Earnings did not disappoint today, as the season begins...
"Deck the halls with boughs of Holly – fa la la la la, la la la, laaaaaaa – tis the season to be jolly – fa, la la la, la la la laaaaa..."
Oh wait, that was last month. This month we should be singing – Jennifer Lopez's "Let's Get Loud" "Let's get loud, let's get loud, Turn the music up, let's do it, C'mon people let's get loud, let's get loud, Turn the music up to hear that sound, let's get loud, let's get loud, Ain't nobody gotta tell ya What you gotta do..."
JPM, C and DAL hit it out of the park and they got LOUD! JPM beat the estimates but not by a penny or two, try 22 cents! C beat by 10 cents and DAL, remember my Delta story from yesterday, it crushed it, beating the estimates by 30 cents!!! So you gotta ask, what are these "highly educated" analysts thinking? It's one thing to be conservative and miss by a penny or two, but 22 and 30 cents?
Investors and algos loved it! By the end of the day, JPM surged by 1.03%, but had been up substantially more earlier in the day. C added 1.55% and DAL ended the day up 3.2% but was also up much more earlier in the session. If this is how the beauty pageant starts, then LET'S GET LOUD!
As the numbers came out, futures surged and when the bell rang at 9:30 then the indexes followed suit and surged as well. The S&P traded as high as 3294.95, just 5.05 pts shy of the magic 3300 number, the one that I said the mo-mo guys are dying to hit. But the news, as good as it is, was just not enough to get them there. In fact, as discussed the market feels a bit long in the tooth. It might be more of a struggle to get it there in the short term. That could not be more obvious than by what happened next.
A story hits the tape that the US is set to leave some of the tariffs in place until after the election (as no one really believes that a Phase Two trade deal is going to happen by then). The tone shifted. The Dow went from being up 148 points to begin down 20 points or a 164-point swing in 30 minutes. Suddenly, there was a piece of news that "appeared" negative. But I have to ask. Really? No one ever said that the US was going to eliminate all of the tariffs with this deal. Yes, some of them were reduced, say from 15% - 7%. While others still remain, and were never supposed to be reduced. So this headline and story is not really a story at all and should be a non-event. But it isn't because the market is just looking for a reason to "try and back off." Remember, it is a bit long in the tooth and since October has done nothing but go straight up. I mean the Dow is up 12% since October 3rd. The S&P is up 15% and the Nasdaq is up 20% in the same time slot. So when the reporters "break" this story, they think they hit the jackpot! Dude, it's a non-event and the other headlines that say that investors are on edge ahead of the signing. I have to ask: Why? What is there to be on edge about? The deal is done, it has been translated, Liu He is in DC, Stevey Mnuchin has been waving to the crowds. Let's get on with it. I mean is there a chance that somehow something goes wrong in the next 10 hours to change the course of history?
If that wasn't enough, someone also leaked a story that said the administration (Commerce Department) is drafting a rule that would block sales of technology to Huawei if US parts make up more than 10% of the products value, currently that stands at 25%. But someone thought it was necessary to change the rules. Now, while this appears to be something new, the idea of doing this is not. It goes back to when Trump blocked the sales of everything to Huawei, back in the spring/summer of 2019. This apparent change of rule set was discussed then. This will also serve to put a bit more pressure on the Chinese to continue to talk. All this while a bi-partisan group of senators introduced a bill to expand and support American innovation in 5G technology, the technology that is going to change the world once again, and is about to hit the world this year. China is way out in front and the Americans are trailing. A Bloomberg story lays it out this way:
"Huawei is poised to become the leading commercial provider of 5G, with far-reaching effects for U.S. economic and national security."
According to statement from senators including Republican Richard Burr, chairman of the Senate Intelligence Committee, and Democrats Mark Warner and Bob Menendez:
"Chinese state-directed technology companies present unacceptable risks to our national security and to the integrity of information networks globally..."
While this is true, it is not news at all. This has been an ongoing discussion for years now. The rule also subjects "foreign made goods based on US technology to US oversight." Look, China is in the lead. Period. Mostly because we allowed it, but that's another story...
So the algos used these stories as a reason to stall the advance.
By the end of the day, the Dow was up 32 points, the S&P lost 5 points the Nasdaq gave up 22 points and the Russell advanced 6 points. In the end, it was a confusing day.
This morning we see global markets lower, not much, but lower as the headlines try to play it off as "investors waiting anxiously for the trade deal to be signed." To that, I say BS. The markets are just consolidating.
