Markets rally as investors cheer Bessent nomination, tariffs, and holiday optimism

• Markets celebrate the Scott Bessent nomination. Stocks surge!

• Trump announces 25% tariffs on Mexico and Canada to stem the flow of illegal immigration. (Tariffs imposed on January 20th).

• Adds an add’l 10% for China to stop the flow of fentanyl.

• Bonds, gold, and oil all trade lower – VIX screams ‘nothing to worry about.’

• Bitcoin – disappoints and trades lower, (for now).

• Try the Mini Cheese Rice Balls.

It was a Scott Bessent rally – investors/traders and algo’s all very excited about the latest cabinet pick – a Wall Street hedge fund manager that many now expect will bring a wall street mindset to the Treasury.  It was also – in my opinion – a move that shows support for the latest Trump commentary concerning the border….He is prepared to raise tariffs by 25% on Mexico and Canada if they don’t do something to stop the ‘illegal’ invasion of our borders (remember – no one is against legal immigration) along with an additional 10% tariff on China for all the fentanyl that they produce and then send into our country via the Mexican border.  It was Trump ‘following through’ on his campaign promises – nothing more, nothing less – and my sense is that investors welcomed the move.

So, stocks extended their gains – the Dow up another 440 pts or 1%, the S&P + 18 pts or 0.3%, the Nasdaq up 52 pts or 0.3%, the Russell continues to outperform – rising 35 pts or 1.5%,  the Transports stole the show – adding 390 pts or 2.25% while the Equal Weighted S&P gained 66 pts or 0.9%.

Bessent - in a WSJ interview - told us he supports a “gradual approach to implementing trade restrictions and is open to negotiating the exact size of tariffs championed by the president elect”. He also said that ‘his priority will be to deliver on Trump’s various tax cut pledges, while also cutting spending and maintaining the status of the dollar as the world’s reserve currency.

Investors loved it and the algo’s went all in……Now, don’t forget – this is Thanksgiving week – what has traditionally been the start of the annual Christmas rally that takes stocks higher into year-end…Black Friday ‘officially’ starts this week  – although who is kidding who – those sales have been going on for a week now (if not more) and then we move right into Cyber Monday and so it begins….the countdown to the holiday shopping season….a season this year that has 5 less ‘shopping days’ – thus the early start!. 

Retail stocks surged – the XRT rising by 3.65% taking this sector up 16.15% ytd, Consumer Discretionary jumping 1%, leaving that group up 23% ytd.  In addition, we saw strength in Real Estate +1.3%, Basic Materials + 1%, Healthcare + 0.8%, leaving Industrials, Financials, Communications and Consumer Staples all up 0.6%, Utilities gained 0.2% while Energy got smushed – falling nearly 2%. 

Now with all the excitement – there was some weakness in names that have been on fire….reiterating the idea that ‘trees do not grow to the sky’…..NVDA got punched in the head…falling 4.2% yesterday – on top of the 3.2% slide on Friday -  for really no other reason than it was ‘extended’.  The stock broke down thru last weeks low of $137.15 to end the day at $136.02….and it is now about to test the short term trendline at $134.40 – this is key…If the stock breaches this level then I would expect volume to surge and that will send it lower – think $130 ish….but if holds (that’s a key concept here) then I suspect that it will create a whole new round of ‘aggressive’ buyers looking to put more money into the name.  

Remember – this is the conundrum – even if it trades lower – there are buyers, and they continue to buy it – they just are moving passive (not aggressive) – letting the sellers dictate the price – at least in the short term.  But this allows those buyers to accumulate stock at even better prices…. It just depends on your perspective…. some will think the weakness suggests the party is over while others will look at the weakness as a great long-term opportunity….and this is what makes a market.

Bonds rallied hard on the back of the Bessent nomination…the TLT and TLH up 2.35% and 2% respectively.  The AGG index (iShares US Aggregate Bond Index) added 0.9%.  Yields plummeted…. The 2-yr lost 11 bps to end the day yielding 4.26% while the 10 yr fell 13 bps to end the day yielding 4.27%.  (thus, all the excitement in the SMID’s – small and mid-caps – and real estate – think lower rates!).

