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Things you need to know –

  • Stocks falter if only for a moment
  • A barrage of earnings….and so far – they are all beating…
  • F – ‘Shatters’ the expectations…stock up 10%
  • FED enters quiet period…but will Jimmy B talk?
  • Try the Escarole Soup w/Fresh Mozz

Good morning from Los Angeles!  Stocks tired a bit yesterday…. even great earnings couldn’t push stocks higher another day.  Buyers finally appeared to tire as they digested all the news and stepped back.  60+ companies reported and 85% of those beat the estimates – in line with how the quarter has been going.  By 4 pm – the Dow was down 270 pts, or 0.75%, the S&P off 24 pts or 0.5%, the Nasdaq ended the day flat, the Russell lost 46 pts or 1.9% and the Transports gave back 215 pts or 1.4%.

Financials and Energy – two sectors that have outperformed this year led the way lower…falling 1.65% and 2.9% (leaving them still up 35% and 52% respectively). Basic Materials, and Industrials also moved lower losing 1.4% and 1.2%.  The value trade lost 1.4% while the growth trade gained 0.4%

The 10 yr. treasury saw buyers which sent the yield down to 1.54% – this is from 1.66% last week yet that did little to prevent stocks from retreating.  The VIX has rallied a bit off the lows seen earlier this week but remains below all 3 trendlines…but remember what I said on Monday when the VIX ticked at lows not seen since June 2021…. It was causing me to become a bit cautious…. just because when it gets this low- something always happens to create some uncertainty which causes stocks to back off a bit…. Let’s see what happens today.

And in what is a real classic – Ford (which I own)  – saw nothing but sellers during the day – so,  ahead of their earnings it fell by 2.65% ….and THEN……after the bell –  they ‘shattered expectations, raised guidance and reinstated their dividend’ – and those sellers are sorry they were so aggressive….in a complete 180 – the sellers during the day turned buyers after the bell – taking that stock up more than 10% in the after-hours session….. !  This morning it is quoted at $17/share.

MCD and KO both rose after both companies reported better than expected earnings and made it clear that higher input prices will allow them to raise consumer prices…. once again giving them pricing power as we move into the new year and investors like that….so pay attention to anyone that has pricing power, because those will be the companies that benefit in this inflationary environment.
Robinhood – took it on the chin – falling by 10% after recording a 35% decline in revenues…. (They blamed it on crypto trading), I say baloney….

Ongoing infrastructure discussions in DC are having an impact on investor psyche, but do not seem to be having an impact on how investors are really allocating money.  The deal now looks to be about a $1.5 trillion plan and the ‘wealth tax’ that Lizzy and Bernie want appears to be DOA – Joey – taking his limo to Capitol Hill this morning to appeal to the progressive wing of the party to support this lesser bill so that he can claim a win in Europe this week.  Recall, it is the progressive wing of the party that ‘refuses’ to support this lesser bill because they are not getting all of the ‘freebies’ they want…. let’s see if Joey has the charisma to convince them to change their minds.

And speaking of travelling – Yes, Joey is going to Europe (apparently the Southern US border is not a priority) to meet with our allies to discuss how to ‘kill the US oil and gas industry’ in the name of climate change – all while appealing to the Saudi’s and OPEC+ to produce and pump more oil to help meet global demand…. – this as we face $5/gallon gasoline and higher heating oil prices as we go into the winter – and have more supply than we know what to do with…. that supply though is under ground and needs to be brought to the surface – but that apparently isn’t happening either…. even as oil prices remain in the mid $80’s on their way to $100/barrel.   You see this is how capitalism should work… prices go up, you would think we would bring more supply to the market…..and we would if we were not constrained by the current administration….Recall – Joey told Andy Cooper of CNN that he wasn’t sure that he could do anything to help bring the price of oil down and that American’s should get used to paying more.  Ok – whatever…It seems we are paying more for everything these days…. but that’s another story…

