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Things you need to know –

  • It’s all about Non-Farm Payrolls today – futures await the report
  • BoE holds interest rates steady
  • Oil – rallies back after the beating it took earlier this week – OPEC+ is not increasing production beyond what was expected.
  • S&P only 20 pts away from 4700 – this after piercing 4600 on October 29th.
  • Try the Pumpkin Risotto

Stocks ended mixed  ahead of the non-farm payroll report due out today at 8:30…..Dow industrial and Dow transport names coming under a bit of pressure after their latest surge while the S&P, Nasdaq, Russell continued to push higher….and higher….all while investors consider all of the mixed issues surrounding the FED…..In the end – a strong earnings season suggests that investors are not so worried about inflation…….an issue I think will come back to bite us all on the backside….

Mixed issues you ask?  Jay couldn’t have been clearer….

Ok – the taper is set to begin next week – that was expected, but there remain many unanswered questions like:

What about interest rates – while we are told that tapering means nothing – it must mean something……  Is inflation still considered transitory?  Will Jay Powell be the FED chair in the new year?  If not, who then? What does that mean for FED policy?  Lael Brainard clearly in the running…. but Joey has been mum on the topic, as he has about who might fill the other empty seats…and what does that do to the makeup of the FED.  What about the future FOMC committee? Annual changes in the participants means that that could also change the complexion of the current FED policy – And that means what for investors?  Well, it certainly means that the road may not be paved in gold….and that while they might control the narrative now, how will they control it in the new year with a new committee and a possible new Chair?

Now I realize these are all rhetorical questions right now but won’t be in the new year….so tread lightly…. Just to be clear – Joey is set to announce his choices sometime soon – we should hope by the next week or so – and while Jay is expected to be renominated – Joey is getting pressure from Lizzy Warren and members of the left wing of the party to make a change…..and at this moment in history – that will be an issue for the markets in the new year…..For now – investors appear to be focusing back on earnings reports and coming macro data….because that will give insight into answering some of those questions.
Today’s NFP report has an official estimate at 450k new jobs… but if we beat that estimate by the pace at which the ADP report beat (+43%) – then we can expect today’s report to show that we created 650k new jobs….and that might make some sense now that we are a month into the expiration of enhanced unemployment benefits. –

Today’s report is also expected to show unemployment remains at 4.7%, Avg hourly Earnings +0.4% m/m and 4.9% y/y.  While the labor participation rate remains at 61.7%.

Yesterday’s economic data showed us that Unit Labor Costs ROSE by 7.4%, while productivity was DOWN 3.2% – and that is not a good combination at all…. why that wasn’t more of a focus for the markets is a bit confusing for me, but somehow the algo’s dismissed it ….…. Let’s see what todays’ reports says about average hourly earnings…. will that number be more than the expected +0.4%? In the end – it is low interest rates that many think will continue to power stocks higher….

The 10 Yr. treasury ended the day yielding 1.52% down from 1.57% on Wednesday…. all while the BoE (Bank of England) and the ECB (European Central Bank) left their rates unchanged.  The fall in bond yields being credited to a couple of things – remember – Yields fall as prices rise, so someone is buying treasuries….…. One explanation is that foreign money continues to come into the US treasury market and US investors that may be unsure of what’s next for stocks – leave money in the treasury market until the clouds disappear.

The VIX (fear index) remains subdued…. ending the day at 15.55 – and that continues to suggest complacency among investors.

Oil – which has gotten slammed this week – down nearly 6% as industry reports pointed to rising supplies in the US  – which I think is baloney and talk of Joey tapping the strategic petroleum reserve put pressure on prices….and then yesterday OPEC+ announced that they are sticking to the plan – defying US pressure to increase production and output by more than the 400k barrels we are expecting and that caused traders to take oil back up to just under $80. In the end – OPEC+ doesn’t really care about inflation or any ‘energy crises.  Trendline support is at $76 while resistance remains at $84.

Tech – XLK and Consumer Discretionary – XLY sectors led the way higher for the Nasdaq and S&P…both sectors up better than 2%.  Financials – XLF and Real Estate -XLRE led the way lower…falling by 1.4%.  The growth trade – SPYG rallied by 0.8% bringing its ytd performance to + 29% while the value trade – SPYV fell by 0.2% leaving it up 19% ytd.

European markets are a bit muted this morning…. after the BoE joined the ECB leaving their rates unchanged.  October PMIs for Germany, Italy, France, and the broader Eurozone are due out today.  Industrial production in Germany and France fell by 1.1% and 1.3% respectively as supply chain issues continue to hammer those economies.   At 5:30 am – European markets are up between 0.25% – 0.5%.
US futures are not doing anything to write home about… Dow is -9 pts, S&P’s up 3 pts, Nasdaq up 30 pts and the Russell is ahead by 3 pts as we wait for the NFP report.  Goldman Sach’s Chris Hussey – telling us that today’s payroll numbers are significant because it is the first full month of hiring following the expiration of those enhanced benefits, all while covid issues are subsiding and demand for workers is strong.

Bitcoin is trading at $62k and Ethereum is trading at $4500.

The S&P ended the day at 4680 and is now up 2.4% this week alone…. bringing it up – 20% for the year…. Today will be driven by this morning’s NFP announcement so the investors await…. Markets remain in the 4400/4700 trading band and if investors like what they hear today – we could test and kiss 4700 before the day ends….

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Take Good Care

Chief Market Strategist, Consultant

Pumpkin Risotto

For this you will need: Pumpkin puree – not pumpkin pie filling, olive oil, 2 large shallots, thinly sliced, 1 1/2 cups Carnaroli rice, ½ cup white wine (dry not fruity),  4 c of chicken broth, heated to a simmer, heavy cream, butter, pepper, fresh grated Parmigiano-Reggiano cheese,  finely chopped flat-leaf parsley,

Heat oil and a dollop of butter in a large pot over medium-low heat.  Add shallot and cook, until shallot is softened, about 7 minutes – (remember to stir).  Add rice and cook, stirring constantly, until rice is translucent, about 8 minutes.

Now add wine and cook until wine is mostly absorbed, then add 1 ladle of broth and stir, until liquid is mostly absorbed, when almost completely absorbed – repeat the process again…. now add pumpkin and stir to combine. Add remaining broth one ladle at a time until fully absorbed before you add more…. (Capisce?) do this until rice is tender yet still slightly firm to the bite…in fact you may not use all the broth. Depends on how much rice you used….

When complete – fold in about ¼ c of heavy cream…. (You can always taste and add more if you like) another tblsp of butter, season with pepper to taste (do not add salt – the cheese should be salty enough). Divide risotto among warmed bowls sprinkle with parsley and serve.   Now to make a real impact – shave some cheese over the top then sprinkle with the parsley…. Serve immediately

Buon Appetito.