Not Quite Back Where We Started
We ran high, fell lower, and then flew sharply higher again, but our positioning must change. Also AMD is up big as Nvidia sinks, CPI lands, and a special birthday!
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“We’ve been looking for the enemy for several days now. We’ve finally found them. We’re surrounded. That simplifies our problem of getting to these people and killing them.”
– Lt. Gen Lewis “Chesty” Puller
This is the 251st birthday of the United States Marine Corps. Tomorrow is Veteran’s Day. That’s nice. Today is special. A little more than 44 years ago, I stood on those famous yellow footprints outside of reception at Parris Island, South Carolina and began the process of earning the title and learning a code that would serve me well throughout the course of my lifetime. Over the doorway, the sign read… “Through this portal pass prospects for the world’s finest fighting force, the United States Marines”
I like to think that I have persevered and adapted to a changing environment throughout a career that saw my original occupation (floor trader) in the financial services industry go the way of the blacksmith. This forced a constant reinvention of purpose based on my abilities that I only could have achieved by knowing that surrender is not an option and by learning what I was taught by very tough men in a very tough place as a teenager. (I look at 17-year-olds now and can’t believe where they are mentally versus where I was at that age.)
Our motto is Semper Fidelis. In English, this translates to “Always Faithful.” We are. Our core values are Honor, Courage and Commitment. We are relentless in striving to live up to these values. The song says… “To keep our honor clean.” We mean it. We serve God, Country and Corps, in that order. This reflects our spiritual faith, our personal morality, and our devotion to a higher purpose. This reflects our allegiance to the United States of America and the defense of its Constitution against all enemies. This reflects our loyalty to one another and our shared sacrifice.
Happy Birthday, Devil Dogs!!
“Here’s health to you and to our Corps
Which we are proud to serve;
In many a strife we’ve fought for life
And never lost our nerve;
If the Army and the Navy
Ever look on Heaven’s scenes;
They will find the streets are guarded
By United States Marines.”
Can We Trust It?
Honestly, I’m not sure. Am I glad most of the dough lost last week is magically back where it started? Of course I am. Though I did move a few names around and redecorate my patio furniture, everything is close enough to being back where it was on Election Day to call a “do over.” No, the past few trading days don’t make much technically, nor even fundamentally. Maybe we should just take a knee and go into the locker room grateful that after fumbling at mid-field, we got the ball right back.
That would be fine, except things are not as things were. Nor are things going to be as they were. Hence, after running much higher, then running much lower, and then running sharply higher once again, we find ourselves rethinking how we want to be positioned moving forward. Front month crude oil prices are much lower than they were.
This morning, I saw WTI moving along the tape close to $85 a barrel. WTI crude ended October trading above $104. That’s an 18% drop in a week and a half. The gas stations in my neck of the woods (central Florida) are already reflecting prices for 87-octane unleaded in the $3.40-per-gallon area. Feels like I just filled up for $4+. My pickup truck, which does guzzle, will appreciate that.
Bloomberg News is reporting, by the way, that Pres. Donald Trump has indicated that he’s more interested in pursuing diplomacy with Iran and winding down the war as an alternative to escalation following a meeting with Sheikh Mohammed bin Abdulrahman Al Thani, who is prime minister of Qatar. The U.S. president stated, “Iran, militarily, is effectively over. We’re just keeping it at the status quo, and we’re doing that really at the behest of countries that are their neighbors.”
Capital has stayed put in Treasury markets as well. What started as a move into perceived “safe haven” as equities wobbled around through late October into November has not unwound despite the rebound in stock prices. This is suppressing interest rates. A month ago, the U.S. Ten-Year Note paid more than 5.31%. I see U.S. Ten-Year paper yielding a rough 4.87% as we traverse the zero-dark hours on Tuesday morning. The U.S. Treasury will auction off $42 billion worth of new U.S. Ten-Year Notes this afternoon, so more to come on this front.
CPI Lands
The Bureau of Labor Statistics is set to go to the tape this morning with its data on October consumer prices. The latest consumer price index numbers will cross the tape at 08:30 ET. We expect that on a monthly basis, headline growth in consumer prices slowed in October from 0.6% to 0.3% while growth slowed to 0.2% from 0.3% at the core (ex-energy & food). Numbers like that would have the annual pace of growth accelerating to 3.8% at the headline and 2.7% at the core. Does it matter at this point?
I think it surely does. Even with oil prices in a state of outright collapse. The Fed will be out in force to discuss the result later this afternoon. We’ll be hearing from Fed Gov. Michelle Bowman, who is known for her pragmatism, as well as Lori Logan (Dallas), Anna Paulson (Philadelphia) and Jeffrey Schmid (Kansas City) later on. All but Schmid hold policy voting rights for the next meeting in December. Bowman, by the way, who was a candidate for Fed Chair until Kevin Warsh landed that position, will speak twice, once before the closing bell and once this evening.
Where are the models on October inflation? The Cleveland Fed’s Nowcasting model shows monthly CPI growth of 0.24% at the headline and 0.21% at the core. That same model also shows year over year growth of 3.74% at the headline and 2.48% at the core. Hmm… so Cleveland, which is a solid model, is a little cool to the tough for October. We’ll see.
Marketplace
On Monday, equity markets rallied broadly. The Philadelphia Semiconductor Index led the way with a gain of 6.85% followed by the Nasdaq 100 at +3.4%, the Russell 2000 at +3.15% and the Dow Transports at +3.14%. The semiconductors rallied sharply, despite the 4.4% beatdown suffered by Nvidia (NVDA) as CEO Jensen Huang’s troubles made headlines. Nvidia competitor Advanced Micro Devices (AMD) surged 13.3% (if only someone here had acted on this news and wrote about it, LOL) to lead the group.
All 11 S&P sector SPDR ETFs closed out the day in the green as growth and cyclical sectors outperformed defensive types. Winners did beat losers at both the NYSE and the Nasdaq, but only by a smidgen at the NYSE. The Nasdaq beat was decisive. Advancing volume dominated composite volumes across the marketplace, but not on greatly increased aggregate trade. Hence, I am going to hold off on calling a reversal of trend to the upside just yet. That does not mean that it has not happened. It just means that I am skeptical.
Economics (All Times Eastern)
06:00 – NFIB Small Biz Optimism Index (Oct): Expecting 97.7, Last 97.9.
08:15 – ADP Employment Change (Weekly): Last 16.75K.
08:30 – CPI (Oct): Expecting 0.3% m/m, Last 0.6% m/m.
08:30 – Core CPI (Oct): Expecting 0.2% m/m, Last 0.3% m/m.
08:30 – CPI (Oct): Expecting 3.8% y/y, Last 3.7% y/y.
08:30 – Core CPI (Oct): Expecting 2.7% y/y, Last 2.6% y/y.
08:55 – Redbook (Weekly): Last 10.4% y/y.
1:00 p.m. – Ten-Year Note Auction: $42 billion.
4:30 – API Oil Inventories (Weekly): Last -5.267M.
The Fed (All Times Eastern)
09:35 – Speaker: Dallas Fed Pres. Lorie Logan.
1:30 p.m.- Speaker: Reserve Board Gov. Michelle Bowman.
1:30 – Speaker: Kansas City Fed Pres. Jeffrey Schmid.
6:30 – Speaker: Reserve Board Gov. Michelle Bowman.
Today’s Earnings Highlights (Consensus EPS Expectations)
After the Close: CRWV (-1.21), RGTI (-.05)
At the time of publication, Guilfoyle was long NVDA, AMD equity.
