Things you need to know.
– Stocks get CRUSHED!
– What changed?
– NVDA crushes it but Algo’s were not impressed.
– Oil up, Gold Down, Bonds steady.
– PCE today – what will we learn?
– Try the Linguine Puttanesca
Oh boy, did it get ugly stocks collapsed as the algo’s went into ‘sell mode’ – I think someone hit the wrong button, but it was what it was…..There was nothing in yesterday’s headlines that was so new or came out of left field at all….there were no surprises to speak of…..I mean NVDA blew the roof off the house and the eco data continues to reflect the concerns that we have been talking about for months now….stubborn inflation, tariffs and a supposed softening labor market.
But remember how I have been saying that the recent push higher wasn’t making sense based on the conversation, that the market appeared to be exhausted? That we needed to churn lower to consolidate? (I’ve been a broken record……). That we kissed S&P highs at 6175 three times (January 24th, 31st and February 19th), but just couldn’t push up and through? We kept backing off and then testing short term trendline support only to bounce and kiss the high again…. UNTIL WE DIDN’T. And then when we breached support the algo’s (programmed to react to technical signals) went into sell mode…. we then tested intermediate support yesterday and failed only causing the sell algo’s to ‘shoot first and ask questions later’ kind of reaction…. – the momentum that took us up then took us down….
The Dow lost 195 pts or 0.5%, the S&P down 95 pts or 1.6% taking us to 5861, the Nasdaq lost 530 pts or 2.8%, the Russell down 35 pts or 1.6%, the Transports losing 98 pts or 0.6%, the Equal Weight S&P down 65 pts or 0.9% while the Mag 7 Index got crushed….down 775 pts or 3%.
On the economic front – Initial Jobless Claims came in higher than expected at 242k, Pending Home Sales m/m and y/y crashed – falling 4.6% and 5.2% respectively – much different than the -0.9% and -1.1% that was expected, (but why is anyone surprised…..home prices (not interest rates) have to come down in order to stimulate demand – like stocks – they are ‘overpriced’). Kansas City Fed Manufacturing came in weaker, while inflation expectations remain stubborn……The only bright spot in the eco data was the GDP report showing that the country’s economy grew at a healthy 2.3%.
Now we also got more chatter about tariffs – 25% tariffs in Mexico, Canada, Europe and an additional 10% on China – Was this new information? Not at all. Is the market just recognizing that he is serious or is the market nervous now that the tariffs may not do what Trump thinks they will. Did the market expect that Mexico, Canada and Europe would just roll over or is this a game of ‘Cat and Mouse’? I’m in the ‘Cat and Mouse’ camp – It’s a game of strategy to see who blinks first.
China apparently not backing down vowing to ‘retaliate’. That news at the top of the music charts this morning……Mexico on the other hand – came to the table and is willing to ‘work things out’. Canada & Europe is playing on ‘both sides of the fence’……while the headlines say they are preparing to retaliate – the situation is fluid, with indications of a dual approach that included ‘coming to the table to talk’ alongside a willingness to retaliate – a method that does not make them look weak, but does allow for dialogue. And dialogue is what will bring this to an end…that’s all he wants is dialogue that addresses the inequities…. Following talks with UK PM Keir Starmer – Trump is confident that Britain will avoid any tariffs.
And then we had those NVDA earnings which did nothing but blow the house off the foundation, beating on every metric and offering strong forward guidance, but like I said – someone had to focus on the ‘bad news’ – to which I asked – What was the ‘bad’ news? Well, it was an assumption that the AI market will not be as strong as the market (investors) have been pricing in or is it that investors have taken the stock to levels that are not sustainable? (Think the famous ‘Irrational Exuberance’ headline). Look, Jensen could not have been clearer about the future of AI and their role in it, when he said –
“We’ve successfully ramped up the massive-scale production of Blackwell AI Supercomputers, achieving billions of dollars in sales in its first quarter. AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionize the largest industries.”
To be clear – Agentic AI refers to artificial intelligence systems designed to act autonomously and proactively, making decisions and taking actions toward a specific goal without constant human oversight. The term “agentic” comes from “agent,” emphasizing the AI’s role as an independent entity capable of perceiving its environment, reasoning about it, and executing tasks to achieve predefined objectives. It’s a step beyond reactive AI which is artificial intelligence that operates by responding directly to stimuli from its environment without maintaining memory, internal state, or the ability to learn from past experiences. And that is different from Physical AI, which is artificial intelligence integrated into tangible, physical systems that interact with the real world. Unlike software-only AI (e.g., chatbots), physical AI combines intelligence with hardware—think robots, devices, or machines—that perceive, move, manipulate objects, or otherwise act in physical environments. It’s AI with a body, essentially. And in order for all of this to work – they will need chips…. NVDA chips!
