Momentum is alive as mixed data and earnings fuel market gains amid geo-political uncertainty

• We are now all in on the earnings season…it’s a big week.

• Tech earnings expected to explode higher.

• Early Voting is now in FULL Swing….

• Bonds churn, Gold up, oil up.

• Try the Penne w/Pumpkin Cream & Sweet Sausage.

And it continues to be ‘Game On’ as investors, traders and algo’s continue to take stocks higher…. Better than expected corporate earnings, stronger forward guidance and mixed eco data all being cited as the reasons why stocks continue to go up.  Now I say mixed eco data, because it’s a funny thing – it is strong in some places while weak in other places – but in either case – it is just enough to convince the algo’s that the rate cut cycle is very much alive. 

On Friday the Dow added 40 pts, the S&P’s up 24, the Nasdaq gained 115 pts, the Russell lost 5 pts, the Transports up 50 while the Equal Weight S&P added 22 pts.

The November FOMC meeting is just 2 weeks away – recent FED head commentary suggests that while we are not getting another 50 bps rate cut – we ARE getting a 25 bps cut – something I do not agree with, (I think they should do nothing) but again, I am just one lone voice. The blackout (or the quiet period) is just one week away – so expect all kinds of ‘comments & guidance’ from different members of the committee this week as well.

And we are now knee deep into earnings season…we are moving away from just the big banks into a range of other stocks and industry groups. Today we will hear from the likes of NUE (steel producers), ARE (Health Care REIT), HXL (Aircraft & Parts), WRB (P&C Insurance). Tomorrow morning brings us autos, homebuilders, tobacco, diversified industrials, Investment management, wireless telecommunications and Aerospace & Defense represented by GM, PHM, GE, PM, MMM, MCO, IVZ SHW, VZ, LMT & RTX.  On Wednesday morning it’s KO, T, BA, HLT, ODFL and Wednesday afternoon – watch for TSLA, IBM, NOW, NEM & LRCX. 

And then we have ‘tech’…..and boy is that going to be exciting…..As you can imagine – Enterprise spending – otherwise known as ‘total spending’ which includes purchasing good and services and controlling costs is expected to be ‘solid’….(watch the controlling costs part of that equation), digital advertising, Cloud services and the ongoing AI revolution all expected to drive this group higher as we move into year end.  

Last week – I told you to watch the ‘hyperscalers’  - Hyperscalers are large data centers that provide cloud computing storage and networking services…Now, you’ll think of Amazon Web Services, Microsoft Azure and Google Cloud Platforms but open your mind….in this group we also have CSCO, IBM, ORCL, NOW, & DELL…..so the excitement is going to be whether or not these guys see incremental strength from enterprise spending on AI and cloud services.   

My friend Dan Ives (Wedbush fame) expects that this quarter’s results will -

 ‘Set the stage for the 2nd derivative of the AI revolution to take hold and that 70% of global workloads will be on the cloud by year end 2025 – up from less than 50% today.’. 

Channel checks and supply chains suggest that demand for AI chips will lead to a ‘tidal wave of spending’ led by companies on chips made by NVDA and ASML – did you see the TSMC earnings last week?  Explosive and the guidance is explosive as well. What is interesting though, is that ASML’s forecast was weak -it doesn’t make sense – TSMC is their largest customer and they reported explosive growth – which is why I say look at ASML after last week’s sell off – I think there is a disconnect…… I suspect that we will hear nothing but great things from the likes of PLTR, SAP, ORCL, IBM, AMD, CRM and the list goes on…. So, strap in…. we are about to launch….

We are also just 15 days’ (360 hours away) from the Presidential election – early voting/mail in balloting is now under way…and by most accounts – the odds are tilting toward Donny winning the WH and the Republicans taking the Senate.  The official polls suggest it is still a ‘tight race’ that Kammy is leading in the ‘swing states’  while the betting markets have Donny winning in the swing states…...so it is going to be interesting to see how this turns out….are the polls correct or are the guys/gals who are betting real money correct? Oh, it’s a tangled web we weave…. As you can expect – watch where investors put money to work – because that will be a telltale sign as well.

