Holiday highs: Markets surge amid tariff talk and rate speculation

• Dow and S&P close at new RECORD highs.

• Gold rallies, Bonds rally, Oil sits tight.

• FOMC mins suggest ‘CAUTION’.

• Claudia and Justin called Mar-A-Lago.

• Try the Pumpkin Pie.

Stocks hit a RECORD high (again)! But again – it is a holiday shortened week and volumes are lower…. Many portfolio managers and traders are away from their desks – so moves are always a bit exaggerated as the algo’s take control.

Trump’s threats on raising tariffs by 25% on both Mexico and Canada – caused the Mexican President – Claudia Sheinbaum Pardo to almost immediately say that ‘Caravans of migrants no longer reach the border’ (something that is clearly not true – I mean do you believe what you hear vs. what you SEE?)– she went onto say that Mexico is working hard to ‘curb the flow of drugs (including fentanyl) while also saying that it ‘remains a public health and consumption problem’ in our country. (*since she made those comments – she also threatened to raise tariffs on US imports into her country as a way to strike back but is willing to have a call asap). Canadian PM Justy Trudeau also had a call with President Elect Trump – promising to do whatever it takes to assist the US in solving this crisis. In addition, markets were excited about a possible ‘cease-fire’ between Israel and Lebanon.

So, stocks marched higher…. the Dow up another 123 pts or 0.3%, the S&P +35 pts or 0.6%, the Nasdaq up 120 pts or 0.6%, the Russell lost 17 pts or 0.8%, the Transports gave back 58 pts or 0.3% while the Equal Weighted S&P ended the day flat.

As you might expect – the automakers were hard hit on the tariff talk…F lost 2.7%, GM gave up 9% and STLA lost 5.6%.

In the end – street analysts are viewing the idea of rising tariffs as a bargaining chip – and not as a long term solution….– the ball IS in Mexico’s court – the threat of tariffs can go away if Claudia chooses to assist us in the migrant invasion – which means she needs to stop the cartels – but let’s be clear – that is something that she is unable to do – they tell her what to do (they ‘elected’ her – she is beholden to them). China on the other hand is manufacturing fentanyl at record rates – so that is a different discussion and one the Trump will surely have.

Yesterday’s eco data was mixed…. Services activity in Philly came in below expectations while services in Richmond and Dallas were strong. It was manufacturing in Richmond that suffered – coming in at -14 vs. the -11 expectation. FOMC mins did not reveal anything new – but it did confirm what I have been saying….while a December cut is not OFF the table, the mins reveal that members of the FOMC are becoming more cautious….and while the market is still expecting a cut right now (futures are giving it a 60% chance) I am not expecting nor do I think they should cut rates.

New Home Sales PLUNGED…. falling 17.3% vs. the expectation of -1.8%. Yet none of this appeared to cause any angst for the broader market but it did cause some angst for the homebuilders – the XHB lost 2%, ITB lost 2.2%, and then think about companies like WHR (they make major home appliances) – yeah – it lost 4.7%. FND (they sell tile, wood flooring, laminates, stone along with decorative accessories) and they gave up 3.8%, SHW – 0.9%, OC – 1.3%, MAS -1.8% - you get the point, right?

Of the broad 11 S&P sectors – Energy (think oversupply) and Basic Materials (think weak housing report) lost ground – down 0.2% and 0.8% respectively. Utilities were the winner – rising 1.5%, followed by Tech, Healthcare and Real Estate – up 0.5%, Consumer Staples gained 0.4%, Consumer Discretionary gained 0.3% with Financials up 0.2% and Industrials ahead by 0.1%.

The growth trade – SPYG gained 0.9% while the value trade – SPYV ended the day flat. Semi’s and Disruptive Tech also lost ground, down 1.3% and 1.5% respectively.

Now another interesting event…. Lonnie Musk makes comments about the F-35 and the ‘idiots’ that are still building it. His reasons include the idea that we can use ‘reusable drones’ to do the work…. Those ‘idiots’ that he refers to are LMT – and his comments served to put even more pressure on a stock that is already down on the idea of DOGE coming in to cut gov’t waste (can you imagine the waste?) …. LMT is down 15% off the mid-October high – when the DOGE talks began – but is still up 15% ytd.….and yesterday’s comments only added insult to injury…. LMT appears to want to test the long term trendline – at $503 – whether it holds is another story. Stay tuned. XAR – aerospace and defense ETF though bucked that trend and gained 1.2% and is up 28% ytd.