Oil got crushed…. WTI falling 3% to end the day at $69.10…. the idea that there is a ceasefire being discussed in the Mid-East between Israel and Lebanon – triggered a selloff - taking some of the risk premium out of the latest move higher.  What is interesting is that supply was never disrupted – but it was the idea that an ongoing conflict would eventually cause some disruption and that gave way to the risk premium that market participants built into the price.  

In addition – the Iraqi’s the Saudi’s and the Russians – all got together yesterday for ‘tea in Baghdad’ to discuss the latest condition of the global energy markets, crude production and waning demand.  In the end – they agreed that maintaining stability and fair pricing was the goal – remember – OPEC+ as a group – are expected to meet in Vienna on December 1st where they will decide on production quotas – quotas that have already been reduced to try and stabilize prices in the $70/$80 level.  What happens at that meeting will be the catalyst for what happens next for prices.  We remain in the $65/$71 trading range.

Gold – fell 3% or nearly $100 to end the day at $2642 on the heels of that Bessent nomination and the potential mid-east ceasefire.  Now it was also a fair amount of profit taking – after the stunning move higher this year and especially during the last 3 months….Remember – gold was up 25% ytd coming into yesterday morning…and it was up 13.5% since the August low – ahead of the chaotic election….Investors piling into the precious metal as a ‘safety trade’ (think uncertainty) while foreign countries built up reserves……and now that the election is over and the cabinet appears to be coming together – that ‘safety trade’ is being unwound…..

Gold has now fallen thru the short term trendline and is about to test its intermediate term trendline at $2613.  Again – if it holds that will set it up for a renewed push up to test $2700 – and if it fails then we could see it test the $2500/$2560 trading range. Right now, we are in the $2613/$2700 trading range.

The dollar index remains elevated…at $106.84, the VIX is screaming that there is ‘nothing to worry about’ – which is exactly why you need to remain vigilant and Bitcoin has backed off, it did not pierce $100k yet and is trading at $91,700 this morning (down $8000 from Friday’s excitement) – as bitcoin groupies take some money off the table. 

What is interesting here is that you have to look at the chart…it went apoplectic post the election (+42% in 2 weeks) on all of the excitement of a new administration embracing the asset…And while they might – do not be surprised to see Bitcoin trade off a bit to digest the news (election) and the surge higher….Trendline support is down at $76,200 (down 16% from here) – just sayin’.

This morning US futures are up but barely…Dow futures +36, S&P’s up 5, Nasdaq is up 17 while the Russell is down 9 pts. The travelling for Thanksgiving has begun…. trains, planes and automobiles are on the move…. Today’s Eco data includes.

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.

Tomorrow, 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 – the moves this week can be exaggerated – so be careful – for a long term investor these are not the days you want to make decisions….You are invested – so if we move up – you are participating – so stop worrying and enjoy the holiday.

European markets are all lower…. down between 0.5% and 0.9%. Investors there are discussing the latest Trump tariffs along with a possible ceasefire in the Mid-East. 

The S&P closed at 5987 up 18 pts – this after it tested a high of 6,020 – a new intraday high.  The rest of the week – will be antsy…. volumes will decline causing moves to be exaggerated…. 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.

Mini cheese rice balls

You need – Ricotta, Mozzarella, shredded Locatelli Romano Cheese, s&p, eggs, breadcrumbs, Vegetable oil and cooked white rice.

Begin by mixing the ricotta, mozz, Locatelli, and then add in the cooked rice.  Set aside.

In another bowl – scramble the eggs – season with s&p. Set aside.

In another bowl – add the seasoned breadcrumbs. 

On the stove – heat up a pot with the vegetable oil – make it hot because you need to ‘deep fry’ the rice balls. 

Now – make the rice balls – about the size of a golf ball (remember these are appetizers, not dinner) – then dunk them in the eggs and then roll them in the breadcrumbs.  Now add to the hot vegetable oil and fry them until they are nice and golden.  Remove and set on a plate with a paper towel.  Let them rest for 5 mins to cool and then BAM – jump in and eat them.  So good.

Now you can also make these with ground beef and peas – but that’s a recipe for another day.  Happy Thanksgiving.