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Good morning, good afternoon, and good evening to wherever you are. Yesterday’s trading left a lot to be desired. It was Columbus day in America and banks and the bond markets were all closed. People took a long weekend and trading was subdued to be sure.  Volumes were low and while low volumes can produce some volatility, that was surprisingly was not the case at all yesterday.  

Over the weekend, the latest trade deal got chewed up by analysts, investors, and traders. While some digested it, others spit it out. Not really sure what to make of it. Was it something to celebrate or was it a big nothing done? And while most of the analysis suggests the latter, the market did not really sell off at all.  I for one expected a bit more of a retrenchment — especially because it was a semi-holiday. After last week’s gains that saw the market rise on, what I would call, uncontrolled optimism driven by algos on a trade deal. That doesn’t really appear to solve a lot of the issues. Yes, tariffs that were due to rise today were halted. OK great, and China is due to buy more agricultural products (think soybeans and pigs). But did that really solve the trade issues? Think forced technology transfer and intellectual property rights to begin with. While Trump told us that the process has indeed begun, the jury is still out.  

Market action last week would have you think that after 20 months, all of the trade issues were resolved and it is smooth sailing ahead. News reports here continue to be mostly optimistic while news reports in China appear to be much more subdued and controlled. Is that just the way the state run media manages expectations? Because now, it is all about the expectations. The administration is sticking to their guns telling us what a great first step this is, and Treasury Secretary Stevie Mnuchin reiterated that tariffs in December are still set to kick in IF there is no agreement on Phase One signed by Donny and Xi Xi next month in Chile.  

The S&P had a 10 pt range yesterday, falling in the early mins after the opening only to rally back and remain tight for the rest of the day. The other indexes followed suit and by the end of the day while the market ended the day a bit lower. There wasn’t any real pullback after the 3.5% surge last week. At 4 pm – the Dow was lower by 29 pts, the S&P gave back 4 pts, the Nasdaq fell by 8 pts and the Russell gave back 6 pts.

Overnight, trading in Asia was more mixed. After Monday’s rally, new doubts appear to be emerging about the “trade lite” deal that was announced on Friday. China wants to meet again BEFORE any deal gets inked next month. And that doesn’t really leave much time to get this done. Economic news in China was mixed. the latest Consumer Price Index rose by 3% year/year while Producer Price Index fell by 1.2% year/year. Pork prices surged by 69% year/year because of the African Swine Flu that has decimated their meat supply. So now you want to know why they want to (need to) buy more pork from the US? Come on, is it really because they want to make a deal or is it because they are forced to buy more meat to feed their citizens? This ISN’T rocket science.  

So the week is starting out to be a bit more cautious, as talk of the trade lite deal is showing some signs of strain, and the fact that China now wants more time to “iron out the details,” they also want the tariffs to go away, something that Donny, Stevie and Bobby tell us “ain’t happening.”  

Trading in Europe this morning is suggesting that it’s all good. All markets are higher as the EU (European Union) negotiator tells us that a BREXIT deal is still possible by month end if the UK agrees to more concessions.

Michel Barnier, the “negotiator” said: “our teams are working hard… and this work has been intense over the weekend and yesterday, because even if the agreement will be difficult… to be frank, it is still possible this week.”

And that is getting the algos all fired up. in other news, economic data in the UK shows that unemployment rose by 22,000 at the end of August, taking the unemployment rate from 3.8% to 3.9%. Spain’s Supreme Court on Monday jailed 9 Catalan separatists for the chaos they created back in 2017, and that is causing protests and unrest in Barcelona. That’s nothing but noise, not a market moving event at all, but just wanted you to know.  FTSE – 0.20%, CAC 40 + 0.32%, DAX +0.33%, EUROSTOXX + 0.45%, SPAIN +0.52% and ITALY +0.39%.

US futures are surging ahead of a slew of earnings from some very big, high profile companies due out today, and more this week. JPM exp of $2.46/share, GS exp of $4.82/share, C exp of $1.92/share, WFC exp of $1.14/share, JNJ exp of $2.00/share, UNH exp of $3.74/share, BLK exp of $6.97/share.

Now recall that all the talk is how the country is facing a tough earnings season and that caution is the preferred mood.  Look, analysts are telling us that earnings for the S&P companies are due to decline by 4.3% year/year. With trade still an issue, strategists do not expect a lot of optimism coming from the C-Suite over the next 3 weeks.  But, I think it’s overdone. Already we have gotten 23 company reports and of that 90% (21) have have “beaten their estimates.” Bank of America tells us that there is a correlation between the early results and the final performance. So will it be as bad as early expectations? And like we always say: “earnings are history, makes no difference what is important is what the guidance looks like.”

Just for your edification here is what the sectors are expected to report:

Util +4.2%, Health Care +2.2, Communication Services flat, Industrials flat, Consumer Staples – 1.8%, Consumer Discretionary – 2.5%, Financials – 2.6%, Basic Materials – 9.3%, Info Technology – 10.2% and Energy is expected to be down by 35%!  

Expect the story to be the same. Profits getting slammed by trade unrest, slowing global economy and massive geo-political unrest. Expect to hear a lot about 2020 estimates and expect to see companies begin to temper those expectations as it is still unclear what is ahead for the economy, for trade, for the US Presidential election cycle (and that will become more important as the field gets cut down). And that will prove to be the catalyst that forces a re-pricing of stocks.  Now a re-pricing does NOT mean a disaster is ahead at all, it just means that maybe this rally has run out of steam. For now…  

Speaking of the election, did you see that NYC’s former Mayor Mikey Bloomberg is reconsidering his bid for the nomination?  Apparently he is a Biden supporter. But with Joey having a bit of an issue, Bernie’s heart attack, and Lizzy surging in the polls, Mikey is re-thinking his decision… and that could prove to be a “game changer” if he tosses his hat into the ring. Say what you want, but Mikey is no dummy… capisce?  

Take good care.


Campanelle w/Spinach, Sundried Tomatoes and Mascarpone Cheese

This is a simple 20 min recipe. It also uses mascarpone cheese and as you can see – I am a fan of mascarpone cheese… It is very versatile and can be used in a number of ways in pasta dishes… and here is one for you…

You will need: Campanelle pasta (Italian for “little bells”),  Mascarpone cheese (room temp), zest & juice of a Lemon, S&P, olive oil, minced garlic, chopped sun-dried tomatoes,  1 bag baby spinach, toasted bread crumbs and of course fresh grated Parmegiana or Pecorino Romano Cheese.

Begin by combining the zest, lemon juice, mascarpone, and S&P in a bowl, whisk to combine.

Bring a  pot of salted water to boil – add pasta.

While this is happening (you have like 8 mins) heat the oil in a skillet, add the garlic and cook another minute or two, then season with S&P.

Cook the pasta until al dente, like 8 mins… do not let it get soft and mushy.  Strain reserving a mugful of the pasta water.

Return the pasta to the pot and set over medium low heat.  Stir in the mascarpone and lemon mixture, sun-dried tomatoes, and spinach. Add back about ¼ c of the pasta water and toss together until the spinach has wilted and everything is piping hot, adding a little additional pasta water if needed.

Serve immediately in warmed bowls topping each bowl with grated cheese and some toasted breadcrumbs – do not overdo.

**you can add some texture to this dish by sautéing some seasoned diced chicken in a bit of olive oil and diced onions.  Add the chicken when you are putting the whole dish together in the pot.  

Buon Appetito.