Stocks decline as economic data and port disruptions stir inflation fears, investors brace for NFP report

• The Longshoremen get a 61.5% pay hike.

• Language around automation yet to be defined.

• Israel ponders what’s next…the world waits.

• Today is all about the NFP – what will it say about the FED’s next move?

• Try the Pasta Alla Zozzona.

Stocks churned lower on Thursday – this as so much was happening…. We got a mixed bag of eco data – Services PMI’s showed that we moved further into expansionary territory…suggesting that the services sector remains ‘hot’…. while Factory Orders disappointed and Durable Goods came in inline. 

The situation at the ports remained a problem causing more angst for the markets -that situation was supposedly ‘tentatively’ resolved last night – after a lot of pressure by the administration on USMX to make a deal.  USMX is the organization that represents ‘employers’ in the industry – not the union.  The administration told the employers to ‘make a deal’ no matter the cost – which causes me to wonder – what did the administration promise to do or NOT to do?  

In the end – the Longshoreman are getting a 61.5% raise over the 6 yr. period of their new contract (I’ll give you one guess who is funding that wage increase) while language around automation and benefits is yet to be completely fixed – Essentially – they ‘extended’ their contract until January 15th as negotiations continue…And that should help the markets today.  

The deal helps the Harris campaign from becoming a bigger political issue for her – because a prolonged strike would have become a ‘crisis’ just days ahead of the election….in the end – the massive pay hikes (61.5%) will be an inflationary issue – It’s called the ‘Wage/Price Spiral’ inflation theory – where rising prices causes workers to demand more, thus putting upward pressure on wages while employers are forced to raise prices to try and keep up with rising wages – it is a vicious circle that ONLY ends when the country goes into recession.  The 1970’s style wage/price spiral inflation story did not end well…. But I’m sure this time ‘is different’.   Oh, boy….

And then -

Israel has yet to respond to the latest Iranian attack on that country and that is leaving the oil markets and the broader global markets on edge – especially after President Biden made some confusing comments on what an appropriate response should look like.  Asked if the US would support an attack on their oil assets – JoJo said.

“We’re discussing that, I think that would be, well…. Anyways”

In the end – JoJo does not want to be negotiating in the media – and that was enough to cause oil to surge by 5.1% or $3.61/barrel to end the day at $73.31.  This morning oil is up another 65 cts at $74.33- leaving it kissing both intermediate term and long term trendlines…. The next move in oil tied directly to what happens next.

Gold is holding steady at their most recent highs at $2675 – as it too awaits what happens next on the economic front, on the geo-political front and on the inflation/labor market front. A stronger NFP number will take those jumbo cuts off the table and that will put pressure on gold, while a weaker number will support further aggressive cuts and that will help gold. Gold remains in the $2650/$2700 range.

The VIX advanced by another 8.5% as the tension builds – leaving that indicator up 35% for the week but below the early September high of 23.76.  This morning – the VIX is just a bit lower – down 28 cts as the world moves into the weekend – when ‘so much’ can happen.

At the end of the day the Dow lost 185 pts, the S&P’s down 10, the Nasdaq down 7, the Russell lost 15, the Transports gave up 226 pts while the Equal Weighted S&P lost 32 pts.

9 of the 11 sectors ended in negative territory yesterday. Only Energy and Technology advanced – up 1.8% and 0.4% respectively.  Consumer Discretionary and Basic Materials were the leaders in the loss column losing 1.1%.... Consumer Staples and Real Estate lost 1%, Healthcare down 0.9%, Industrials and Financials lost 0.5%, Communication down 0.4% while Utilities ended the day flat.

The contra trades remained steady but only a bit higher as the markets churned. The VIXY ETF was the standout – up 4.4% as ‘fear’ builds.

And today is all about the NFP report…. remember – the estimate is for 150k new jobs to have been created in September…. And it is due at 8:30 am.  Unemployment is expected to remain steady at 4.2%....  The whisper number was expecting a much lower number ~100k…. but Wednesday’s upside surprise in the ADP employment is causing some confusion and causing the whisper number to NOW expect new jobs created to exceed the estimate….…so we wait.  In any event -the tension is high…IF we get 170k new jobs does that change the FED’s narrative?  And if we get a weaker number will that lock in another ‘jumbo rate cut’?  The market wants a jumbo cut, so if the data does not warrant that, what will the algo’s do? 

The FED has made it clear that inflation (for them) is no longer the issue (although it is not completely dead) – it is all about the labor market…so sit tight…the clock is ticking.

US futures are teasing higher but none of it suggests concern or celebration……Dow futures down 30 pts, S&P’s up 3 pts, Nasdaq up 20 while the Russell is up 5.

Eurozone markets are all higher…Italy in the lead up 0.7%. The UK is lower down 0.3%.  European shippers are all under pressure after the ‘tentative deal’ reached last night. The idea there was that a prolonged US strike would have been a ‘win’ for the European shippers – so any of the gains they enjoyed over the past 3 days are now nothing but a memory.  Maersk down 8%, while Hapag-Lloyd is down 12.5%.

The S&P closed at 5699 down 10 pts……. Yesterday we did NOT breach the Wednesday low of 5674 so that should be a positive……. If we get an NFP number that suggests any weakening in the labor market I think we hold steady, but if it’s a strong read, then I suspect the market could trade lower.  It will be all about HOW they position it…. Next week starts the 3rd qtr. earnings season…and we will begin to get estimates for what 2025 is really starting to look like and what the C-suite thinks about the state of the US economy. 

Remember – it is a seasonally weak time of year…. Long term investors need to remain focused, build a strong, diversified portfolio of large cap/mega cap names that can weather the storm. Younger investors should take on more risk – which does not mean be reckless, it just means you should have a larger proportion of your money in big tech while older investors need to remain a bit more cautious moving money into fixed income and higher dividend paying names. 

Pasta alla zozzona

This is a combo of carbonara and amatriciana…. Delish

For this you need – 1 lb. of medium rigatoni, sweet sausage, guanciale, Olive oil, s&p, eggs, fresh grated Pecorino cheese, onion, cherry tomatoes in puree.

Bring a pot of salted water to a rolling boil on the back burner. 

Begin by dicing the onion and sautéing in a large pan with olive oil.  After 5 mins, add the sweet sausage meat, (out of the casing) and the chopped guanciale.  Brown until all cooked. 

Now add the cherry tomatoes in puree – stir to mix, turn heat to med and let it cook. Season with s&p. 

Now add the pasta to the water. Let it cook for 8 mins…leaving it aldente.

Now in a bowl – crack 2 eggs and use only the egg whites.  Now crack a 3rd egg and use the whole thing…. scramble…Now add 1 c of the Pecorino cheese, season with s&p.  set aside.

When the pasta is done – using a slotted spoon – put the pasta in the pan with the sauce. Do not throw out the water.  Mix well.  Take the pot off the stove and now add in the egg mixture and one ladle of the pasta water – mix to coat.  Serve immediately.

Delish…. Troppo Buono!