Job market strong, stocks rise, oil rallies and treasury yields fall

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  • Job market is strong – Investors continue to go all in.

  • Treasuries decline as stocks rise.

  • The VIX suggesting that just maybe stocks are a bit ahead of themselves.

  • Oil – rallies back strongly after last weeks sell off.

  • TSLA under pressure as Lonnie considers a sale of personal stock.

  • NYC and Miami now in a Bitcoin/Blockchain fight.

  • Try the Pumpkin Cream Pie for dessert.

US labor market showed strong improvement in October…. the Non-Farm Payroll report showing an increase of 531k new jobs while both the dismal September report and August reports were revised upwards as well.  Service parts of the economy making the biggest gains…. Restaurants, Hotels, Leisure, Consulting firms all seeing great gains…. Manufacturing also doing well.    Unemployment fell to 4.6% while average hourly earnings m/m and y/y came in as expected.   Employers are eager to hire, wages are up, and the worker is the beneficiary no matter that inflation and the cost of living has skyrocketed as well. 

Investors loved it…taking stocks higher (again) and bonds higher which sends bond yields lower…. this as the report showed us that the economy has successfully rebounded from the summer wave of the Delta variant of Covid 19 and that investors are not yet super concerned about inflation.

By the end of the day the Dow rose 204 pts or 0.6%, the S&P up 18 pts or 0.4%, the Nasdaq up 32 pts or 0.2%, the Russell up 35 pts or 1.4% and the Transports up 111 pts or 0.65%.   The 10 yr. Treasury ended the day yielding 1.48%! this down from what was 1.64% only days ago……pre the FED meeting where we learned that the FED is about to launch their tapering program…taking nearly $15 billion out of the mix starting next week and continuing every month until they succeed in taking it all away – End date is expected to be June 2022.   What is important here I think is that Jay Powell continues to control the narrative….by saying that no one needs to worry about interest rate increases…. that tapering does not equal an automatic hike in rates once completed – and investors appear to be taking him at his word and taking stocks even higher….…. To which I say – Caveat Emptor. 

Energy – XLE and Industrials – XLI up 1.3% and 1% respectively, Utilities – XLU even made the top three up 0.95% on the day. The value trade (SPYV) up 0.8% while the Growth (SPYG) trade ended flat. 

And what is something new (or at least much more a part of the conversation) that we should all focus on is the ESG trade (Environmental and Social Governance) trade.  You can access exposure to this ‘new’ sector in a variety of ETF’s – The EFIV is just one of them…. It is the S&P 500 ESG ETF.  This stock has been on a tear this year…up 30% ytd and is now kissing new highs almost daily…. It is something that long term investors should consider as part of their portfolios.  Other ETF’s taking advantage of the space (which is global) include offerings from Blackrock, iShares, Thornburg, Natixis, Vanguard, among some others…. and they all have a range of options depending on where you want to look for ESG opportunities….in the end – they all have similar holdings that include almost everyone you know…MSFT, AAPL, TSLA, AMZN, FB, NVDA, JPM, HD, UNH….notice what we do not see in there energy names…..which is curious to me since the big boys like Shell, XOM and CVX all announced big pivots into renewables in the years ahead…as they realize that we should be moving away from fossil fuels and into renewable energy (which is a positive ‘environmental move) ….Surely, these funds will begin to introduce these names into the fold…..at some point.

The VIX (fear index) has risen just a bit but remains well below all 3 trendlines closing at 16.50 on Friday.  It feels though, like it is getting ready for a surprise hit…. This morning it is up small trading at 16.72…. and is now up 1% from last week’s lows of 15…just something to consider, that’s all.  

Oil – which I pointed out on Friday had gotten slammed last week – down nearly 6% (falling to a low of $78.80) as industry reports pointed to rising supplies in the US  – and talk of Joey tapping the strategic petroleum reserve put pressure on prices (which I thought was baloney) ….and then on Thursday afternoon we heard from OPEC+  who announced that they are sticking to the plan – defying US pressure to increase production and output by more than the 400k barrels we are expecting and that caused traders to take oil back up to end the week at $81.26/barrel. This morning WTI (West Texas Intermediate) is up $1.24 or 1.5% at $82.51/barrel leaving it just $2 or 2.4% below its most recent high.

