SoftBank bets big while markets sweat small cuts: Jerome Powell’s orchestra preps for rate rhapsody

• Stocks churn while we wait for JJ and the Inflation Orchestr

• Oil down, Bond yields up, Gold down, Bitcoin up.

• Masayoshi Son commits $100 billion to US Tech Projects.

• Tech surges…Semi’s, Quantum, Cyber, Cloud

• Try the Butterscotch Clusters for the Christmas Eve Dessert Table.

I am on my way to NYC for business. – Appearing on Fox Business in studio with Liz Claman on Wednesday for Fed Day and then with Charles Payne on Thursday, then I’ll be back in Florida for Stuart Varney on Friday morning.

Good morning. And the churn continues as the rate decision looms (a 95% chance of a cut is the current call) …. The Dow lost 110 pt but the S&P gained 23 pts, the Nasdaq added 247 pts, and the Russell tacked on 15 pts. The Transports lost 131 pts, and the Equal Weighted S&P gave up 27 pts.

Treasuries ended the day slightly higher, the TLT + 0.3% and the TLH + 0.1% leaving 2 yr yields at 4.27% and the 10 yr at 4.425% (inching ever closer to that 4.5% rate that may begin to cause some stock investors to reconsider the plan).

Oil gave back 65 cts to end the day at $70.65 and this morning it is down another 60 cts at $70.05….the story is the same….waning demand, slowing China, blah, blah, blah…but yesterday – remember I said that while we were above intermediate trendline support at $70.30 – if we failed to hold it then a test of the October, November lows at $67.50 would most likely be tested…Now it will be the short term trendline at $69.71 that will either confirm or deny that move. Overnight WTI traded as low as $69.91 – let’s see how the day progresses.

Gold lost $6 to end the day at $2670 – and this morning it is lower by $18 at $2652….it is those rising bond yields (4.425%) that is eating away at some of Gold’s recent gains…last week – we broke thru short term trendline support at $2701 and this morning we are sitting atop of intermediate trendline support at $2640…..So here is the rub, lower rates should help support gold prices, (lower rates = weaker dollar = good for gold) all while higher treasury prices will cause some investors to move some money out of stocks and gold (non-interest bearing asset) and into that ‘higher yielding, interest bearing, no risk’ asset. If we fail to hold trendline support at $2640 – then the November low of $2600 would not be a surprise…Remember – gold is up 23% ytd – which is a BIG move for gold, but if bond yields are going higher (which they appear to be doing) then it is not a surprise to see gold come under some pressure. Remember – Gold is Gold – what are you worried about?

The VIX rose by 6.4% yesterday – as the rate decision hovers over us…..and this morning it is up another 1% as we wait….Now – we are still below all 3 trendlines, but here is where you need to stay awake….Remember, I said the VIX is in the ‘no worry’ zone, which is exactly why we need to be worried…All we need is one headline to send the VIX surging and when that happens, the algo’s will go into ‘sell mode’ – and stocks will decline…which is again why I keep telling you to sit tight – because you know it is coming. You are invested, so if we go higher – you’re good…and if we trade lower – you can take that new money and put it to work at lower prices – Capisce?

Bitcoin – surges yet to another new high….and this morning it is trading at $107,200 (+152% ytd) while Ethereum is trading at $4015 (+75% ytd), and XRP is trading at $2.71 (+337% ytd).

Of the 11 S&P Sectors – Tech gained 1% while Consumer Discretionary added 1.4%. Communications up 0.4% while Industrials ended just north of the unchanged line. We saw weakness in Energy – 2.2%, HealthCare – 1.2%, Basic Materials – 0.9%, Utilities – 0.8%, Consumer Staples – 0.5%, and Financials lower by 0.2%.

Further down the chain – Homebuilders lost 1%, Retailers + 0.3%, Cybersecurity + 1.5%, Semi’s +4%, Aerospace and Defense +3%, Oil & Exploration – 3.5%, Big Pharma – XPH added 0.6%.

