Things you need to know.
– Stocks weakened on Friday as the WH said ‘the clock is ticking’.
– And it ‘ticked’ and now the US is imposing tariffs on the 3 Musketeers.
– Global markets under pressure……down > 1.5%
– Oil rallies on the tariff news, the VIX surges as well.
– Expect the contra trades to be the winners today.
– Try the Mac & Cheese.
Stocks sold off on Friday as investors prepared for the US to impose tariffs on Mexico, Canada and China – something that apparently it had not been listening to no matter that it has been well publicized….This was not a surprise at all…. The idea that traders were ‘flummoxed’ is confusing to me, where have these traders been? Have they not been listening, or did they not believe that he would impose them? Stocks, which had been higher, got spanked as White House Press Secretary Karoline Leavitt took to the podium at about 1:30 to reiterate and confirm the plan……Again, It has been the headline for weeks now, I guess some investors just didn’t believe it.
The Dow lost 337 pts or 0.75%, The S&P down 30 pts or 0.5%, The Nasdaq lost 54 pts or 0.3%, the Russell gave back 20 pts or 0.9%, the Transports got hit the hardest – down 205 pts or 1.25% while the Equal Weight S&P lost 58 pts or 0.8%.
This morning global markets are repricing assets (all lower) now that Trump has done what he said he was going to do all along ….
Asian markets closed lower…. Japan down 3.5%, China down 0.4%, Australia down 1.8%, Taiwan down 3.5% while South Korea is down 2.5%. European markets all down more than 1.5%, US futures pointing lower as well.
Dow futures down 600 pts or 1.3%, S&P’s down 95 pts or 1.6%, Nasdaq down 375 pts or 1.9% while the Russell is down 50 pts or 2.2%. Get ready, it is going to be an ugly uncomfortable day….
The VIX is surging – up 20% at 19.59, but still not at the ‘danger zone’ yet (the danger zone is 28)….., expect the contra trades to do well today….The DOG, SH, PSQ, VIXY, and the SPXS…will see volumes explode…as some investors look to blunt the move….
Here is what you need to know.
Trump has issued executive orders imposing new tariffs on imports from Canada, China, and Mexico. While this move fulfills his campaign promises, it has triggered retaliatory actions from these trading partners, raising concerns about an extended trade war. He now acknowledges that these measures could lead to higher prices and lower supply in the market in the short term, but is confident that Americans will support this move to stop the illegal immigration and drug issues at the borders arguing that Canada, Mexico, and China have NOT done enough to stop the flow of fentanyl and illegal immigration into the U.S. Saying on Truth Social that “It is my duty as president to ensure the safety of all.”
He declared an economic emergency to impose new tariffs: 10% on all imports from China, 25% on imports from Mexico and Canada, and 10% on Canadian energy imports (oil, natural gas, electricity). These tariffs, affecting key goods such as oil, lumber, produce, clothing, auto parts, plastics, textiles, and computer chips, will take effect on Tuesday. Notably, there are no exceptions for U.S. importers. The moves have triggered immediate retaliation from key trading partners.
Mexican President Claudia Sheinbaum (who doesn’t really control her country rejecting the idea that the cartels control the country) imposed retaliatory tariffs, while lame duck Canadian Prime Minister Justin Trudeau announced matching 25% tariffs on up to $155 billion in U.S. imports. Trudeau also encouraged Canadians to “choose Canadian products,” effectively calling for a boycott of U.S. goods. Several Canadian provinces began removing American alcohol brands from government store shelves in protest.
China has yet to impose new tariffs but has signaled that “necessary countermeasures” are coming. Its Ministry of Commerce plans to sue the U.S. at the World Trade Organization (WTO) for what it calls “wrongful practices.”
Now while markets are lower – energy is higher…. Why? Think about this – We, (the US) consumes 20 million barrels of oil/day….We produce 13.2 million barrels/day……Canada supplies us with over 4.3 million barrels of oil/day and with 10% tariffs imposed on Canadian energy we can expect prices to rise – at least in the short term…..
Despite Trump’s warning that he will escalate tariffs further if other countries retaliate, his move has already set off a trade dispute with America’s three largest trading partners. But let’s be clear – This is a DRUG war with the Mexican cartels and with China, not a TRADE war….
Now, the reaction is always ‘shoot first and ask questions later’ and that is what we are seeing today…the markets always overreact – (recall what happened last Monday with Deep Seek). The sell algo’s are blowing up, causing the buy algo’s to step back – once again leaving a void in prices and so prices are falling… But again – do not forget – buyers are not running away at all, they are just repricing what they are willing to pay based on the headlines and as the prices go lower, the buyers will become more aggressive…..…but right now, they are not interested in paying UP for stocks. They are testing the level of angst in the markets and right now – the angst is high…….so why get run over? It’s not any more complicated than that.
