Stocks rally to new highs (again) on the back of the weekend news as the shortened Thanksgiving week got underway…
Rinse and repeat (this was the Monday opener).
Good morning America, good afternoon Europe and good evening Asia. It’s a short week for US trading; closed Thursday all day and closed early on Friday. So if anything is going to happen in the markets, expect it to happen today, tomorrow, or Wednesday.
And it happened, yesterday… Global markets rallied on the news that China has now thrown IP theft and Forced Technology Transfer into the mix. Then there was a wave of mega mergers that only added to the excitement for the day. Surprisingly, there we no contradictory tweets by either side and that gave the algos a sense of relief. Asian markets closed higher by 0.5% to 1.5%, European markets rallied to the same tune, with most of the markets up 0.7% across the board.
We watched as US markets rallied and ended the day up between 0.7% – 2%. The Dow added 190 points or +0.68%, The S&P added 23 points or 0.75%, the Nasdaq surged by 112 points or 1.32% and the Russell advanced by 33 points or 2.1%.
The three new deals announced (totaling some $50 billion worth of deals): LVMH/TIF in a $16.2 billion all-CASH offer representing a 37% premium, SCHW/AMTD in a $26 billion merger, representing a 26% premium, and EBAY is selling its StubHub business to European Rival Viagogo for $4 billion, all CASH. This tells us is that CEOs are CONFIDENT in the business outlook and they are confident in the economic environment. NO matter that there has been a trade WAR going on for 23 months now and the global economy is supposedly failing.
With interest rates at all-time lows (and potentially going lower) and the ability to lock in long term money at favorable rates, it makes sense for the merger action we are seeing as long as the CEOs are CONFIDENT about the future. And they are!
Now the trade news continues to be the main driver while low interest rates continue to be the fuel for the tank that has caused global markets to surge. According to Fed Chair Jay Powell last evening, do not expect rates to rise any time soon as long as the economy continues to perform as well as it is. So, while investors continue to be optimistic about a Phase One trade deal, they do not seem to be concerned that the ongoing drama will derail the current trend.
Overnight, the US and China had a phone call and apparently “reached consensus on properly resolving relevant issues,” agreeing to “stay in touch” (do you think?) to effect a Phase One trade deal. While the three players, Liu He, Stevey Mnuchin, and Bobby Lighthizer were all on the call, no one was willing to provide further details other than to say it was “constructive.”
So, here is the rub, Dec. 15 is only 19 days away. Donny has a decision to make. If a trade deal is not “reached,” will he impose those 15% tariffs on another $160 billion of imports or not? Now, “reached” can be defined any number of ways. Is it a signed deal? Is it an “understanding?” Is it “ongoing constructive conversations?” Is it 90% done? Is it “potentially very close?” How will we know which definition will be used on that day? As you can already tell, they (the admin) are floating balloons, testing the language on the markets to see what elicits a reaction as they prepare for the announcement. I mean there has to be an announcement in the next 19 days or he will have no choice on imposing the tariffs. Not his style. He won’t back down if there is NO deal “reached.” So, expect to hear a dozen versions of what “reached” means as he, and they, try to manage the market expectations going into year end.
Asian markets ended mixed with Japan + 0.35%, China + 0.35%, ASX +0.853% while China fell 0.29%.
The Hong Kong listing of BABA was a huge success, rising some 6%. Hong Kong CEO Carrie Lamb refraining from announcing any new proposals surrounding Sunday’s elections did cast a negative pall over the rest of the market.
European markets are off to a weaker start, but nothing to write about. After the surge yesterday on the headlines, it’s not surprising to see the markets digest. In the UK, PM BoJo is coming under increasing pressure from the Labour party leader, Jeremy Corbin as the Dec 12 election nears.
FTSE +0.15%, CAC 40 – 0.04%, DAX -0.18%, EUROSTOXX -0.16%, SPAIN -0.19%, AND ITALY -0.10%.
US futures are marching in lock-step with Europe. Nothing new on trade, follow up analysis on the merger deals with the SCHW/AMTD deal getting the most attention as independent RIAs are NOT happy with this deal. This merger creates less options and less competition for custodied assets leading to what some are suggesting will be worse service and rising fee structures as they both cut commissions to zero one month ago. By the time this deal is done, the combined firm will control over $2.1 trillion in assets. While consolidation in some industries helps to create efficiencies, that is not the sense here. The industry is very efficient already. Commissions are zero and technology has eliminated hundreds of thousands of jobs. According to the announcement, there are plenty of “synergies” that can also be eliminated to get more value out of the deal. (READ: More job losses to come).
Regulators need to consider what the increased concentration of assets means for the system and for investors, especially when the market comes under pressure. No one cares when the market goes up, but watch out when it begins to correct. And while there are plenty of anti-trust issues to consider, Schwab CEO Wally Bettinger is not concerned that the regulators will hold this up. This is exactly why the regulators should put the brakes on.
Expect the markets to become less active by this afternoon as so many people begin to make their way to visit friends and relatives for Thanksgiving.
The S&P trend line drawn from the April 2019 highs to today suggest that 3135-ish should be resistance. That is right where we closed yesterday. With little to no new news, expect the market to churn and digest and bide its time until we get more clarity on the trade war. Friday begins (although we can argue this point all day) “the shopping season” with the launch of Black Friday (which really starts on Wednesday evening for some retailers) and Cyber Monday (12/2). The consumer is fine, just watch the numbers that the retailers report starting Saturday morning.
I will be on CNBC’s Squawk on the Street at 9:15 am Friday morning.
Take good care. Have a Happy Thanksgiving.
Spaghetti Squash –
This is that big kind of pale-yellow squash that you find in the vegetable aisle at this time of year. This is simple to make and is always a welcomed side dish.
Preheat your oven to 400 degrees.
Cut the squash in half – lengthwise. Using a spoon – remove the seeds and threads. Now – in an aluminum baking pan – place the squash cut side down. Fill with water just enough to go halfway up the side of the squash. Place in a 400-degree oven and let it roast for 40 mins or so. Remove and take out of the pan. Using a fork – shred the cooked squash – it will look like spaghetti as you shred it. Remove and place in a bowl with butter and cheese. You can use grated Parmegiana or Romano – or you can use shredded cheddar, or Mozz if you prefer. Season with s&p and serve on your thanksgiving table. It’s simple, yet delish.