The global economy is just fine. Chinese economic data (Industrial Output and Consumer Spending) is better than expected, causing economists at both UBS and Oxford Economics to raise their 2020 China GDP forecasts from 5.7% to 6%. US Markit Service AND Manufacturing PMI’s (Purchasing Managers Index) are both in expansion mode. Yesterday both of those key readings were reported in line – at 52.2 and 52.5 – (North of 50 is expansionary and bullish). Toss in a good miss on trade tariffs and an understanding that Phase One of the trade deal is “totally done” and you had a recipe for a gourmet meal. Stocks around the world rallied and here at home we saw the Dow add 100 points, the S&P gained 22 points, the Nasdaq surge by 80 points and the Russell tack on 12 points.
It was another day to celebrate all that is good. The S&P nearly piercing the next century mark (3200) as the algos pushed it right to 3197.71 before stalling while the Dow and the Nasdaq chocked up another new high for the year. Even the Europeans are joining in on the fun, as the Eurostoxx 600 set its first new high in four years, even though the data and the analysts tell us that they are “mired in low growth.”
So many things are happening on all fronts. The FED reassured markets that they are on hold, no more cuts just yet, as the US economy seems to have found itself, noting that downside risk has abated and the “R” word (Recession) is Not Happening. Trade with Mexico and Canada is supposedly done (but there IS a question, see below). Trade with China is supposedly done as well, the UK has voted, and on Capitol Hill, legislators voted to fund the country through September, so no risk of default and the Democrats are voting to impeach the President!
And all of this good news is just that, good news! The US economy is fine and the global economy isn’t so bad either, no matter that the trade war has been going on for 23 months. Now, speaking of trade, remember on Friday when Nancy Pelosi stood up and took credit for the “new and improved” US/Mexico/Canada trade agreement? Well, not so fast, big boy. Apparently, the Mexicans are not happy about some of the language in the deal. You see, the Dems snuck in the fact that the US will send “trade ambassadors” to Mexico. Actually, the wording was:
“…that we would send in up to five additional US Labor Dept officials as “attachés” to the US embassy in Mexico City or other consulates in the country, raising concerns that they would act as ‘labor inspectors’”
I mean look, we’re just trying to keep everyone HONEST. So the Mexicans sent Sr. Snead to meet with Bobby Lighthizer yesterday in DC. When it was done, Bobby clarified the roles, saying that
“the personnel will not be labor inspectors and will abide by all relevant Mexican laws.”
And so, the Mexicans are good now. No worries – Ay Bueno! But for a moment there, it did look like this was going to be an issue. All good.
On individual company news, AMAZON tells its third party merchants on their site that they can no longer us FEDEX Ground for delivery of products sold on AMAZON, citing slow work performance issues! Dude! One week before Christmas, really? The news sent FDX plunging from the 4-point rally after the opening to a 7-point plunge before settling the day down $1.60 or 1%. FEDEX responded by saying that the memo impacts a small number of shippers but “limits the options for those small businesses on some of the highest shipping days in history.” They also clarified the concerns saying that they still expect to handle a “record number of packages this holiday season and the overall impact to our business is miniscule.”
In other news, Boeing can’t seem to get it right. It announced the suspension of the 737 Max production beginning in January creating an “escalation in the crisis facing the plane maker that is sure to ripple through the global aerospace industry.” The news caused BA to get clobbered (again), losing 14 points or 4.3%, taking 99 points off of the Dow Industrials! So think about this for one minute, BA employs over 12,000 people in its Renton, Washington plant while supporting thousands of other jobs across their network of suppliers. So this news is not welcomed news to BA, their workers, their suppliers, the deli guy and the coffee shop owner. BUT, they made a mistake and flew a plane that probably shouldn’t have been flying, at least not in its current form. While they are working to fix it, the FAA (Federal Aviation Authority) is taking its time on approving it, because they too share some responsibility on what has become the plane maker’s biggest crisis of the 21st century. BA closed at $327, testing the lows of August but will more than likely test the lows of last December at $298 before this is over. They need to cut CEO Denny Muilenburg to make a statement, to make it clear that “out with the old, in with the new.” I mean Denny wasn’t a good listener!