Eco data today includes S&P Manufacturing PMI of 50.1 – putting that in expansionary zone…. (it’s been in contractionary zone for months now, so this is significant). ISM Manufacturing PMI – their estimate is 49.9 – which is right on the line…. but officially in contractionary zone…. We are also getting data on Construction Spending – m/m of +0.2%.
It is a BIG earnings week – more than 120 names set to hit the tape…. I look for results from PLTR, TSN, CLX, CNC. ADM, KKR, CMI, PEP, PYPL, MRK, GOOG, QCOM, AMZN and the list goes on….
Representing Online Marketplace, Application Software, Packaged Foods, Home Products, Managed Care, Agriculture, Private Equity, Non-Alcoholic Beverages, ‘Other’ Financial Services, Large Pharma, Internet Media & Services, Semi’s, etc.…
Treasuries are down this morning on the back of all the chaos (some pointing to the idea that companies will be forced to raise prices causing inflation to reaccelerate) and that is sending yields higher….The 2 yr gaining 7 bps to yield 4.27%, while the 10 yr is yielding 4.53%.
The dollar is also spiking higher on the back of the tariff news…. currently up 1% trading at 109.44, testing the January high of 110.
Oil – is up $1.75 or 2.4% as the tariff news takes root…..Look, we discussed this last week – the Tariffs on energy will cause a short term spike in prices but they can also disrupt supply chains and create uncertainty, all while the threats on oil producing nations – (think Mexico and Canada) could cause them to retaliate by reducing oil exports or cutting production which will tighten supplies and send prices higher. Again, you can also argue that oil traders are buying oil to hedge against perceived inflation or the economic uncertainty that some think will be triggered by the disputes. I expect oil will continue to test higher in the days ahead…. with $80/barrel a real possibility….
Gold which busted out last week is not really reacting to the news right now…. This morning it is down $2.50 at $2832…. Last week we tested $2850 where I think it will run into resistance…. This morning – gold traders are reassessing the news and what it means…. Will we see inflation surge? Will the news cause a ‘flight to safety’? Remember, last week, I said don’t get so excited just yet…..while the breakout (to $2850) was positive – we have to see how it acts in the next couple of sessions…Short term support is $2775 while trendline support is at $2718 – something that I don’t think will happen, but just so you have the data point.
The S&P closed at 6040 down 30 pts – giving back the 30 pts it gained on Thursday…. leaving us in the same place we were earlier in the week. We have been churning down 30 then up 30, down 30, but today we are going down again… S&P futures are down 90 pts at 7 am…..getting weaker as the sun rises over the Atlantic…..the move today most likely going to cause more damage to the markets and that will need to be repaired in the coming days as the headlines become even clearer…..
If anyone is surprised by the markets reaction, then you haven’t been paying attention…. what did you think would happen? Did you think there was going to be an 11th hour deal? Many did, but that is not what happened and so markets will reprice now.
Recall, I have been saying that you (as a long term investor) need NOT chase anything, that I have been calling for a pullback….and here we are…..if you are a long term investor, let it shake out….No need to rush out and buy anything just yet…..but if you see an obvious opportunity go for it… there are going to be plenty in the days ahead….…. If you are a short-term trader, you love the action….and for you, there will be opportunities as well.
Diversification remains the key for long-term investors.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Mac & Cheese –ot your Kid’s Mac & Cheese!
It’s an anxious day and we need some comfort food – something that makes you feel warm and fuzzy…. – and what is better than a plate of Mac and Cheese….
For this you need: 2 c of whole milk, water, 1 lb. of elbow macaroni, 8 oz of shredded American cheese, butter, 1 tsp of Dijon mustard, 7 oz of gruyere cheese – shredded, 2/3 c of breadcrumbs, olive oil, s&p and fresh grated Parmegiana cheese.
Turn the oven to broil – so that it’s ready for you.
Bring 3 ½ cups of salted water to a boil – Add the milk. Now add the macaroni and reduce heat to medium low and cook for about 6 mins…. or until aldente… (You do not want mushy pasta). The pasta should suck up the water and milk…. (If it doesn’t – then you used to much, but just strain it off)
When cooked – add the shredded American cheese and mustard – stir constantly until cheese melts – should be no more than 1 min or so…. Take it off the heat and now add in the shredded Gruyere mix just to distribute – and then put it in a buttered Pyrex dish.
In the meantime – add the breadcrumbs to a frying pan and a dollop of butter – cook over med heat until the butter melts – remove from the heat and spread the breadcrumbs over the mac and cheese. Top with the Parmegiana and place under the broiler (middle rack) – just long enough to toast the breadcrumbs…. Remove and serve…. Yum.
Buon Appetito.