Yesterday’s dramatic sell off took NVDA down thru both the intermediate and long term trendlines….($133.71 and $126.56) to end the day at $120.15 down 8.5%….NVDA is now down 21.5% off the recent high and is at a level ($120) that should offer support – but if the negativity continues then we could see the algo’s force it to $100/sh….as buyers step aside – because in the end, the algo’s can act irrationally… – but therein lies the opportunity……
Bonds which have been on a tear – took a breath yesterday as well…the TLT fell 0.7% while the TLH lost 0.3%………but remember – the recent action in the bond market suggests that investors are nervousness about an economic slowdown rather than confidence in a stronger economy and yesterday’s eco data only confirming that. The 2 yr is now yielding 4.05% (down from 4.3%) while the 10 yr is at 4.25% (down from 4.6%). 30 yr mortgages are now at 6.8% down from 7.1%. And since I am not in the camp that mortgage rates are going much lower – prices will have to decline to stimulate demand.
Oil surged by 2.2% yesterday…. apparently, investors started to pay attention to the decline in stockpiles as well as the Venezuela shut down…. Yesterday I said I thought it would find support at $68, and it did…. rising to $70.13. This morning it is down 90 cts at $69.45…. leaving us in this $68/$72 range.
And gold continues to retreat…falling $42 yesterday and another $25 today…….It has now fallen 3% in the last 4 days…..which is also NOT a surprise….we have discussed this…..The chart told us as much……and remember – I told you I thought we could test the $2850 range….well, guess what? This morning, we tested as low at $2862…. if we fail here – then next stop is $2800.
The VIX surged…. rising 11% yesterday as the ‘fear set in’. The move taking the VIX right back to the highs of January….at about 21. If we get another round of ‘fear’ the VIX will shoot to the highs of December (28 ish) we can expect the pressure on stocks to accelerate.
This morning, we await the latest eco data point…. the PCE…. (Personal Consumption Expenditures) – the FED’s favored inflation gauge….and it is expected to come in a bit weaker (which is a positive). PCE top line m/m of +0.3% and y/y of +2.5% down from +2.6%. Core PCE (ex-food and energy) of +0.3% (up from +0.2%) while y/y is expected to be +2.6% down from +2.8%. This comes out at 8:30 – so sit tight…. In addition to the PCE we will also get Personal Income of +0.4% and Personal Spending of +0.2% down from +0.7% further suggesting that the consumer is paring back…. tired of inflation.
US futures are rallying…. The Dow +140, S&P’s +20, the Nasdaq went up to 55, while the Russell is down 3. European markets are mixed….UK, Spain and Italy are higher while France, Germany and the Euro Stoxx are lower.
The S&P closed at 5861 – down 95 pts…. Intermediate trendline support at 5945 FAILED to support as the selling intensified…. We are now in a new trading range defined by the long term trendline support at 5716 and the short term trendline resistance at 6000……. My gut says that while futures are in rally mode this morning…..the level of anxiety remains high….and so, I would not be surprised if we tested 5800….and if we did – the S&P would only be off 5.5% off the high – still well within what is considered the normal trading range. Which doesn’t mean individual names (mega cap names) are not down more…they are….and those are the ones you should be watching, adding to your shopping list….
Remember, while the weakness can cause you to be worried, you are a long-term investor…. this too shall pass and as long as you have a well-defined and well-balanced portfolio – you will be fine…. Click on the link.
https://slatestone.com/contact-us/ to send me an email or – give me a call to discuss your wealth building plan. 561-244-2504.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Linguine Puttanesca
This dish is a classic….and originated in Naples and is today a staple of the Neapolitan household. It is made from tomatoes, black olives (or Kalamata Olives), capers, anchovies, onions, garlic, oregano, and parsley. It is easy to make and has an interesting history. It is spicy and tangy – an appropriate description of the mkt today…
Bring a pot of salted water to a rolling boil – then turn to simmer until you need it.
Start with 3 crushed garlic cloves sautéed in olive oil about 3 / 4 mins…do not let it burn… next add a diced white onion and sauté for 5 mins or so….
Now add in the chopped anchovy filets and sauté – as they cook, they melt away. Add one can – 28 oz – of kitchen ready crushed tomatoes… not puree – Crushed.
Add about 1/4 of a can of water – Let simmer for 10 mins or so. Next add capers, oregano, pepper, chopped Italian parsley, and rough chopped pitted Kalamata olives or pitted black olives – whichever you prefer – but do not mix… It is one or the other. No need to add salt as the anchovies are salty enough. If you like bite more, you can add red pepper flakes at this point… cover and simmer.
Add the Linguine. Let boil for 8 mins or until aldente.
Remove and drain – keep a mugful of the pasta water. Add the pasta to the sauté pan with the Puttanesca sauce and heat and stir until well coated and fragrant. Serve immediately onto warmed plates offering up grated Parmegiana cheese on the side.
Buon Appetito