And those quantum names that we discussed last week (that I find interesting) found plenty of interest yesterday as well. RGTI + 1.3%, IONQ +8.6%, QTUM + 4.9%, QUTB +4.4%. I would suggest that the moves in the Semi’s and broader tech space along with these names are a direct result of what we heard from Mar-A-Lago yesterday….and for those of you who missed it – here it is….

Masayoshi Son the founder and CEO of SoftBank Group, is a prominent Japanese entrepreneur known for his investments in technology and startups. Yesterday, he and President-elect Donald Trump announced SoftBank's plan to invest $100 billion in U.S. technology projects over the next four years, focusing on artificial intelligence (AI) and related infrastructure (think Quantum computing). During the announcement, Son expressed increased confidence in the U.S. economy following Trump's election victory, referring to Trump as a "double down president" and indicating his intention to "double down" on investments in the U.S.

This investment is expected to create approximately 100,000 jobs in the United States. President Elect Trump taking the moment to highlight the significance of this commitment – saying that it ‘demonstrates strong confidence in America's future and will help ensure that emerging technologies are developed and grown within the U.S’.

Eco data today includes Retail sales – which are expected to be UP – m/m +0.6% (vs. +0.4%), Ex autos and gas of +0.4% (vs. +0.1%). Industrial Production +0.3% (vs. -0.3%) and Capacity Utilization of 77.3%. Now, I do not expect any of this to drive the markets up or down…the focus remains on what we will hear tomorrow…and more so, what we will hear at the press conference. The interest is not the 25 bps rate cut that JJ is forced into, but rather the language he uses for the coming new year – number of cuts (if any), pace of cuts (if any), neutral rate (is it still 3% or has that changed?), and what about the outlook for the economy and the labor market – both of which seem to be firing on all cylinders.

Now this morning the Op-Ed page of the WSJ runs with a story and headline that you would think I wrote… (I did not).

“A Question for Jerome Powell” – it’s simple really – the piece asks one question – WHY? In the end – it’s simple…if street analysts and economists are all predicting higher inflation next year (it’s already beginning) then why are we cutting rates into a strong economy? The last thing JJ and the ‘Inflation Orchestra’ need to do would be to RAISE rates next year to combat rising inflation – which is exactly what will have to happen if that analysis (surging inflation) comes true.

The funny thing about this is that there are some analysts suggesting that bankruptcies, foreclosures and credit card charge offs are at all-time highs – so let me ask – cutting rates by 25 bps at this point is going to solve that problem? Hardly! In the end – what we need is a recession! Not a deep one, but one that realigns the narrative. By keeping rates steady, that will help slow us down…. cutting rates will only speed it up…. but hey, I’m not a member of ‘the Orchestra’!

US futures are lower…Dow futures down 175, S&P’s down 18, Nasdaq – 19 and the Russel is -6.

European markets are also mixed – Both the Euro Stoxx and France are up 0.15% while the rest of the continent is lower.

The S&P ended the day up 23 pts at 6074. We remain in the 6000/6100 trading range in my mind thru year end…unless the market perceives JJ comments as too hawkish – then we could see a swift test of trendline support at 5910 ish. I think the risk is more hawkish than dovish but that’s me.

Again, at this point, I would let the portfolio ride only by making last-minute changes due to tax planning issues. New money should be sitting in a gov’t mm fund earning 4.25% while we wait for the new year – where I fully expect (or hope for) some early weakness to take the froth out. In the end – patience is a virtue.

Try the butterscotch clusters

These are a holiday favorite – easy to make, no baking.

My grandmother used to make these for the holiday season…. It was (and is) always a favorite. Today it is a tradition that I do with my girls – and it always brings me and them back to an earlier time.

For this you need - Nestle Butterscotch morsels, salted peanuts, and Chinese noodles.... (you know the crunchy ones).

Begin by setting up a double boiler - when ready add in the butterscotch morsels.... Stir until it melted.... Now add the noodles and the peanuts.... Stir to coat really well. When ready - remove from the heat and with a tablespoon - take scoops of the mix and plop them onto wax paper.... They will harden into clusters in about 10 mins.