The VIX (fear index) as you might expect continues to churn in the ‘no fear’ zone…down at 14.30 – well below all 3 trendlines and this only serves to help stocks gain ground.

Bonds lost some of the ground it gained on Monday – the TLT down 0.4% while the TLH lost 0.3% but did very little to bond yields yesterday…. The 2-yr ended the day yielding 4.25% and the 10-yr ended the day yielding 4.29%. This morning though, bond yields are lower…. The 2 yr is at 4.21% with the 10 yr at 4.25%.

The energy sector – as noted above lost ground, Oil exploration and production gave up 0.7% - think names like TPL -2.6%, MTDR – 0.6%, EQT – 0.9%. But oil specifically (WTI) did not do much….it ended the day flat at $68.75 and this morning it continues to churn in place. We remain within the $66/$71 trading range – but OPEC+ is meeting in Vienna next week (Sunday in fact – Dec 1st) so pay attention to what we hear on Monday…. What will OPEC+ decide to do? Will they hold production, or will they cut production to try and support prices? Or will they choose to flood the market with supply – driving prices lower – which will negatively impact all of the Non-OPEC Producers. So many questions….and so many ways to answer to them….

Gold rose on the back of dollar weakness (as dollar trades think rates are going down) – as investors digested yesterday’s eco data and awaits today’s eco data…. think the PCE report – the FED’s favored inflation gauge. In any case – gold gained $16 and this morning it is up another $24 – trading at $2670 leaving us smack in between the two trendlines $2615 (support) and $2703 (resistance). Today’s PCE report could change the FED narrative…. A hotter PCE report will cause them to think twice about a December rate cut.

Eco data – the PCE report is expected to be 0.2% m/m (unchanged), but y/y is expected to rise – coming in at +2.3% (vs. last months 2.1%). So, if these numbers come in stronger – that will be a negative…and remember – the October PPI report (11/14) which was expected to be hot – came in even HOTTER and all that suggests is that inflation just might be getting ready to cause another problem. So, how can the FED cut rates in that situation? They can’t, I mean they can – but that wouldn’t be smart…but what do I know?

US futures are lower…Dow futures down 27, S&P’s down 10, Nasdaq down 75 while the Russell is up 12. Do not react – it is the day before the holiday – the action today is NOT indicative of anything…..other than a bit of churn and digestion of the surge higher this week, and last week and the week before and the week before that…..you get it right? I just want to know when the market is really gonna DIGEST! Would love to put more money to work – but I am trying to be patient…. Not interested in chasing….

European markets are all lower as well…. most mkt centers down more than 1% - with the exception of the UK – which is bucking the trend and is flat on the day – which is a WIN considering all the others are under pressure. The concern today is tariffs.

The S&P closed at 6021 up 34 pts piercing Monday’s intra-day high of 6020. Today and Friday will be a non-event, volumes will decline causing moves to be exaggerated – in either direction….…. If you have to – put in bids and offers below and above current prices to take advantage of any exaggerated moves while you are away.

Thanksgiving pumpkin pie

You need: 1 9-inch pie crust, unbaked, 3/4 cup sugar, 1 tsp ground cinnamon, 1/2 tsp salt, 1/2 tsp ground ginger, 1/4 tsp ground cloves, 2 large eggs, 15 ounce can can pumpkin puree, 12 ounce can evaporated milk.

Preheat oven to 425 degrees F.

In a large bowl beat the eggs and pumpkin together. In a separate bowl, combine the sugar, cinnamon, salt, ginger and cloves, and add to pumpkin mixture.

Gradually stir in the evaporated milk. Carefully pour mixture into unbaked pie shell.

Bake for 15 minutes then reduce the heat to 350° F; bake for 40 to 50 minutes or until the pie is set. Check for doneness - when a sharp knife inserted in center comes out clean.

Cool completely and serve with whipped cream or vanilla ice cream.