Trade Deal Delay

Stocks meandered most of the day, doing nothing really as investors/traders/algos sit and wait and wait and wait…for today’s FOMC (Federal Open Market Committee) rate announcement (no change) and Sunday’s trade deadline. There was plenty of other news: Nancy (Pelosi) and The Dems came to the table and agreed to administration terms that support the USMCA (US/Mexico/Canada Trade Agreement). At nearly the same time, she also announced two new articles of impeachment against President Trump. Yet none of this “other stuff” succeeded in moving the markets either way. By the end of the day the Dow lost 28 points the S&P gave up 4 points, the Nasdaq lost 6 points, and the Russell gained 2 points.

As I pointed out just days ago, the talk is of DELAY (kicking the can down the road) yet again. The administration (through the WSJ) floats the idea that US and Chinese officials are in talks to “postpone tariffs on $165 billion worth of Chinese goods that are due to kick in on Sunday.” As even the Chinese said, there is no hard deadline for an initial deal and there are a lot of options on the table. So will we get the 11th hour deal on Saturday evening? Will news hit the tape that talks are moving along? Will Donny show good faith and delay those tariffs? I mean there is a spectrum of outcomes: On one end is no deal and new tariffs, while on the other end there is a Phase One deal, a rollback of some of the current tariffs and then there is the combination of everything in between. Investors/traders and algos appear to be taking it all in stride. With markets closer to all-time highs, the sense is that a delay of tariffs and ongoing negotiations is the way we are going. Now if there is nothing done and tariffs get imposed on Sunday, then we can expect that trading on Monday and beyond will become a bit more volatile into the end of the month, something that the administration doesn’t really want to happen. So the countdown continues…

On the international front, the Saudi “Vision 2030” launched. Saudi Aramco made its debut on the Saudi Tadawul exchange. Now if you recall, in the end the deal to sell 1.5% of the company (small float) to the public was valued at $1.7 trillion, a bit below the $2 trillion that the kingdom expected. Today’s launch saw those share surge 10% from the IPO price of 32 Riyals to 35.2 Riyals (hitting the daily limit for any stock on that exchange to move) valuing those shares at $1.88 trillion. That made it the largest “listed company in the world.” (35.2 Riyals = $9.38) Now recall that the Saudis cancelled many of the international roadshows due to lack of demand (US included), putting more pressure on the locals to carry this trade. With such a small float the moves can be exaggerated, as evidenced by today’s 10% surge.

[Saudi Vision 2030 is a program introduced by Crown Prince Mohammed bin Salman, aimed at transforming the Saudi economy from the “oil dependent state” it is into a 21st century powerhouse with an economy that is diverse and exciting. This IPO is the centerpiece of that program].

Already, there is a chorus of naysayers that are calling this move a “hollow win” pointing out that so much of the deal and the action was “manufactured.” Well, we are about to find that out over the course of trading in the weeks ahead. Remember, this is an oil story and with so much supply, much of the action will be driven by what the Saudis decide to produce or not!

Saudi Aramco’s CEO Amin Nasser had this to say to CNBC:

“We are happy with the results today. And you have seen the market respond to our results, the company will continue to be the leader globally when it comes to the energy sector and at the same time we are looking at sustained and growing dividends to our investors. At the same time, we continue our growth strategy, increasing profitability across cycles.”

Trading in Asia was muted and the markets ended mixed as global investors wait on the FED and the trade deal.

Japan -0.08%, Hong Kong +0.79%, China +0.06%, and ASX +0.64%.

In Europe, markets are also mixed. Besides the FED and the trade talks, Europe awaits the UK election.  A new poll suggests that the UK Prime Minister election is tighter than previously reported. Current PM BoJo’s conservative party, who was expected to surge in the polls and keep a majority in Parliament, is now in question. And if he doesn’t get the majority needed, then the whole BREXIT conversation takes on a new meaning. Even if he does win, without a majority, can he successfully negotiate an exit by Jan. 31?

FTSE -0.06%, CAC 40 -0.21%, DAX +0.19%, EUROSTOXX – 0.07%, SPAIN +0.28%, and ITALY -0.01%.

US futures are a bit higher, nothing to write home about, as investors and traders in the US await the same. The Fed is expected to hold rates steady while vowing to keep the repo market stable and the US economy stable. So if the market hears anything to the contrary then we can expect a bout of volatility.  Will he continue to suggest that a 2020 rate cut is in order (which the market expects) or will he suggest that the next move could be up? While I do not think he will, there is always the possibility (small as it is). Therefore, I expect no response from the market during his press conference. Then, the talk will turn to the trade deal (or not). Will we hear more about a delay in tariffs and if so, what will the market do? I think we will and I think the market is already prepared for that. A delay would suggest that negotiations are moving along and the market will like that. No delay will suggest something else, and if that happens then be prepared for a minor pullback.

Dow futures are down by 27 points, S&Ps are off by 1, the Nasdaq is flat and the Russell is down 1 point as the sun rises over the Atlantic. The S&P closed at 3132, leaving it 20 points off the all-time highs and appears to be in the 3100/3145 range. A no trade deal story could see the market back off to trend line support at 3048, which would represent a 3% retreat, as disappointment and profit taking kick in. Just sayin’…

On a side note, the Yankees just announced that they offered 29-year-old pitcher Gerrit Cole $324 million for a 9-year deal ($36 mil per season). What will Lizzy Warren have to say about that?

Take good care.

Kp


sole

Feast of the Seven Fishes #6 Filet of Sole – Italian Style

This is also simple to make and is a personal favorite… For this you need: Filet of Sole, Eggs, Italian Style Breadcrumbs *(recipe below – these are also the breadcrumbs you use for stuffing the calamari), flour, Olive Oil and tartar sauce.

Beat 6 eggs in a large bowl to make an egg wash

Place Flour on a separate plate, place Italian breadcrumbs on a separate plate. – Now make a production line. Flour – eggs – breadcrumbs.

Next – dredge the pieces of filet in flour – shake off excess then introduce into the egg wash – remove from the egg wash and place on the plate with the breadcrumbs. Using a fork make sure that you cover the filet in breadcrumbs. Place on a clean plate. Repeat until you have breaded all of the fish.

Next turn the oven to broil and pour olive oil in a pan – maybe like 1/8 inch in pan. Heat the oil under the broiler… now be careful and watch – as the oil gets hot you need to make sure that you are ready to broil the filet. Take a pinch of breadcrumbs and toss in the pan… do they sizzle right away? If so – then you are ready. Now place the filets in the hot oil and flip to the other side… now let them broil to a nice golden brown… Open oven door and with a spatula – carefully flip the filets over to brown the other side… Once browned – remove and place in a serving platter. Serve this with tartar sauce and any leftovers make great “fish filet sandwiches the next day!” (Make sure you use toasted Italian bread, melt some provolone cheese – add a bit of tartar sauce).

*Homemade Italian style breadcrumbs –

In a food processor – blend a bag of hamburger rolls (or hot dog rolls) and transfer to a bowl. Add pepper, onion powder, garlic powder and some parsley for color. The key ingredient is 3 or 4 handfuls of grated pecorino Romano cheese – you can mix both Romano and Parmegiana if you wish. Do not add salt…the cheese will make up for any salt you think you need. Mix well and set aside.

Buon Appetito

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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