US futures are up again this morning…. there is no economic data due out today, but we do have a full range of data points out this week.  PPI (Producer Price Index) due out tomorrow, CPI (consumer price index), Wholesale Inventories, Mortgage foreclosures all due out on Wednesday while the JOLTS (Job Openings Labor Turnover Survey) is due out on Friday.  At 6:45 am…Dow futures are up 72 pts, S&P’s up 3, Nasdaq up 3 and the Russell up 7 pts.  After the passage of the first infrastructure bill – watch for more of the industrial sector continue to benefit…CAT is up nearly 4% in the premarket while John Deere is up 1%.  Both expected to be big beneficiaries of the spending bill.

TSLA is quoted down more than 5% in the premarket as it become clear that Lonnie may have to sell 10% of his stock to meet his US tax obligation of nearly $15 billion – this after he ‘asked’ the Twittersphere what he should do!  And that sent some elected officials into a tizzy…. can you imagine – asking twitter users how to manage a multibillion-dollar portfolio to meet your tax obligation?  And while this is a TSLA specific issue – weakness in TSLA will have an impact on the indexes…. unless of course – investors celebrate the move and reward Lonnie by being net BUYERS of the stock…. after the initial sell pressure subsides.  
European markets are a bit muted this morning…. There is no economic data due out across the region – so much of the action is being driven by China data that showed exports surged by 27.1% – well ahead of the expected 24.5%.  At 6:45 am – European markets are down between 0.05% – 0.25%.

Bitcoin has gotten a bit of a boost after NYC new mayor Eric Adams reveals that he is set to make NYC the blockchain/bitcoin capital of the US – challenging Miami’s mayor Frankie Suarez in a NYC vs. Miami challenge…. As of 7 am Bitcoin is trading at $65k up 5% while Ethereum is trading at $4700 up 2.1%.   

The S&P ended the day at 4697 after piercing 4700 at 9:32 am on Friday….and trading as high as 4718 before backing off to end the day up 17 pts leaving it up 25% ytd.  The move today – will be driven by the passage of the first infrastructure bill late Friday evening and the talk of passing the next ‘human infrastructure’ by Thanksgiving……. Expect continued pushback from Senators Manchin and Sinema unless of course Chucky can make them big promises.  So, the question is – Will they cave or will they hold the line on this out-of-control spending package that by the way is estimated to cost more than $4 trillion according to a Wharton School of Business analysis….  that is $2 trillion more than what they are all telling us….as the usual ‘slight of hand’ continues to drive the discussion.    While I have pointed out that we are in the 4400/4700 trading band – we have now pierced the upper end and talk of S&P 4800 by year end is now the target.

Pumpkin cream Pie (For dessert) 

This is a simple pie to make but like all desserts this requires very specific measurements….so here you go.

Preheat oven to 350 degrees.

You can make your own pie shell, or you can buy the Pillsbury pie crust at your local grocer.  Place the pie crust into a 9-inch pie plate and carefully mold it to fit the plate.

For the cream cheese part of this you need:  8 oz of Philly cream cheese, ¼ c of sugar, ½ tsp of vanilla, and one egg.   In a blender combine the ingredients and pour into the uncooked pie shell.

Next for the pumpkin filling you need:  15 oz of Pumpkin pie filling, ½ c of sugar, 1 ½ tsp of cinnamon, ¼ tsp of: ginger, nutmeg, and pumpkin spice, 1 c of evaporated milk and 2 eggs.   In a large bowl combine the first 6 ingredients.

Then add the milk and eggs and then when fully combined – gently pour this over the cream cheese mixture in the pie crust.

Place in the oven and bake for 1 hr.…. Remove – let cool and serve with homemade whipped cream.