This sweet, spiced sauce, known as nogada sauce in Spanish, is the classic topping for stuffed poblano chiles.
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In a medium saucepan, bring the milk just to a simmer. Remove from the heat and add the walnuts. Let stand until the walnuts are soft, 45 minutes.
Meanwhile, in a small saucepan, simmer the sherry over moderate heat until reduced to 1/4 cup, 5 minutes.
Transfer the walnuts and milk to a blender. Add the reduced sherry, bread and cinnamon and puree until nearly smooth. Season the sauce with salt and pepper.