It’s a Tangled Web We Weave – Try the Scallops

Stocks churned and then rallied late into the day… is the market telling us that Biden is on track to win? Not sure… Financials +1.9% and Energy +4.1%  had their best days in weeks… and those are not Biden friendly industries… so maybe it’s telling us that Trump is going to win… Oh, it is a tangled web we weave… by the end of the day – The Dow gained 153 pts, the S&P rose 18 pts the Nasdaq surged by 21 pts and the Russell moved up 27 pts… again outperforming on a percentage basis.

Stimulus talks stall, virus case surge across Europe – Germany now in the spotlight as infections jump to a record and Spain is ‘out of control’. Here in America – Cases are also surging… Ohio now reporting record rates of infection… economic data yesterday showed a decline in jobless claims and continuing claims and a surge in sales of existing home sales (that is all bullish). The gov’t reported that home sales surged by 9.4% vs. the expected 5% (which would have been healthy enough) and economic conditions across the Mid-West – with the Kansas City Fed Survey coming in above expectations as well. Again all bullish… Earnings continue to come in strong and those that aren’t are having a mixed time. Some are being punished while others are being rewarded.

Airlines are the perfect example… they have been reporting RECORD losses (not unexpected), and they will benefit from a stimulus program (if they get one) yet the group surged yesterday… Why? Because those stocks have already been punished and while those losses mount – the CEO’s tell us that demand is improving and at some point, the planes will be full again once a vaccine becomes available. And that vaccine? We are within striking distance… Eli Lilly’s cocktail of drugs is now front and center – joining the likes of JNJ, Moderna, and Regeneron. And this morning Gilead is surging by 7% as the FDA approves Remdesivir as a therapeutic. And the Senate – has now voted to advance the nomination of Amy Coney Barret to a full vote – as the Democrats chose to play hooky and skip class.

AND… the debate! Let’s not forget the debate… speculation building all day long…what would we learn from this final debate? Would Kristen Welker be able to control the ‘boys’? (She did) Corruption? Would Joey accuse Donny of ties to China and Russia? Would Donny quiz Joey about the latest ‘pay for play’ story to hit the papers? Was he going to bring up Hunter? Would Joey explain it? And who is Tony Bubolinski and where has THIS guy been? In the end – NONE of that really matters and while both sides did accuse each other, neither side chose to address it. What we got – was nothing really substantive – a lot of finger pointing and accusations… and while both sides got a few ‘gotchas’ there wasn’t anything that was going to change anyone’s mind… While the media is telling us that they discussed a range of issues from the virus to foreign policy to health care – none of it was substantial by any stretch of the imagination.

Talk of Trumps lack of a response to the virus is exhausting… the truth is NO ONE was going to stop this from happening… have you seen what’s going on in Europe now? Joey telling us that Trump has no vision for controlling the virus… And that is confusing – we have invested billions of dollars in pharma’s to develop a vaccine… We have 6 first class pharma’s that are within striking distance of a vaccine and this morning – we have that Gilead news… And THAT is also bullish… Are we going to negate this development? Gilead surging by 7% in the pre-market trading. And FYI – no matter who is President – this is a pharma victory NOT a presidential victory…

Additionally – they discussed Energy – which is also confusing — right? As Joey is about to break up the energy industry. Fracking – yes or no? There is confusion on his stance and that of his running mate… Both had pledged to ‘Shut it down’ earlier this year (see the host of video’s) while now – they are saying – they aren’t and that they were misunderstood!

What we didn’t hear about were plans for Taxes, Trade policy? What’s next for China considering we are in the middle of a Phase 2 trade deal? Financial regulation? Technology regulation? The Supreme Court and are we going to get 4 new justices to push the thinking further left? In the end – it will be what it will be… so while the polls have narrowed – they still have Joey ahead by 7.9 percentage points. Enough to prevent a contested result… but there are still 12 days to go and so much can change. Remember – even though 43 million votes have been cast – it still comes down to the 7 or 8 swing states… The RED states will be RED states while the BLUE states will be BLUE states… what will the PURPLE states do because THAT is what really matters.

This morning – US futures are mixed… The Dow is up 85 pts, the S&P is up by 15 pts, the Nasdaq is down 9 pts and the Russell is up 10… markets remain focused on any stimulus talks – but let’s be clear – there are NO talks scheduled for today (unless of course someone is playing ‘I’ve got a secret’) … rather – it seems to me that the market is focusing on the Gilead news and discussions about last night’s debate. Who won? Clearly half the country thinks Biden won, while the other half thinks Trump won… so where are we really? The next 12 days are surely going to be filled with drama… on both sides… but in the end – it’s all noise… because both sides are guilty – period. Can we agree on that?

