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Purse, Money, Credit Squeeze, Wallet, Taxation, Tax

Things you need to know

  • Markets advance – but appear to be a bit tired
  • PFE and AstraZeneca make real headway against Covid and its cousins
  • Oil continued to advance; Treasury yields advanced
  • Investors await tomorrow’s CPI report
  • Feast of the 7 Fishes – #7 Bay Scallops in a Black Truffle Cream Sauce

Risk Assets continue to march upward…. after the bit of ‘agita’ it suffered two weeks ago.  PFE announced that their 3rd shot (booster) when accompanied by the first two shots is enough to ‘neutralize’ the newest member of the Covid 19 family – Omicron.  And that gave the ‘left’ a bit of ‘agita’ because what they want is to continue to control the narrative – but that apparently is not happening.  Omicron is NOT causing widespread ‘anything’, not hospitalizations, not deaths, nothing….and while it might be more transmissible – it is proving to be nothing more than a common cold.  Let’s be clear – there has not been one death associated with it – and while some may say – it’s too early to tell, I say – Man up.  Get your vax and go on your way….  Covid is here to stay, but not as a pandemic – more like an endemic – infections will become more common, mutations will appear, but severe outcomes, lockdowns, and new ‘shelter in place’ restrictions are most likely behind us – unless you live in CA or NYC. We have vaccines and better therapeutics that will help to keep this under control.  It’s time to move on.    

In addition – yesterday the FDA cleared the way for the AstraZeneca’s  ‘Covid Cocktail’ – a therapy that is made up of 2 monoclonal antibodies that is specifically for individuals that suffer from weakened immune systems due to pre-existing conditions etc.…. or have a history of severe side effects from the other vaccines.  This IS big news….and plays directly into my thesis above.

Investors, traders and algo’s loved it- and while stocks waffled around just a bit in the morning – they ended the day once again higher than they were the day before.  At the closing bell – the Dow showed a gain of 35 pts, the S&P’s up 14, the Nasdaq ahead by 100, the Russell added 18 and the transports bucked the trend and moved in the opposite direction – losing 51pts.  The best performing sector was Healthcare – XLV added 0.75% the worst performer?  Consumer Staples –
XLP -0.32%….so it wasn’t a blowout day at all…when we would see some sectors registering 2% or 3% moves.  The Value Trade – SPYV ended the day flat while the Growth Trade – SPYG managed to gain 0.6%.

The 10 yr. treasury yield rose to 1.52% as bond prices fell, Oil ended the day up 30 cts. to $72.63 – taking back nearly 65% of the price slide initiated on Friday November 26th….…but remains about $10 below the 2021 high of $83.83.  It is kissing trendline resistance at $72.93…so let’s see what today brings…this morning oil is a bit weaker – trading at $72.05/barrel.

The JOLTS reports – remember that?  The Job Opening Labor Turnover Survey?  The expectation was for 10.4 mil openings…. the whisper number was for 10.6 mil openings and the actual number was 11 mil openings…The number of job openings now EXCEEDS the number of unemployed Americans by the most ever on record…. Industries that need workers continue to be manufacturing, food services, hotel service and educational services.  The quit rate did decline suggesting that employers are more successful at keeping the workers they have – and that could be for a range of reasons, more benefits, more flexibility, higher wages, or any combination of each…. In any event – it was the highest reading on record – so for anyone saying that they ‘can’ find a job’ – they aren’t looking hard enough….

Eco data today includes the usual suspects…. Initial Jobless Claims of 220k, Cont. Claims of 1.9 mil. The Langer consumer comfort reading is also expected – but do not look for that to drive the action….it won’t….Friday’s eco data is what will drive the action….We will get the all-important CPI (consumer price index) reading….expectations for m/m is +0.7%, ex food and energy of +0.5%….CPI y/y is for +6.8% and ex food and energy of +4.9%….now if they come in at those numbers they will be at their highs and that is what the market is expecting but if the whisper number is correct – the numbers will be even higher – which in this case is NOT good….you want that number to be lower….not higher…

In any event –

Next week is the FOMC meeting (Federal Open Market Committee) and it is expected that Fed Chair Jay Powell will announce a doubling of the pace of the bond purchases announced one month ago while also hinting at more aggressive rate hikes next year. Why the pivot?  Because inflation is now running at 30 yr. highs, and he is trying to stay in front of it vs. behind it.  (My sense is that he lost that fight…and this continues to play into my theme that the situation is worse than they are letting on, which is why I think the narrative has changed so swiftly…but what do I know????)

Now they have done a stellar job of telegraphing this next move…they have sent Bullard, Daly, Quarles, Bostic to name just a few….and now Jay has even joined the party….so if anyone is surprised next week – if all of this is true – then I’d say – Where have you been?  I guess the surprise will be – if he DOESN’T say it…. And then that will only serve to cause more confusion as some begin to question the FED’s credibility.  In any event – do not fall asleep.

Remember Fed Funds Futures are pricing in 3 rate hikes – May, July, and November ‘ish’….and that is 2 more than the initial conversation and now 1 more than the updated conversation and possibly 1 shy of the eventual conversation!

