Things you need to know.

–        Froth – remember that word.

–        Tech gets punched in the face.

–        Put it perspective – were those results REALLY disappointing?

–        Yields up, OIL UP, Gold flat.

–        Today is NFP, Tuesday is THE election – although millions have voted.

–        Try the Porcini Rubbed Lollipop Lambchops

*If you’d like to learn more about Slatestone Wealth – Click here and put KP in the message box- I will give you a call back.

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Froth – a mass of small bubbles caused by ‘agitation’. OR a market condition where an asset’s price increases in value BEYOND its intrinsic value – when overconfident investors (algos) ignore the fundamentals and bid up a stock (or stocks) beyond its quantitative worth.

Maybe, just maybe we finally got to that point – Disappointing (or perceived disappointing) quarterly results from major tech companies sent stocks into a tailspin yesterday, marking the S&P’s first monthly loss since April. The Dow lost 380 pts or 0.9%, the S&P 500 dropped 110 pts or 1.9%, The Nasdaq lost 515 pts or 2.8%, the Russell down 40 pts or 1.6%, the Transports lost 72 pts or 0.4% while the Equal Weight S&P gave up 80 pts or 1.1%.

Tech giants like Microsoft and Meta Platforms reported mixed earnings, triggering stock drops of 6% and 4.1%,  – Now that depends on your perspective, right…..So for instance MSFT they beat on EPS, the beat on top line revenues – $65.6 billion (+16%), they beat on cloud revenues $38.9 billion, and their Azure and cloud services grew by 34% – but that was NOT good enough because the C suite forecasted future ‘slower growth’ (only 32%) ‘representing the struggle to bring data centers online fast enough to keep up with demand for AI services’  and so that ‘dour’ outlook caused the algo’s to take 6% out of it. And I say the algo’s because it starts with them…. once one of them starts to sell, it becomes like a herd mentality…and they all jump in, running for the door at the same time… Now, if you ask me – 6% was a lot considering that MSFT was only up 14% ytd going into yesterday – it’s not like it was up 50, 80, or 100%…. but that’s me.

META  quarterly net income +35% to $15.7 billion, EPS $6.03 vs. $4.39, FCF of $15.52 billion – Marky telling us that ‘We had a good quarter driven by AI progress across our apps and business,  We have strong momentum…’ yet the algo’s focused on the fact that he is going to ‘ramp UP heavy investments in AI and other futuristic tech’ – now ramping up means he is spending more money on R&D – you’d think as an investor that’s a good thing….and it is, but it is the overall ‘nervousness’ that sent these stocks into a tailspin…..

I mean they took 5% out of NVDA and these two reports suggest to me that demand for NVDA chips is only going UP not down – but what do I know……!

But it wasn’t all doom and gloom – there was investor excitement in other names International Paper rose 13%, ConocoPhillips added 6.4%, Booking Holdings +4.8% and Norwegian Cruise Lines added 6% – now none of these are sexy, but they were solid performers.  And the contra trades were all winners as well.  The DOG +1%, SH + 2%, the PSQ + 2.6%, VIXY + 8%, SPXS (triple levered short) +5.8%. 

In the end – TECH across the board got punched in the face…. – XLK lost 3.2%, Semi’s – SOXX – 3.9%, Cybersecurity – CIBR – 1.6%, Disruptive Tech – ARKK -4.8%. The weakness in the other sectors were not nearly as bloody…. Consumer Discretionary down 1.5%, Real Estate – 1.75%, Basic Materials – 1.3%, Financials – 1.3%, Industrials – 1.2%, Healthcare -0.8%, Communications – 0.9%, Consumer Staples – 0.2%, while Energy gained 0.6% and Utilities added 1%.

After the bell – we heard from both AAPL and AMZN – AAPL beat again on nearly every metric – quarterly Revenues of $94.93 billion, iPhone Revenues $46.22 billion, EPS $1.64 vs. $1.59 – come on….Their SERVICES business of $25 billion equates to an annual run rate of $100 billion – am I missing something? They took 4.2% out of it yesterday and it is down another 1% this morning….all on the idea that growth in China remains slow….Go ahead – you sell your AAPL because growth in China is slowing, I am keeping mine and buying more because every other metric for the company keeps making new highs. 

AMZN – do we really need to go THERE?  Beat, beat, beat and they offer solid forward guidance across the board…. the stock is up 6% in the pre-mkt (but it was down 3% yesterday). Price targets go up as high as $250/sh…

Eco data – came in better than expected – Challenger job cuts fell to 50.9% down from 53.4%, Employment COST index rose 0.8% vs. the 0.9% exp, PCE (FED’s favored inflation gauge) came in – in line (no surprises – flat month over month) while Initial Jobless Claims plummeted….

Today’s eco data is all about the October NFP report and the tension is high…. expected job creation is only 100k – but this could be a messy report because of the disruptions seen by Hurricanes Helene, Milton and the Boeing strike – which is still going on…. all temporary conditions…. Recall that on Wednesday – the ADP employment report came in much stronger than expected at 233k vs. the expected 111k…. and that caused US treasuries to fall sending yields higher…amplifying the move higher ever since the September NFP report.

Bond yields remain elevated…the 2 yr. is yielding 4.178%, the 10 yr. is yielding 4.295%…. a strong report today will only send those yields higher and strengthen the idea that JJ is going to have a harder time cutting rates…  The market has been conditioned for a 25 bps cut next week – I don’t see it…and the bond market apparently doesn’t see it either….bond yields have done nothing but go UP since JJ slashed rates by 50 bps…..which doesn’t really make sense – but so much isn’t making sense at the moment….