And yes – we still have the FED to deal with….as we approach the FED FOMC meeting…. we are now in the ‘quiet period’ – we won’t hear anything from the current committee members now until November 3rd…but we could hear from FED Presidents that are not on the FOMC committee – and who might that be?  My bet is Jimmy B…. (St. Louis Fed President) – he loves to opine on FED thought just ahead of the FED meeting…. Let’s see if he can keep quiet.  Recall, that Jimmy wants the FED to get going on the taper AND he is in the more hawkish camp when it comes to interest rate increases – which are now expected to begin in June 2022.  And that is what will cause turbulence for investors in the weeks ahead…. Will Jay continue to tell us that the tapering and interest rate increases are mutually exclusive?  Because that is what the market expects….so any change to that narrative will cause investors to re-price stocks.

US futures are up this morning…. Dow futures ahead by 87 pts, S&P’s up 15 pts, the Nasdaq up 87 pts and the Russell is ahead by 7.  There is a lot of talk about what Joey is going to say to Congress….and remember – it is all ‘paid for’ or at least that is what they want us to think…. It is not paid for (yet) but maybe we will hear more about that in a couple of hours.

Economic news – Initial Jobless Claims of 288k, Cont Claims of 2.4 mil, 1st release of 3rdQtr. GDP of +2.6% – now this is down from the breakneck speed of 6.7% last qtr. but will not be a surprise at all….  Analysts/strategists have been telegraphing this for months now….so do not be surprised by the dramatic drop.  In addition, we will get pending home sales of +0.5% m/m and -3% y/y.

Earnings today include Apple and Amazon…and while there will be a handful of others…. the chatter will be about these two…. period the end.

European markets are mixed…. Investors across the region are awaiting a rate decision by the ECB and then a press conference with President Christine Lagarde…. What will she say about inflation?  What will she say about moving on policy?  Will she still take a back seat to Jay Powell, or will she be forced to act first?  The decision is out and there is NO CHANGE in policy…. we wait now for the press conference.

Bitcoin and Ethereum have gotten beaten up lately as talk of a new coin – SHIB are stealing the spotlight…. yesterday saw Bitcoin trade as low as $57k but this morning it has once again pierced $60k…. Ethereum traded as low as $3900 but this morning is up at $4,100.

The S&P ended the day at 4551- on the low of the day…. Which should mean we try to test a bit lower to find out where everyone is……but the afterhours earnings parade did produce some key winners and that is causing some investors to go all in again…And with the latest ECB statement – It should offer some support.   Earnings from AMZN and APPLE today – will dominate the chatter.  The excitement is building….

We remain in the 4400/4700 trading band.

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Take Good Care

Chief Market Strategist, Consultant

Escarole Soup w/Fresh Mozz

I love the basic escarole soup…but today that is not what you are getting….today you will get an Escarole puree soup topped with fresh mozzarella, toasted pine nuts and sweet raisins…..Come on now….how good does this sound?

For this you need:  fresh mozzarella cut into chunks, pine nuts, olive oil, chopped onion, Yukon gold potatoes, peeled and coarsely grated, or veggie or chicken stock, fresh escarole roughly chopped, s&p, golden raisins, soaked in hot water for 5 minutes then drained.

In a large pot – heat oil over medium-high heat. Add onion, reduce heat to med and cook, uncovered, stirring occasionally for about 10 mins….  Next add potatoes and cook, stirring occasionally, about 5 minutes more.  Now add in the escarole and season with s&p.

Continue cooking, covered, stirring occasionally, until leaves are wilted and tender, about 10 minutes more; add 1 ½ cups of stock and bring to a simmer. Transfer contents of pot to your food processor and purée until smooth; season with salt to taste.

When serving – add chunks of the fresh mozzarella, some toasted pine nuts, and sweet raisins…. you can drizzle a bit more of the olive oil if you prefer….

Buon Appetito.