Markets climb amid strong retail earnings, economic optimism, Bitcoin teases $100k

• Strong retail earnings and strong eco data drive stocks higher.

• Bitcoin comes close to piercing $100k – ‘close but no cigar’.

• Dollar rallies, Commodities Rally, Bonds are confused.

• Trump picks Bessent as Treasury Secretary.

• Try the Italian Wedding Soup.

Stocks marched higher on Friday…. driven by strong retail earnings (think GPS +12.8%, Ross Stores +2.2%) and ongoing robust economic/business activity.

Both the S&P Services PMI and the Flash Composite PMI – came in strong at 57.

Up from 55 and 55.3 up from 54.3, respectively. Now this suggests that the ‘services’ part of our economy remains healthy, and in expansionary territory….

Kansas City Fed Services Activity confirmed what the PMI said – coming in at +9.

Up 4 pts over last month. Manufacturing PMI though remains in contractionary.

Territory coming in at 48.8. (This was NOT a surprise at all, manufacturing has been weak for months now).

The Dow + 425 pts or 1%, the S&P + 20 pts or 0.4%, the Nasdaq up 32 pts or 0.2% the Russell outperformed – rising 43 pts or 1.8% and this reflects the fact that investors remain optimistic about the future of the US economy – the danger here is that rates rise putting pressure on margins for US centric companies, the Transport added 195 pts or 1.1% while the Equal Weighted S&P gained 60 pts or 0.8%.

Bitcoin surged by more than $11k for the week to trade as high as $99,850 – leaving it just $150 away from penetrating $100k. It is now up 47% since the election and that is causing all kinds of excitement.

Here is the link to my appearance on Varney & Co on Friday morning…. where we discussed this -

Over the weekend – after it failed to penetrate $100k – traders took profits –

Taking it down $4,000 to $95900 – this morning it is +$3000 trading at $98,450.

The dollar continues to shoot higher…. closing Friday at $107.55 – after trading as high as $108.07 on Friday morning at 4 am. The dollar is now up 3.8% since the election and is up 7.5% off the late September low. This morning it is down 65 cts at $106.90. 

Now a strong dollar usually means that commodities come under pressure – due to their inverse relationship…because most commodities are priced in dollars. When the dollar strengthens, commodities often become more expensive for foreign.

Buyers, which tends to reduce demand and put pressure on prices. And for a while that was true…but more recently – say the past 2 weeks – the dollar has advanced and commodities have advanced. The BCOM (Bloomberg Commodity Index) is up 4.5% since November 15th …. Because there are exceptions to the rule…. commodities can rise in value even as the dollar strengthens.

Some reasons why this might happen can be:

Supply Side Constraints – think weather, geo-political tensions & strikes.

Structural Supply Deficits – think under investments in exploration/ capital.

Expenditures or declining natural resources.

Strong global demand – think emerging markets growth (China, India, Brazil, etc.).

Inflation hedge - When inflation expectations rise, commodities often attract.

Investors seeking to hedge against the erosion of purchasing power. Even with a rising dollar, inflationary pressures can push commodity prices higher.

Alternative asset class. Investors pour money into commodities separate from stocks/bonds/real estate. Think about diversification.

Dual Demand – if the dollar is rising because of a strong US economy, then.

Commodities can also benefit from increased domestic demand and that can push prices higher.

Stockpiling – this is where countries stockpile commodities as a precaution against future shortages or price volatility – and this drives commodity prices higher. independent of the dollar.

This morning the dollar is lower as investors assess Trump’s pick for Treasury Secretary – Scott Bessent – who is expected to ‘take the sting out of the administrations more aggressive trade and economic policy proposals. He is a Wall Street hedge fund manager (Key Square Group - $5 billion), he is considered fiscally conservative, and the sense is that he will prioritize economic and market stability. So, sit tight – more to come.

Oil advanced by 1.5% or $1.10 on Friday closing at $71.18/barrel representing a 5% total move on the week. The surge credited to the rising tensions in the Ukrainian/Russian war – with Vlad warning the world that he has lowered his bar.

For a nuclear response – after Zelensky fired US made missiles and British made.

Missiles into Russian territory. In addition – Zelensky has used drones to target.

Russian oil infrastructure and that only adds to the possible supply disruption.

Away from all of this – we have the Chinese that appear to be demanding more oil.

– something that the oil analysts told us was not happening. It depends on what day of the week we are talking about. You know me – I don’t think demand is the issue for floundering prices…. demand is strong…. it’s supply that is the issue….and more supply will surely bring down prices and that will be good for inflationary pressures but will make the Saudi’s get their panties in a bunch. This morning – Oil is trading down 40 cts at $70.84 after testing and piercing trendline resistance at $71.33.