As discussed – the bond market is preparing for inflation to rear its ugly head next year NO MATTER who is living in the WH…..and the sense is that the FED will have to concede to higher inflation to help get us out of this massive US debt issue…Is the 2% target going to 4%?  And what does that mean happens to the 10 yr. yield?  6% anyone?

Oil jumped by nearly 3% – rising $1.90 to end the day at $70.53 and this morning it is up another 2.7% or $1.87 at $71.10…. So, what happened?  Iran has threatened to attack Israel from IRAQ…..now that’s new….So we have Iran attacking Israel (via proxy) from Gaza, Lebanon, Syria and now Iraq…..the latest news suggesting that they are preparing to attack using more drones and ballistic missiles…and an attack on Israel from Iraq adds another new dimension to this ongoing story…..that only further complicates it and what Israel allies might be forced to do. 

That move pushed oil up and thru trendline resistance at $70.23 – leaving us about to test intermediate resistance at $73.10.  And it’s Friday…the weekend could end up being long and anxious….in the end, Benny is correct…. – it is Iran (and all of their puppets) not Israel that needs to be stopped.

Gold – after kissing that new century – $2800 – it backed off to trade as low as $2740 before closing at $2750…. This morning, we are up $9 and remain well in the $2700/$2800 trading range.  All this as we deal with strong economic data, confused fed policy and the final days of the US Presidential election….which is now entering its final days….I’m voting for those European style elections that happen over 90 days…and done…I mean this 2 yr. run stuff is exhausting – mentally and financially. 

US futures are up …. Dow futures up 120, S&P’s up 20, the Nasdaq up 85 and the Russell is up 3.  The focus this morning is all about the NFP report and the discussion and analysis of the tech mess that has and is happening.  And do not discount the recent narrative that is concerned that volatility is about to spike because the election is about to offer more UNCERTAINTY rather than CERTAINTY…. because we won’t have a clear winner by Wednesday morning. Recall – the longer the uncertainty goes on, the more angst it will create…Let’s hope that is not the case. 

There are about 15 more companies reporting today. CVX (BEAT), XOM (BEAT), GTLS, ARES, TROW, CHTR, W, D, LYB

European markets are a bit higher…. up between 0.5% and 0.75%.  This after the beating they took yesterday after Eurozone inflation creeps back up – neutering the idea that the ECB is going to get a JUMBO cut……And after the UK’s new labor gov’t unveiled a budget that included $52 billion worth of tax increases… Let that sink in….in the meantime – the UK is forecasting real GDP growth to be 1.1% this year, 2% in 2025 and 1.8% in 2026.

The S&P closed at 5705 – down 108 pts.  And it is now down 3% off the October high…taking us right to the short term trendline…. (5700) – yesterday’s low was 5702.  Futures this morning are pointing up – as we await the NFP report. We want to see a weak number (but be careful – we could see it because of those hurricane issues – which are temporary not permanent), and so they will try and pull a fast one if you are not paying attention. Unemployment is expected to be 4.1% (unchanged), Average Hourly Earnings of +0.3% m/m and + 4% y/y. 

Yesterday the VIX spiked by 14%, this morning it is down 5%, but next Tuesday, Wednesday could see fear spike if we don’t’ get a result…. or if it senses that there will be challenges all over the country…. think the half dozen swing states….

And all this means is that you should never make emotional decisions and the next couple of trading days will surely test that…. Recall, upside (according to the charts) could take us to somewhere between 6000 & 6200 while the downside has trendline supports at 5700, 5590 and 5350.  None of those levels take us into ‘correction’ territory…we’d have to go to 5260 for a full 10% decline off the recent high of 5840 back in mid-October.

My guess is that once the election is over and the winners (WH, Senate and House) are determined, then investors can focus back on what the economy would be expected to do under either administration.

Remember – Do not go changing your portfolio based on who will live in the WH…. politics do not price stocks in the long term – although it can and does create short term chaos and long-term opportunity. 

Successful investing is a marathon not a sprint. Click on the link to send me a message – I’m happy to discuss.

 https://slatestone.com/contact-us/

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.

Porcini Rubbed Lollipop Lambchops

This is all about the rub – where you use it – is up to you….

Porcini Rub:   Grind 1 oz of dried mushrooms until fine…you can use a mortar and pestle or a food processor.

Next combine the mushroom powder with 2 tbsps. of sugar, 1 tbsp. of s&p, 4 garlic cloves and about 1/4 cup of olive oil.   Set aside.  You can make a container of this rub up to this point and store in the fridge in a sealed jar.  When  you get ready to use it – take it out of the fridge and let it come to room temp.  Mix and then massage it into your meat of choice.  I would use this on a rib-eye or on lollipop lambchops….

For the Lollipop Lamb chops – massage the chops with the porcini rub – both sides – place on broiler pan and let rest for 20 mins or so.

Turn the broiler on high – and place the chops under the broiler.  If you choose – you can also do these on the grill but beware – they will cook fast – so stay tuned.  

You want them to be juicy yet a bit crusty……Once they are done – arrange on a bed of arugula salad – seasoned with s&p, fresh lemon juice, a splash of oil – drizzle some nice balsamic vinegar over the top and serve.

Simple, easy.  Enjoy.

Shopping for wine or spirits?  Go to WoodenCork.com – use the code ‘WAKEUPKENNY’ to get a 10% discount.

Buon Appetito