Overnight, markets are digesting the latest surge to new highs. Asian investors still on a “trade high” as they take the Nikkei, Hong Kong and Chinese markets higher still. BoJ (Bank of Japan) is due to announce their latest policy decision on Thursday. All three rose 0.47%, 1.22% and 1.36% respectively. In Australia, the RBA (Reserve Bank of Australia) left rates alone at 0.75%, leaving open the possibility of further cuts if needed. The ASX ended the day flat.
In Europe, markets there are all a bit lower. UK Prime Minister BoJo once again threatens to leave the EU deal or no deal by the end of 2020 if the EU does not agree to a free trade agreement! Do you see what just happened? He just kicked that can down the road by another 12 months. The current D-Date is January 31st 2020, but this morning he said that he will use his new found majority in Parliament to “outlaw any extension to the BREXIT transition period BEYOND the end of 2020.” On the other hand, he had a “nice conversation” with Donny and word has it that they are looking forward to “an ambitious free trade agreement” with the US. BoE (Bank of England) is due to announce their latest policy decision on Thursday as well.
FTSE -0.03%, CAC 40 -0.30%, DAX -0.60%, EUROSTOXX -0.49%, SPAIN -0.39%, and ITALY +0.23%.
US futures are a bit lower after yesterday’s surge. Everyone appears to be taking a breather. The market needs to hear the details. It wants clarity on what everyone agreed to. The longer they make us wait, the more risk there is that everyone will begin to question the details. Dow futures are down 35 points, S&Ps are down 2, Nasdaq is up 2 and the Russell is off by 2 points. Nothing to get all worked up about. This is really the last week of anything significant in terms of trading volumes. Next week, with Christmas on Wednesday, it is sure to be quiet and with the market at all- time highs. Investors can rest assured that they won’t be getting coal in their stockings like they did last year.
Economic data today includes: Housing Starts – exp of +2.3%, Building Permits down 2.9%, Industrial Production of +0.8% (versus last month’s -0.8%) and Capacity Utilization of 77.4 (solid but not inflationary).
The S&P closed at 3191 and will most likely try to pierce 3200 again in the days ahead, just because… Barring any negative news the range appears to be 3140/3200…
Later this week, we will hear from FED Presidents: Bobby Kaplan (Dallas), Eric Rosengren (Boston), and Johnny Williams (NY) expect them to re-iterate the latest FED news: rates on hold, no inflation, and economy stable, etc.
Oil holding its own at $60.25. Thanks to the trade deal and OPEC production cuts.
Gold continues to hover at $1483/oz., just kissing resistance at $1487 and then $1500. Unless there is some fallout over trade, I suspect that gold will stay put. If the deal is what they say it is, then watch as gold backs off to test $1450/oz.
Take good care
Orechiette w/Escarole & Beans
If you grew up in a southern Italian household – this was pronounced as (Shka-Rola & Beans). It is a great, simple dish to make and eat. Have plenty of fresh grated Parmegiana cheese on hand.
Now depending on where you are from – Southern Italy, Sicily, Mediterranean side or the Adriatic side will determine how you make this dish…but for me (Neapolitan & Sicilian) – simple is always better.
So, you will need: 1 lb of Orechiette pasta, garlic, olive oil, diced Vidalia onion, escarole, chicken broth (homemade is always better), cannellini beans, s&p and plenty of fresh grated parmigiana.
Bring a pot of salted water to a rolling boil
Begin by sautéing crushed garlic in some olive oil, now add in the diced onion and sauté until nice and soft – do not burn the onion – so keep the heat at medium and stir often. Sauté for about 15 minutes to get them perfect.
Next add the “shka-rola” to the pan and sauté quickly. Season with s&p. Now add in the chicken broth – remember you’re NOT making soup – so don’t overdo it with the broth. Drop in the cannellini beans right from the can – using the “juice” in the can as well. (yummy!)
Simmer for 15 minutes to make sure the beans are all warmed up. Turn off the heat and add a handful of cheese and mix well.
Now add the pasta to the pot and cook for 8 minutes – just aldente. Strain – always reserving a mugful of pasta water. Add back to the pan and now add in the Escarole and beans. Mix well. The hot pasta will suck up the juice – so be prepared to add back a bit of water to re-moisten.
Now serve in warmed bowls and have extra cheese on the table for your family. It’s the perfect winter meal and so simple to make. Enjoy.