Gold has recovered nicely since getting punched in the face - falling 8% in the first two weeks of the month – trading right down to the intermediate term trendline at $2609 – Gold found support and the gold bugs have taken it right back to $2737 – a 6.5% move up last week. (Think Goldman recommendation - $3000 by year end 2025).

This morning – we are seeing gold under pressure again – as gold traders also consider what a Scott Bessent Treasury will look like. The sense is that if he becomes treasury secretary – then that should ease concerns over Trumps inflationary agenda – and that would reduce the need for a gold inflation hedge. This morning gold is down $38 at $2699, putting it right back between trendline support at $2611 and resistance at $2705.

The bond market is all over the place…. While the 2-year started the week yielding 4.30% it ended the week yielding 4.37% - up 7 bps. The 10-year started the week.

Yielding 4.43% and ended the week yielding 4.40% down 4 bps. Shorter duration 3 & 6-month bills are yielding 4.55% and 4.49%, respectively. 30 yr mortgage rates are pushing 7.10% while 12-month CDs are paying you about 5%.

This morning – bonds are surging and yields are falling – again think the Scott Bessent nomination…..he is expected to back the pro-business policies that a Trump administration promises and that should take pressure off of higher rates and yields….this morning the 2 yr is yielding 4.34% down 3 bps while the 10 yr is yielding 4.34% down 6 bps.

And US futures are surging…. Dow futures +300, S&P’s up 30, Nasdaq is up 130 while the Russell is ahead by 27. It is a holiday shortened week – but one that is full of eco data.

Today brings us both the Dallas and Chicago Fed Manufacturing Activity indexes, tomorrow we get the Philly FED Services Activity, the Richmond Fed, and Dallas Fed Services Activity along with new home sales – expected to be down 1.8% and the November FOMC minutes – where I do not expect to learn anything new.

On Wednesday – we get Mortgage Apps and the 1st revision to 3Q GDP – expected to be unchanged at 2.8%.  We will also get the FED favored inflation gauge – the PCE price index which is expected to be +0.2% m/m and +2.3% y/y (vs. the +2.1% last month) and Pending Home Sales expected to be -2% m/m.

Thursday is Thanksgiving and Friday is half a day – but expect all kinds of ‘Black Friday’ sales going into ‘Cyber Monday.’ Remember – there are 5 less shopping days this year between Thanksgiving and Christmas – so the push is on, and analysts are expecting another record shopping season.   

European markets are slightly higher – up between 0.1% and 0.6%. Italian bank – Unicredit has made an overture to buy Banco BPM for $10.5 billion and that is putting some pressure on the Italian market – the FTSE MIB Index is down 0.5%.

The S&P closed at 5969…. And with futures up we can expect it to open right at 6000 putting it once again at the highest level for the year.  While I thought the market felt a bit tired, the RSI (Relative Strength Index) is neither overbought nor oversold – it is right in the middle of the graph…so we could go either way….and it appears that way is UP.   

Italian wedding soup

Start with the basic chicken soup.

For this you need 1 whole chicken, 1 beef shank, onions, carrots, celery, water, s&p.

Rinse the chicken and remove the innards from the cavity. Rinse the beef shank - place both in the pot and fill with water. Now add the chopped veggies. Season with s&p and bring to a boil. Once it boils - turn the heat to med low and let it simmer for about 1 1/2 hrs. Turn heat off - remove the meat and allow it to cool.

When cool - remove the skin and debone the chicken. – shred some of the chicken and add back – (while making chicken salad of the rest) Remove the beef from the shank bone and shred also and return to the pot. Now - place the pot in the fridge and allow it to cool overnight - the fat from the chicken will rise to the top and form a 'skin'.

Remove from the fridge and take the fat off and discard. Re-heat.

Now make the meatballs for the soup.

For the meatballs - you need:

1 lb. ground veal (or you can use ground beef), minced garlic (2 cloves), chopped fresh parsley leaves, freshly grated Parmesan, milk, 1 extra-large egg, lightly beaten, s&p.

Place the meat, garlic, parsley, Parmesan, milk, egg, s&p in a bowl and combine. Using a teaspoon, make small balls and set aside. Once completed – fry the meatballs and then add to the soup. Right before you serve the soup – add a bag of spinach and allow it to wilt.

Ladle into soup bowls and sprinkle each serving with extra grated Parmesan. A nice piece of garlic bread on the bottom of the bowl is always a favorite.