Tech takes center stage: Markets surge as rate cut anticipation grows

Hello TECH! And just like that… we’re off (again!). Stocks kicked off this holiday-shortened week with a full-throttle tech rally — a real lovefest. The Nasdaq surged 2.7%, while the Mag 7 exploded higher by 3.55%.

Your fan favorites?

TSLA +6.8%, NVDA +2%, GOOG +6.2%, AMZN +2.5%, MSFT +0.4%, META +3.1%, AAPL +1.6%.

And it didn’t stop there… Semis ripped +4.4%, Disruptive Tech +4.3%, Quantum (QTUM) +3.25%, Cybersecurity +1.25%, Robotics & AI +1.7%, XLK +2.4%

It was a broad, enthusiastic risk-on vote for all things Jetson-like. And for those of us in the Baby Boomer crowd — enjoy this blast from the past: sitting on the couch on a Saturday morning, bowl of Frosted Flakes in hand, hearing Tony the Tiger belting out “They’re Greaaaaaaaat!”

So why the euphoria?

Because in the minds of investors — and more importantly, in the minds of the Momo crowd and the mentally deficient algo’s that react like a teenager whose frontal lobe hasn’t fully developed — the Fed narrative is now locked and loaded. No matter what anyone says, the market has already decided: a 25-bps cut is coming. Period. Full stop.

Now, we can talk about it — and as you know, I’m firmly in the no-cut camp — but I’m also one lone voice and I do not have a seat at the table and while we know there is some dissension in the ranks – it is a ‘majority vote’ and the market is betting that the majority of the voting members of which there are 12 will vote to cut.

Futures markets are now pricing in a 77% probability of a cut, and here we sit just one week away from the Fed’s official blackout period, which begins Tuesday, December 2nd. Remember: once that clock strikes midnight, voting members go silent — sequestered. No speeches, no interviews, no cryptic clues. If they want to say anything, they’ve got six trading days left to do it. Otherwise, we will be left with hearing from the Non-voting Fed members (the “I have thoughts but no power” crowd) and the usual ‘deep throats’ — Nicky T at the WSJ, and of course, our friends over at Goldman who always seem to know what someone whispered to someone else at a cocktail party in D.C.

At the end of the day – here is what it looked like - Dow gained 202 pts or 0.5%, the S&P up 102 pts or 1.5%, the Nasdaq rose 598 pts or 2.7%, the Russell gained 44 pts or 1.9%, the Transports added 24 pts or 0.4%, the Equal Weight S&P added 31 pts or 0.4% while the Mag 7 gained 1137 pts or 3.55%.

And if you want proof of just how top-heavy this market has become? Look no further than the Equal Weight S&P. It gained only 0.4%, while the traditional Market Cap S&P jumped 1.55%. In the end - The regular S&P is about the star quarterback while the Equal Weight S&P is about the whole team.

Why the massive spread? Because the outsized influence of the BIG TECH behemoths on the Market Cap index is now impossible to ignore — when they move, the whole thing moves. They’re the tail… and the dog!!!

Now again, notice what happened here… TECH, Utilities, and Communications all surged — and yes, you can thank the ongoing AI mania for that. Consumer Discretionary also joined the party, but that has nothing to do with AI and everything to do with the American consumer — who, apparently, still feels pretty damn good.

Of the 11 sectors – Tech + 2.4%, Consumer Discretionary gained 1.3%, Utilities +1.1%, Communications +1% - after that – we see that Healthcare was up 0.4%, Industrials +0.25%, Basic Materials +0.2%, Real Estate + 0.15% while Consumer Staples gave back 1.1% (again think boring, why own PG when you can own PLTR?) and Energy lost 0.3%.

Now, we have to discuss what is happening with Bitcoin and the Crypto asset set…Recall yesterday we discussed support levels and that $80,000 was a level that many thought would hold and if it didn’t then $75,000 would be the next test – well – 80 held, we churned there for one or two days and then they came after it again….they took it up to $89,500 or up 11% in 4 trading sessions. Now, I do not think the volatility is over (yet), I would not be surprised if we tested $80,000 again over the next couple of weeks – especially if we get one or two negative headlines surrounding AI and the TECH sector. This morning Bitcoin is down $1300 this morning at $87,400.