Japan fell by 0.45%, Hong Kong -0.39%, China -0.55% and the ASX +0.47%.
European markets are trading at the flat line. Not really falling out of bed, but just waiting for the trade deal to be signed...(Yawn). Germany is set to report full year 2019 GDP figures this morning. This will give the world insight into Europe's largest economy. In the UK, we will get inflation data from the BoE (Bank of England) and a speech form monetary policy committee member: Mike Saunders. That could offer some hints on the banks next move next month. In other news, the UK, France and Germany have "formally" accused Iran of violating the 2015 nuclear deal, paving the way for re-imposition of the UN sanctions that were lifted as part of the agreement. Again, this was expected.
Earnings today include: GS, BLK, USB, BAC, more financials. You can be sure that Larry Fink at Blackrock (BLK) is not going to disappoint at all. He is like Jamie Dimon at JPM. Just watch as he appears on CNBC this morning on Squawk Box, and goes on about how great they are and how they meet customer needs and how the assets under management went from $6 trillion to something bigger! GS will be the one to watch as they can be antsy. Either way, overall the tone for the financials appears to be good. So, let's get loud.
Economic today includes PPI (producer price index) exp of +0.2%, ex food and energy of +0.2%. But recall, yesterday's CPI report was a bit weaker than expected so it would make sense that this should be as well.
The S&P tested 3295 yesterday and backed off to land at 3285. You can feel it. It wants to kiss 3300. It just needs a reason, and it needs to eliminate the noise over the "signing" of the deal. It's not really that big of a deal. All they are doing is signing their names, but we will get the full transcript of what's in the deal today as well and that is sure to give some analysts reason to pause as they tear it apart and look for the loopholes, etc... But that's a story for another day. We are in a tight range of 3270/3300. Futures are lower. Dow off by 37 points, the s&p is off by 3 points the Nasdaq off by 6 and the Russell off by 5 points. My guess is that this is a head fake, and that we will see 3300 before we see 3250. When we hit 3300, the advance will stall and then consolidate.
Braised Beef Tenderloin w/Roasted Brussels Sprouts
Braised Beef Tenderloin w/Roasted Balsamic Brussels Sprouts – this is a great dish... easy to make and so good.
You will need: crushed garlic, olive oil, butter, the beef tenderloin cut into 1 1/2-inch-thick pieces, flour, s&p, and a nice full bodied red wine...
Ok – begin by selecting a sauté pan that will accommodate the tenderloins without crowding... Now – heat the pan on med hi... add in a bit of olive oil and about 3 tbsps. of butter... (the oil prevents the butter from burning). Drop in the crushed garlic and sauté.
While the butter is warming up – dredge the filets in flour and when the butter is all melted – add the filets and brown the meat nicely on both sides. Once you are satisfied – remove the meat and place on a platter – season with s&p.
Add in about ¾ cup of red wine to the pan... let the alcohol burn off – always using a wooden spoon to scrape the bottom of the pan... when the wine is almost boiled off – add back the filets and cook for about 1 or 2 mins per side... Remove and immediately serve on a warmed plate with a green veggie... I suggest roasted Brussels sprouts.
For these you need: Brussels Sprouts – trimmed and sliced in half lengthwise, s&p, lemon and butter. Prepare the sprouts and roast them while you tend to your tenderloins...
Preheat your oven to 400 degrees
In a bowl – add the sprouts, s&p. Cut up a stick of butter and place strategically around the dish. Now - roll the lemon on the counter to soften and awaken the juice. Now slice in half, stick a fork in it and squeeze around and over the sprouts. Cover tightly and roast for 25/30 mins – then remove the foil and let them get a bit brown... Taste. Are they done? If so remove and serve alongside your tenderloins and a large mixed green salad - always a fine touch – dress with a red wine vinegar and olive oil dressing. Season the salad with s&p, oregano and a splash of lemon juice... toss and serve.
Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.
Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.
Definitions and Indices
The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.
UNLESS OTHERWISE NOTED, INDEX RETURNS REFLECT THE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS, IF ANY, BUT DO NOT REFLECT FEES, BROKERAGE COMMISSIONS OR OTHER EXPENSES OF INVESTING. INVESTORS CAN NOT MAKE DIRECT INVESTMENTS INTO ANY INDEX.
BJAM is an investment advisor registered in North Carolina and Arizona. Such registration does not imply a certain level of skill or training. BJAM’s advisory fee and risks are fully detailed in Part 2 of its Form ADV, available upon request.