyers ran in to buy up gold…..with rates not going up any longer (for now) that proved to be the opportunity for investors waiting for the signal.  Gold shot up yesterday and is up another $10 this morning…. trading at $1977…. Up 2% from the trendline. Resistance is right here at $1988 – a push up and thru here will open the door for gold to advance back to the October highs of $2025.

Oil – remains tight at $78/barrel up from $75 – 3 days ago. Resistance will be found at $81, so it remains in the $75/81 trading range.

European markets are all higher… the UK goes positive on the year…. up just 1%…. trailing badly from its counterparts…. France up 11%, Germany up 13%, Spain ahead by 17% and Italy up 25%. UK inflation fell to a 2 yr. low…. coming in at 4.6% down from 6.7% – PM Rishi Sunak is calling it… ‘mission accomplished’…. but it is not clear whether the BoE agrees but investors across the zone are celebrating the same way investors in the US are.

House speaker Mikey Johnson passes a CR bill and sends it onto the Senate…. Jo expected to sign it by weeks end – thereby avoiding a shutdown…. (Yawn…)

The S&P closed at 4495 – up 85 pts – Now solidly on the north side of resistance at 4404. The gap created by yesterday’s good news (closed at 4411 on Monday and opened at 4458 on Tuesday – that is a 47 pt gap) – WILL need to be filled at some point….it may not be today or tomorrow – but don’t be surprised when it does.  In order for the mkt to continue to advance – it will need to fill that gap and be sure that investors support it. Do not discount the amount of short covering yesterday that only added to the excitement…once those positions are closed out – that ‘demand’ dries up…. Capisce? In any event – many are asking – Did Santa come early? Can we keep going higher from here…the S&P is up 10% in 2 weeks…. leaving it up 17% ytd…. a fine performance by most measures…. We are 100 pts away from the 2023 highs of 4600…that’s essentially 2.5%…. Can we do it? Of course – especially if JJ wavers at all on the rate CUT story…. In any event – don’t go chasing names you already own on up days – unless you just can’t help yourself…Sit back, do your homework and then move appropriately.  Call me to discuss.

Remember – this is a long game…investing is dynamic, not static….

Take good care,

kpolcari@slatestone.com

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.

Kenny Polcari is the Chief Market Strategist for SlateStone Wealth.  Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.

Stuffed Cubanelle Peppers

Another Thanksgiving vegetable to serve….and so good….

Cubanelle peppers are the long Italian peppers used for stuffing. Pick up a dozen from the store and try this recipe.

You need:  Cubanelle Peppers, Italian seasoned breadcrumbs, olive oil,

Put the breadcrumbs in a bowl and add some olive oil – enough to wet them but not enough to soak them…. mix well.

Now – using a teaspoon – carefully stuff the pepper – pushing the breadcrumbs deep into the pepper with your finger if you need to. Once stuffed – place in a baking dish – alternating ‘head to toe’.

Preheat the oven to 375 degrees.

Now drizzle the peppers with a bit of olive oil – not too much – they will make their own oil….

Now cover with foil and place in the oven – bake for about 40 mins. Now remove the foil and let them brown a bit…. if there is too much oil – just take a spoon and remove some it.

Let them brown for about another 10 – 15 mins or so. Remove and let stand while they cool. Now – if you overstuffed them – then expect to see some of the stuffing come out of the pepper – no problem – It’s all good.  Serve alongside the other veggies at your Thanksgiving table.

Buon Appetito