Talk of a Blue Wave continues to grow and that is leaving some to suggest stocks will rally – Hmmm? When? After they correct? Of course they will rally AFTER the correction which will come first… and the size of that correction will depend on the size of the wave… so get ready… and if the wave comes – then expect a massive stimulus plan to follow soon after the inauguration as the Democrats will go all in… spending money we don’t have – promising to make it up by raising taxes across the board… and that means across the board – no one will be shielded… because if its not income taxes, it will be some other tax or as DC insiders like to call it – ‘Fees’.

European markets are UP nicely at 6:50 am all better than 1% across the board…  – the FTSE +1.55%, CAC 40 +1.35%, DAX +1.05%, EUROSTOXX +1.1%, SPAIN +1.25% and ITALY +1.11%.  Flash Eurozone PMI reports dropped below the magic 50 line… coming in at 49.4 – and this does suggest contraction… (not good) but that only means that nothing will change… rates will remain low (negative) and that the ECB (European Central Bank) will keep the stimulus spigot on… and that is good for stocks… Earnings remain in focus – Barclays beats big – double analysts’ expectations, Daimler upping guidance as they report strong demand in China for Mercedes Benz’s… while Elis and Nordea Bank both climb more than 7% and 5% respectively on strong earnings… No one appears to be concerned about the surging cases of covid 19… Just sayin’… many in Europe holding out hope that Nancy and Stevey will strike a deal and to this I say – ‘Don’t hold your breath…’  Ain’t happening before the election… First Pelosi says that ‘we are just about there’ then she says that ‘It could be a while’ cooling any thoughts of a pre-election deal.

Earnings today include: NLSN, CLF, AXP, ELY, ITW,

Eco data: Markit US Manufacturing PMI of 53.5 (Bullish), Markit US services PMI of 54.6 (again bullish) and Composite PMI expected to be 54 (again bullish).

Oil – rallied 1.5% yesterday… after Russia indicated that they are ready to extend the supply cuts in the face of a surging virus that has the ability to disrupt the global economy yet again – Re-enforcing his collaboration with the Saudi’s as they attempt to keep oil prices from falling. And while that is good – remember that that does not mean oil will surge either… but it will – in my opinion – help to keep oil prices from collapsing as well.  This morning oil is trading at $40.72 – holding onto all 3 trendlines as they intersect – leaving traders to figure out what’s next…

The S&P closed at 3453 yesterday – up 18 pts. But before it did this – we did test lower yet again… trading as low as 3415… inching ever closer to the trendline at 3406… and this is KEY to watch… because my sense is that it will not hold if it becomes clearer that Biden and the Democrats will sweep… any sense of a split executive branch will keep the market from correcting substantially… And while Nancy continues to tease – the reality is a stimulus deal is not happening before the election. While I do think we will remain in the 3406/3580 range until we get clarity on the election – that can surely change in a moment’s notice… if it does then 3300 would be the next trendline level of support while the September lows of 3200-ish would not be out of the question if the Wave becomes a Tsunami. Talk to your advisor to get comfortable with your portfolio.

Take good care – have a good weekend.

Kp


Seared Scallops Bathed in Vermouth

If you like scallops – you will like this dish… simple elegance.

You will need – olive oil, garlic, cauliflower heads, scallops, butter, shallots, dry vermouth, s&p, and fresh basil.

Start by heating up some olive oil in a sauté pan… add some sliced garlic – not to much – now add the cauliflower – season with s&p and cook until slightly browned- maybe 5 mins or so… remove and set aside.

Add a bit more olive oil to sauté pan – heat… when nice and hot…add the scallops – season with s&p – careful not to crowd – sear for about 2 or 3 mins… flip over and cook for about 2 min more. Remove and set aside.

Now, add butter and the sliced shallots – cook until soft and the butter begins to brown… not long… Add about 1/2 c of dry vermouth and scrap the bottom of the pan… add back the cauliflower – reduce heat to med and cover and cook for about 5 mins or until the cauliflower is tender… add the scallops to reheat only… no more than 1 or 2 mins… Serve immediately on a warmed plate – garnished with fresh basil. Enjoy a chilled dry white wine  – nothing fruity…

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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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