This morning we learned that China’s Evergrande Group has now been officially labeled a defaulter – and this now sets it up for a massive restructuring.  Bloomberg points out that this ‘development marks the beginning of the end for the sprawling real estate empire started 25 yrs. ago…setting off a lengthy battle over who gets paid from what remains…”

While this is dramatic news for Asian investors and some global investors – do not expect this to be that black swan event that many are making it out to be…. this is not a surprise at all (if it is, you haven’t been paying attention) – the US market is not going into panic mode on this headline.  It does though, pose a challenge for Xi Xi and the party….as they have tried to prevent this crisis from becoming a bigger crisis in China.  It will be interesting to see how they respond.

US futures are down – the Dow off 100 pts, the S&P’s -15, The Nasdaq – 70 pts, and the Russell down 12 pts.   Look, the recent surge higher has seen all the index’s gain about 5% across the board – leaving them still a bit below the all-time highs seen on Wednesday before Thanksgiving…. So, it does make some sense – especially ahead of tomorrow’s CPI report and Monday’s PPI (Producer Price Index) report.  Inflation is running HOT – this is not a secret – the unknown is how exactly the FED will respond…and not if rates are going up, but rather the pace at which they will rise is much more important.  Clarity is key here and I’m not sure we are going to get that just yet…. I suspect that the conversation will remain fluid, allowing the FED to pivot (again) if the inflation data continues to come in strong.

The chatter this morning is about how there is still room for a Santa Claus rally…. really?  I would argue that Santa has already come – the S&P gained 10% from October 1 – November 25th…..that was on top of the 15% it has gained all year…taking it to a 25% return….Omicron came – knocked about 6% off of the markets – much more for some of the disruptive tech names –  and now the recent moves have taken the indexes almost back to those pre-thanksgiving highs – where it appears they are running into resistance.  If anyone is expecting the markets to gain another 5% (which I guess is that ‘Santa Claus’ rally that they are talking about) between now and December 31st – I would say – ‘not so much’.  But – let’s see….

(I define it as another 5% because is a 1% or 2% move from here really a Santa Claus rally?)

10 Yr. treasuries are yielding 1.50% this morning – just a bit weaker – and I suspect that if the tone remains muted, do not expect yields to do much of anything…. but watch as the morning turns to afternoon so see if we suddenly see anything that might indicate what we will see in tomorrow mornings CPI report.  (The implication here is that ‘someone’ saw tomorrow’s report today…I mean someone must know what tomorrow’s report will say by noon time today…. It’s a report…. the gov’t collects the data, and then runs it thru a big computer that creates the results…do we think that all happens at 8:30 am on Friday morning?  Come on, man!)  In any event – it is what it is….

European markets are also just a bit lower…digesting their recent moves up – post the omicron ‘scare’ and as they await today’s data and tomorrow’s CPI report.  There is no eco data in Europe this morning that will drive the action.  At 6:15 – markets across the region are down about 0.2%.

The S&P closed at 4701 – after trading as high 4705…. And while 4743 is in sight – it won’t go there today….and if tomorrow’s data is stronger than expected it probably won’t go there tomorrow either.  Stay the course but build yourself in some downside protection – that just makes good sense.  Because we all know how quickly the narrative can change.  Breadth does remain a bit questionable…with more stocks below their 200 dma vs. above…. just sayin’.

Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.

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Take Good Care

Chief Market Strategist, Consultant

Feast of the 7 Fishes – #7 Bay Scallops in a Black Truffle Cream Sauce

For this you need:  Bay scallops (the little ones), olive oil, butter, heavy cream, white wine, shallots, garlic, black truffle, white truffle oil, s&p, brussels sprout leaves, I lb. of medium pasta shells and fresh grated Parmegiana.
Ok – you can make this dish in 15 mins…. Put a pot of salted water to boil.

In a large sauté pan – begin with a ½ stick of butter and a splash of olive oil – turn up the heat to med.  Now add in the sliced shallots and chopped garlic…sauté in the pan for 5 – 8 mins…. now – turn up the heat and add in the rinsed bay scallops – you want to hear them quickly.
Add the pasta to the boiling water – stir.

Next – once the scallops are seared – turn the heat down to med and deglaze the pan with some white wine – allow it to steam off a bit – now add the heavy cream and shaved black truffle.  Stir well.  Now add in the white truffle oil – this is key – you DO NOT need much – it is very potent…add – mix, taste.  If you need a bit more than do so…but go easy – do not overpower.
Now take the leaves of the brussels sprouts (cut the bottom and the leaves fall off) and add to the pan – this will give a nice contrast in color.  Season with s&p.

Taste the pasta – should be almost aldente…. strain – reserving a mugful of the water.  Add the pasta shells directly to the sauté pan – pour about ½ of the pasta water in the pan and mix well…. Taste and adjust if necessary.  Next add a handful of the cheese and mix. You will notice that the shells capture the scallop and some of the cream sauce…. perfect.
Serve immediately.

Buon Appetito.