Investors await the NFP report, bonds suggest the recession is coming

Stocks chopped all day….and then ended the day mixed but lower….the Dow losing 200 pts, the S&P down 4, the Russell lost 5, the Transports gave back 110 all while the Nasdaq rose 15 pts – all suggesting that the dramatic move on Wednesday may have been just a bit overdone….and not the reaction that JJ thought should have happened at all. In any event – investors are still digesting some recent weak eco data…..

The most recent ISM Manufacturing report revealed that manufacturing in the US fell to 49 – a stunning drop from last month’s 50.2 – while new orders dropped to 47.2 down from 49.2. ISM employment – that fell too….48.4 down from 50 last month.  Recall that 50 is the dividing line….north of 50 is expansionary, south of 50 is contractionary and we are now solidly in contractionary territory.  The PCE deflator came in at +0.4% up from 0.3% m/m while it did show a slight decline y/y – coming in at 6% down from 6.2%. Construction spending off by 0.3%   Leaving investors to wonder if cooling inflation is now going to lead to that ‘elusive’ recession (or at least elusive for now) that will drag corporate earnings lower.

And that concern helped bonds to rally causing yields to decline.  The 2 yr. yielding 4.19%, the 5 yr. 3.66% and the 10 yr. is yielding 3.52% - recall that yields across the spectrum were as high as 4.7%, 4.45% and 4.23% respectively only last month…

Oil – is marching higher – slowly…..but it is up….this morning WTI is trading at $81.25/barrel – up more than $5 from Monday…..as traders/investors consider the coming ban on Russian oil (Monday) and the OPEC+ meeting on Sunday….where it is rumored that the Saudi’s are considering another production cut to ‘protect their interest’ but to be transparent – there are a bunch of analysts that disagree saying that ‘there’s not a lot of impetus’ for them to cut production again right now.  In any event – yesterday we did see oil challenge and fail to pierce short term trendline resistance at $83.60 – but I suspect that we will challenge it again fairly soon.   We are in the $73.50/89.50 range – big enough to drive a TESLA truck thru, but that is the broader range. Keep your eyes on next week…..– after the OPEC+ meeting and after the Russian ban hits – toss in the ongoing price cap discussion and oil will take center stage next week.  Just an FYI – SC Bernstein is now suggesting that we will see oil ‘top’ $100 barrel in 2023 as China re-enters the work force!

Gold?  Rocketed higher yesterday…..gaining $58/oz to end the day up 3.3% at $1817/oz…..taking it right up to long term trendline resistance at $1824 – before backing off…but that too is temporary (I think).  A push up and thru resistance could see gold test the June highs of $1910….Current trading range - $1740/$1824.

This morning stocks are continuing to digest the recent action….and are all a bit lower in front of today’s NFP (Non-Farm Payroll) report.   Dow down 30, the S&P down 2, the Nasdaq down 10 and the Russell is flat.  The Senate voted to also avert a rail strike just weeks before the holidays, but they did not vote to grant 7 more sick days…the bill is on its way to Joey for his signature….

Today’s estimates call for the NFP report to show 200k jobs restored – but after Wednesday’s disappointing ADP number – the sense is that we will see LESS jobs restored and that will help JJ’s narrative.  A stronger number will only embolden the FED to stick to the their guns and push.  See my appearance with Charles Payne yesterday on Fox Business where we discussed the recent moves, today’s NFP report and the drubbing that CRWD endured on Wednesday….(which is proving to be a great buying opportunity – you gotta love the algo’s!)

Watch what today’s report says about unemployment rate – expected to remain at 3.7% and avg hourly and weekly earnings.

Stocks in Europe are lower ahead of the NFP report.  Stocks off by about 0.2% across the board.  
The S&P closed at 4076– as stocks churned….Resistance at 4050 is now considered support (at least in the short term).  Investors are now putting JJ’s speech behind them and are now once again beginning to focus on what lies ahead in 2023.  To be clear – rates are going to rise in December, January and March (at least) and if inflation is not responding at the pace he thinks it should, then we might see rates rise in April, May and June…..

As discussed – I think the markets will churn over the next 5 weeks….. and then end the year somewhere between 4000 and 4100. 

Stick to the plan.

Halibut with mushrooms, leeks and clams

This is easy and delicious. It makes you feel like you are on the beach with the sand between your toes... Enjoy

Ingredients: Halibut, mushrooms (preferable oyster mushrooms), butter, 3 lg leeks, s&p, chicken broth, 2 doz littleneck clams and chopped Italian parsley.

Season the Halibut with s&p. Set aside.

Start by melting the butter in a sauté pan over med heat – do not burn the butter – add sliced mushrooms – like 2 cups and the sliced leeks. Trim the leeks and use only the white and light green part of the stalk - discard the rest. Season with s&p and reduce heat to med low and cook for about 10 mins or until the leeks are soft. Now add about 3 cups of the chicken broth and raise the heat to med hi – let it come to a boil.

Now add the fish and clams to the sauté pan – wait for it to re-boil and then reduce heat to low and cover. Cook for about 6 or 7 mins... make sure all of the clams have opened. If you still have some unopened clams – remove the fish and the opened clams and continue to cook for another 3 mins or so to give the stubborn ones a bit more time.  If they refuse to open then throw them out….

Serve this dish in a full-size bowl (shallow is best) bathing in the clams and broth topped with the mushroom and leeks. Sprinkle with the chopped Italian parsley at the end. Enjoy this with a crisp, chilled white wine.