Bonds did very little on Friday…  the TLT and TLH up 0.1% and 0.15% respectively…. the 2 yr. ended the day yielding 3.94% while the 10 yr. was at 4.09%.  This morning though, yields are up with the 2 yr. at 3.97% and the 10 yr. at 4.11%.... taking us ever closer to trendline resistance now at 4.17%.  Recall – I fully expect us to test it and then pierce it – taking us to 4.3% rather quickly, leaving many to ask is 4.3% the tipping point or not? Recall, most consider 5% to be the line in the sand…. but let’s see.

Oil continues to thrash around…. It is down 12.5% since October 10th…. – ending Friday at $69.22.  We are below all 3 trendlines and now remain in the $65/$72 range.  This morning oil is up $1 or 1.5% as the conflict in the middle-east enters yet another new phase….After the killing of Hamas leader Yaya Sinwar – you’d think that Hamas and Iran would reconsider their position…since Israel has now taken out a number of leaders – that call for the elimination of Israel…Well, they did and they are not coming to the table…so the conflict rages on leaving oil on the edge…In fact – over the weekend – they struck Benny’s home – while he was away.   

Remember - My gut tells me that the ongoing wars in the middle-east and Russia/Ukraine as well as massive demands for energy and electrification along with a US and global economy that appears to be firing on all cylinders will continue to support oil and energy prices in the years ahead….Fossil fuels are not going anywhere…Just sayin….

Gold – continues to trade back and forth - $2707/$2730 trading range on Friday. This morning Gold is up $20 – trading at $2750 - a target I identified 2 weeks ago -  I continue to believe that much of the move is about safety…but let’s not forget the 16th BRICS summit in Russia….(Brazil, Russia, India, China and South Africa) taking place on October 22 – October 24th….where many are expecting them to continue to discuss a new reserve currency backed by gold.

This morning US futures are churning…. Dow futures are -34, S&P’s -9, Nasdaq -60 pts and the Russell is flat.  And this makes sense right…..stocks have been on a bender, with little to no pullback…that ‘seasonal’ weakness – glaringly absent this year….as the FED tries to keep markets calm ahead of the election….There is no eco data to report today, but later in the week – we will get the Philly Non-Manufacturing survey (services), and the Richmond Fed Business survey.  Existing Home Sales +0.5%, New home sales + 0.6%, the FED beige book and on Thursday – we will get the S&P Manufacturing and Services PMI’s – one in contractionary mode, one in expansionary mode.  

The VIX is up 4.6%- suggesting some nervousness…. which I think is more geo-political rather than economic…but – fear is fear…if it continues to push up, then stocks will push lower.

European markets are lower – it’s earnings and it’s the mid-east tension…. markets across the zone are all down about 0.5%.

The S&P closed at 5864 – up 24 pts.   There are no FED heads scheduled to speak, but much of the conversation will be about Donny’s appearance at a local MCD’s in Lancaster, PA where he donned an apron, made the fries and then served customers at the drive-up window…. Actually, I’m wrong – the msm will not give it any airtime… Coincidentally - MCD is quoted up $1 or 0.3% in a weaker pre-mkt.

In the end though, as a long-term investor - have a plan, be diversified, and have some cash on the side to take advantage of any weakness – and then don’t panic…be patient…  Do not go and change your portfolio based on what you think might happen – politics do not in the long term set prices….it does though create short term chaos, which creates long term opportunity.

Penne w/pumpkin cream and sweet sausage

Here is another fall recipe for you…or the first dish at your Thanksgiving table.

For this you need: 1 lb. penne, 6 links Italian sweet sausage, casings removed, 1 large, chopped onion, 2 cloves garlic, olive oil, ½ cup white wine, 1 cup chicken broth, ¾ c of canned pumpkin (not the pie filling!), ¼ c fresh sage (opt), s&p, ground cinnamon to taste, Dash nutmeg, ¼ c heavy cream, and fresh parmegiana.

 Bring a pot of salted water to a boil.

 Brown the sausage in a large frying pan.  Remove. Add the onion and garlic and a splash of olive oil.  Sauté for 10 mins….

Now add wine - Bring to a boil. Cook until liquid is reduced by half.

 Now turn heat to med low - Stir in the pumpkin, half the sage and s&p.  Cook for 10 mins – so that everything blends.  Add the cream and sausage.  Heat through.

 Drain pasta - reserving a mugful of the pasta water - and return to the pot.  Add the sausage mixture.  Toss to coat.  Add a bit of the pasta water to moisten.  Sprinkle the cheese.  Serve in warmed bowls immediately.