This morning, we hear that META announced that they are going to use (or is considering using) GOOG chips rather than NVDA chips in their data centers. If this is true (and it appears that way), then it suggests that there is more competition in the space (which is a positive sign because that means this whole AI thing is not a flash in the pan, competition is good) and that NVDA and AMD need to ‘get ready’. This morning NVDA is quoted down 3.6%, AMD is quoted down 3.3% while GOOG is up 4.2% and some of their suppliers are enjoying the spotlight as well. AVGO + 2%, CLS +0.6%, LITE +0.7%.

Bonds rose again yesterday – the TLT up 0.6% while the TLH rose 0.4%. and that put pressure on yields. This morning the 10 yr is yielding 4.02% and the 30 yr is yielding 4.67%.

Oil continues to churn below $60. This morning, we are at $58.60. Nothing really to say – you know the drill. We remain in the $55/$60.30 (follow the trendline) trading range. This is an oversupply issue not a lack of demand issue. I just want to be clear – lower oil prices are not a sign of a slowing economy – quite the opposite.

Gold shot higher yesterday…. rising $70 to end the day at $4,134. And here again, you know the details…. It’s all about the coming rate cut that the market is now betting is all but signed sealed and delivered. It continues to trade just above trendline support at $4,000. A failure to cut, will see gold test that trendline – BUT that is apparently NOT happening – so a retest of the November high $4250 would be the obvious move We remain in the $4000/$4250 trading range. Just to be clear, that range adjusts daily as the moving-average trendline climbs. As gold moves higher, the trendline moves higher. Capisce?

Eco data – today we are getting Retail Sales m/m of +0.4%, Ex Autos and Gas of +0.3%. PPI (for Sept) is expected to come in at +0.3% m/m and +2.6% y/y. Now, Core PPI (ex-food and energy) is expected to be up 0.2% while Core PPI y/y is expected to be up 2.7%. These readings if correct – continue to suggest that price pressure are easing at the producer level and that should mean that they will ease at the Consumer level. We are also getting Pending Home Sales m/m of +0.2% and y/y of -1.2%.

US Futures are lower…. Dow futures are -70, S&P’s down 11, the Nasdaq is down 87, while the Russell is down 1.

The VIX collapsed yesterday – falling 12% to end the day at 20.50 – it is now sitting on the trendline. My sense is that the VIX will continue to retreat as we rally into year-end….For me – that means mid 6800’s….which I know is below what Tom Lee (Fundstrat Global Advisors) thinks – he has 7000+ in his sights…We can only hope!

European markets are mixed – Italy continues to get hammered – it is down another 0.1%.....while that is not much, understand that it is down 6.8% over the past 2 weeks….that market is now sitting on it’s intermediate term trendline – remember – trendlines are KEY, if it fails we could see it move ~2% lower, where it should find support..and if that fails – then Mamma Mia! The long term trendline is at 40,400…. or 5% from here….and if that happens – Italy will be in correction territory…. with many asking – ‘Babbo Natale arriva in Italia?’ (Is Santa Claus coming to Italy?)

The S&P closed at 6,705 – up 102 pts. While we remain between the trendlines – we are kissing resistance at 6713…. My gut says – we back off and then push up, kiss and then penetrate it to take us higher into the year end.

Markets are closed on Thursday, and they close early on Friday. People will be away, and volumes will be muted, so reactions can be amplified in either direction…so be careful not to make emotional decisions. Remember, reversals can happen fast.

Cheese ravioli in a simple marinara sauce

This is a family favorite – it’s simple but it reminds me of my grandmother!

In any event – this is so simple, you don’t need much at all.

You need the Cheese Ravioli, Olive oil, 1 lg chopped onion, 2 stalks of chopped celery and 2 large, chopped carrots, 3 garlic cloves sliced, s&p, 2 cans (28 oz) of crushed plum tomatoes and 2 dried bay leaves.

Begin by heating up the olive oil. Add the onions and garlic – sauté for 10 mins.

Next add in the celery and carrots, season with s&p. Sauté for another 15 mins.

Now add the tomatoes and bay leaves, simmer, uncovered on low heat for about 1 hr. Remove and discard the bay leaves. Taste and adjust seasoning.

When done – bring a pot of salted water to a rolling boil. Add in frozen ravioli – once the float up to the top, they are done. Using a slotted spoon, carefully plate, add sauce on top and serve.