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Things you need to know –

  • S&P makes a new closing high
  • IBM beats but traders punish it – the same for INTC
  • SNAP ‘breaks’ dragging social media names with it
  • Oil up, futures mixed, Bitcoin down
  • Try the Drunken Spaghetti

And the fun just doesn’t end…stocks continue to move higher with the S&P now making a new closing high….adding 14 pts to end the day at 4,549.78…..Nothing short of amazing, really….considering what is going on…..The Dow lost 6 pts, the Nasdaq gained 95 pts the Russell +6 and the Transports added another 155 pts – again taking the daily crown rising by another 1%…..this index is just 300 pts or 2% away from making a new closing high…this as the Dow Industrials is just 20 pts away from a new closing high as well.

It was more of the same…better earnings across the board – peppered with a couple of notable negative stories…. IBM would be THAT story……While they beat the estimates at $2.52 vs. $2.50 – quarterly revenues were below the expectation at $17.6 bil vs. the expected $17.7 bil.   The stock fell 9% to end the day at $128.33 – Analysts expressed concern over a slowdown in high-growth segments including what they call ‘cloud and cognitive’.  Others are expressing concern that margins will continue to come under pressure as higher labor costs and retention costs have ‘yet to be passed onto customers.  This morning the stock is quoted at $128.50/$129.50.

INTC is another one…they beat on the estimates yet fell by 8% in the after-hours session following weaker guidance and the idea that the semiconductor shortage is here to stay for a while.

10 Yr. yields closed the day at 1.689% – up 50% off the August lows and up 17% since October 1st.   We are now back at the May highs and only off 10 basis pts from the February highs…Yet investors are unfazed…. Is 1.8% not the big bad boogeyman that we all feared?

After the bell last night – Atlanta Fed President Raffi Bostic appeared on CNBC and warned of rising rates in the second half of 2022 – which again is complete contrast to what yesterday’s Reuter’s poll of 30 economists had to say…. that poll suggested that rates would NOT rise until 2023…. Raffi and others on the FED are singing a different tune…What do you think?   In addition, he also warned that inflation is NOT going away anytime soon…. the word ‘transitory’ now being deleted from the conversation…. adding that if it continues to be an issue – he would advise the FED to become more aggressive…. Oh boy….

You can see how this is setting up…. Can’t you? Like I said yesterday – the idea that rates are NOT going to rise in 2022 is false…. there is every indication that rates will rise…now its just a matter of when and by how much.

Oil is up 30 cts this morning at $82.82 after coming under some pressure on Thursday.  Word that there is a new variant (or at least a renamed variant) – sweeping across the UK is causing some concerns.   And new forecasts of a milder winter in the US did give some reasons for traders to take recent profits.  And so, they did…. But do not expect oil to really trade lower…. Support found at $80 while the upside still has $100 in its sight.

Eco data showed that initial jobless claims have hit a pandemic low of 290k claims…. this is down significantly over the past couple of months…. I wonder if that has anything to do with the loss of ‘extended benefits?  Today’s economic data includes some key stats…. Markit US Manufacturing PMI – exp of 60.5 well into expansion mode (bullish) while Markit US Services PMI is expected to be 55.2 – again in expansion mode but moving towards neutral (recall – neutral is the 50 lines….). Below 50 is contraction…. but let’s not go there right now…. No need.

This morning US futures are just mixed…. Dow futures are up 10, S&P’s down 3, Nasdaq down 43 and the Russell up 10. News that SNAP’s advertising business declined due to Apple’s change in privacy settings is sending the social media stocks into a tailspin this morning…. SNAP fell by 21% in the afterhours session after the release of their earnings…and that is taking FB, TWTR, PINS all lower.

Look for earnings today from CAT, AXP, HON, STX, ROP, CLF, HCA, SLB.

The drama in DC continues…. It appears that maybe the DEMS will get about a $2 tril deal…. plus, or minus a couple of billion…. We should hear more about this in the days ahead…remember – they want to get this done by October 31st.  In addition – it continues to be difficult to assess the impact since we don’t really know what’s in the bill, what the price tag is and more importantly – HOW all of this will be paid for.
In addition – they are sending all the BIG Democratic heavyweights to Virginia to stump for Terry McAuliffe – he is now in a dead heat with Republican Glenn Youngkin….and this will be a race to watch…what will it say about November 2022 if he loses?  Or if he wins?  Expect to hear lots of talk about how this race will set up the DEMS for the mid-term elections.

Bitcoin – which traded up to $66,000 is now backing off to $63,000 while Ethereum is at $4,100.
The S&P ended the day at 4549 – closing at a new all time after trading as high as 4,551.  Going into the weekend – the markets appear to be settled…nothing today should cause any disruption so I suspect it will be a relatively quiet session with no drama.  Earnings continue to ‘surprise’ and the eco data remains in line, treasury yields creeping up, inflation fears appear to be overblown, Oil demand is strong,

Remember – we still have the FED meeting on November 2nd and 3rd – where it is now expected that Jay will announce the start of the tapering as soon as mid-November…. And that is what can derail this most recent rally.

The trendline suggests that we won’t hit resistance until 4700 and we can find support is now at 4440.
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Take Good Care,

Chief Market Strategist, Consultant

Drunken Spaghetti

You need – a nice chianti, garlic, butter, spaghetti, olive oil, chopped parsley, pancetta, and red pepper flakes (optional).

Add equal parts water and red wine to pot and bring to a boil.  Add salt.  Add pasta. Cook until al dente – like 7 mins or so.

In the meantime, peel the garlic and slice it. – chop some pancetta.   Place the butter and olive oil in a sauté pan large enough to fit the pasta and place it over low heat to slowly melt the butter.  Now add the pancetta and cook just until almost crispy…. now add in the chopped garlic.  Sauté.  (Here is where you will add the red pepper flakes if you choose)

When the garlic gets toasty add the additional ½ cup of red wine and about ¼ cup of pasta water…. turn up the heat until the liquid simmers. Strain the pasta – reserving a mugful of water…. toss the pasta into the sauté pan with the garlic & wine.  Mix well, tossing and stirring over med hi heat until the liquid is absorbed.  Do not let it “dry out” …. you can always add a bit more of the water if it does.  Taste.  Good?

Serve immediately in warmed bowls….be sure to have plenty of Pecorino Romano cheese on the table…

Buon Appetito.