Things you need to know:
- Will the Chinese stay for dinner or decide to go home?
- US futures had a wild ride overnight falling back to Tuesday lows – 2884
- Is the US planning on delaying the October tariffs?
- Try the Pan Seared Sirloin with Garlic Butter
The news that the Chinese are hinting at discussing some kind of “trade lite” deal sent the algos into overdrive — not really sure why — since China has always said they would welcome pieces of a trade deal. So this wasn’t news.
But what it tells you is that the market is SCREAMING for a deal, any deal, some kind of deal. As the morning wore on the market surged higher and higher. Then at 2 p.m., we got the FOMC minutes and they suggested concern (see below) which meant that the algos expect more rate cuts and that only added to the excitement — until we reached the trendline at 2928 (where we stalled).
Then someone in China came out and tried to temper expectations ahead of the scheduled trade talks that begin today telling us that because of the recent “blacklisted” Chinese companies, they are not expecting anything significant to happen this week!
Now recall what I said yesterday morning…
“Monday’s weakness took us down and thru trendline support at 2928 and thru the century mark – 2900 – that is just psychological – to end the day at 2893. Any excitement today could easily retake the 2928 trendline – which now represents ‘resistance’ vs. support. I suspect that at least for today – that is where we will stall – that would represent a 1.2% move up from last nights close and with European mkts up less than 1% - that just feels right”.
Between 3:40 and 4 p.m. the market backed off a bit and by the end of the day the Dow gained 181 pts or 0.78%, the S&P gained 26 pts or 0.91%, the Nasdaq added 80 pts or 1.02% and the Russell (small/mid caps) gained 6 pts or 0.47%.
[Now don’t forget – yesterday was the Yom Kippur holiday, so many of the market participants were not at their desks, resulting in lower volumes and subdued trading. But today is a different story. Everyone is back, so let’s see what happens now].
As you might expect, the Technology ETF rallied hard (XLF + 1.46%). That makes sense right, as it is also the one that gets whacked the hardest as well when any negative trade related news hits the tape.
Financials (XLF) surged by 0.93%, Energy (XLE) tacked on 0.91%, Healthcare – XLV ahead by 0.69%, Communication stocks (XLC) were ahead by +0.56%, Even Utilities (XLU +0.48%) found buyers on a day when you might expect that group to be under pressure. Recognize that treasuries came under a bit of pressure sending yields a bit higher and gold settled a bit lower as well, hugging its 50-day moving average at $1,513 — and that makes sense when it is RISK ON.
Now in the afternoon, we also got word that the FOMC is getting more worried about the impact that the trade war is having on the global economy and how the slowdown could eventually hit US hiring and economic activity.
They are worried about the weakness in manufacturing saying:
“A clearer picture of protracted weakness in investment spending, manufacturing production and exports has emerged”
And this only gave more reason to buy stocks because the understanding is that rates will continue to drop. Well… not so fast. In the same release, it also was clear that Powell is under some pressure by the committee to prepare the markets for an END to the current rate cutting cycle. And as you can imagine, the algos are not happy about that at all and that also contributed to the late-day pullback.
Overnight, trading was hectic. US futures dropped 300 pts while the S&P fell by 40 pts – taking that index right back to 2885 before finding support and rallying right back to last night’s close of 2919.
The South China Morning Post runs with a story that said essentially NO progress was made in the “deputy level trade talks” that happened on Tuesday/Wednesday ahead of the more formal “higher level” talks that begin today. It also went onto say that Vice Premier Liu He is planning on leaving Washington tonight vs. tomorrow (not bullish). Why? Because they refuse to discuss forced technology transfer causing the talks to stall.
In the middle of the meltdown overnight, the White House tells CNBC’s Kayla Tausche that the SCMP report was inaccurate.
“We are not aware of a change in the Vice Premier’s travel plans at this time”. They went on to say that Liu is still scheduled to depart on Friday and dinner on Thursday evening has not been cancelled. (oh that’s good!)
Then Bloomberg runs with a story that says the US is considering an agreement to suspend next week’s tariff increases and the New York Times is reporting that the US is granting licenses for some US companies to sell “non-sensitive supplies” to Huawei. On that news, futures did an about face and rallied back to unchanged.
This morning, European stocks are edging higher as investors prepare for today’s trade talks. After all the drama overnight you can be sure that the level of angst is elevated and on a moments notice the markets could either collapse or surge — it just depends on the headline. On top of that, the meeting that was scheduled between the UK and the EU has been delayed until tomorrow after the EU told UK PM BoJo that “substantial concessions are required if a last minute deal is to be agreed to before the Oct. 31 deadline”. FTSE +0.03%, CAC 40 +0.50%, DAX +0.22%, EUROSTOXX +0.18%, SPAIN +0.32% and ITALY + 0.04%.
US futures are off small right now: Dow -16 pts, S&P -1, Nasdaq off 2 pts and the Russell is actually ahead by 3 pts.
Expect the market to react to any trade related news headline as the pressure is on. But do not expect to see any real deal to come of today’s meeting with Liu He. There may be more jockeying and jawboning, but do not expect to see anything resembling a deal at all. Emotions are running high and tensions are running even higher as the global economy continues to come under pressure. The confusion over who is staying and who is leaving remains a mystery. But you can be sure that if Liu He leaves then that is essentially the end of any progress for this series of talks.
Economic data today includes CPI (Consumer Price Index) m/m- exp of +0.1%, Ex food and energy of +0.2%. CPI y/y – exp of +1.8%, Ex food and energy of 2.4%. Again, this report speaks to inflation — what is happening to the prices that consumers are paying. So any report that shows results much stronger than this will point to inflationary pressure building, while any report that shows weakness suggests that inflation is NOT an issue. We will also get Real Avg Weekly Earnings and Real Avg Hourly Earnings.
The S&P rallied right back to the trendline at 2928 which is now resistance for the markets. My guess is that it will attempt to trade up and thru that level again today. Its success will depend upon what the headlines say. I still think we are in the 2850/2928 range.
Oil remains in a stalemate trading at $52.52 as the trade war drags on. Yesterday, we learned US crude stockpiles rose by 2.9 million barrels, more than double expectations. Additionally, OPEC has allowed Nigeria to increase its output and word is that Venezuela will increase its exports despite US sanctions. All of this is only adding more supply to an already oversupplied market. Although it does feel like it is putting in a bottom right here, any positive news on trade will be positive for oil as it will remove the growing cloud of economic uncertainty.
Pan Seared Garlic Butter Sirloin
This is a simple dish to make and when served with roasted potatoes and a large mixed green salad – makes an easy weeknight dish.
For this you need: butter, softened, 1 tspn minced fresh parsley, minced garlic, 1/4 teaspoon reduced-sodium soy sauce, 1 boneless top sirloin steak (3/4 pound), s&p.
Season the steak with s&p and set aside. Letting it sit for 15 – 20 mins.
Making some garlic butter – mix 2 tblspn of butter, the parsley, garlic and soy sauce. Set aside.
In a ribbed skillet – add 2 tblspn of plain butter over med heat. Next add the steak and sear on both sides for 5 mins – that should give you a med steak. If you want more rare, then cook for 4 mins per side and if you want more well done – then cook for 7 mins per side.
When done – place on a warmed plate and top with the garlic butter. Serve with roasted potatoes and a large mixed salad. Simple and so good.
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.