Things you need to know.
– Is it getting HOT here?
– Stocks got hammered, VIX surges, Bonds rise – sending yields lower.
– Consumer Staples and Contra’s bucked the trend.
– Oil Down, Gold holds steady.
– It’s a big week for earnings, but all eyes are focused on NVDA.
– Uncle Warren holds a ‘boatload’ of cash!
– Try the Luncheon Club Classic Lobstah Roll
** I am in NYC this week recording the next episodes of Trader Talk on the Yahoo Finance Channel – https://finance.yahoo.com/videos/series/trader-talk/ You can also find it on Apple & Spotify.
It’s getting HOT here. Stocks got hammered after weaker-than-expected economic data – weaker services PMI’s (which caught everyone by surprise), a surge in consumers’ long-run inflation views to the highest level in months and Existing Home Sales that plummeted beyond even the weak estimate – down 4.6% vs. the expected negative 2.6%. Friday’s economic data left investors, traders and more importantly the ‘algo’s’ unsettled at a time when the Fed has signaled it is in NO RUSH to cut rates while the data may be beginning to suggest that the economy is starting to ‘choke’ a bit…and that resulted in a ‘Risk Off’ day that sent the ‘longs’ lower (think the sectors) and the ‘shorts’ higher. (think the contra trades)
The Dow lost 750 pts or 1.7%, the S&P lost 105 pts or 1.75, the Nasdaq gave up 440 pts or 2.2%, the Russell lost 67 pts or 3%, the Transports lost 430 pts or 2.6%, the Equal Weight S&P gave back 104 pts or 1.4%, while the Mag 7 Index got smushed…losing 690 pts or 2.5%.
Now the VIX – fear index – broke out – rising 16.3% on Friday to end the day at $18.05 – taking it up and thru all 3 trendlines…leaving it on the northside of resistance. Another negative headline will send the VIX up again and that will put more pressure on stocks.
Now, not all of the sectors suffered, in fact we saw significant strength in Consumer Staples up 1.2% on a down day…..and that makes sense, because consumer staples are things you need whether the economy is weak or strong, so while consumers may pull back on ‘Consumer Discretionary’ down 2.6%, they will not pull back on staples. Utilities also ended the day flat – which is considered a win. You can thank falling bond yields for the support. (think divy payments).
Other industry groups that took the brunt of the selling included: Industrials – down 2.2%, Energy – 2.1%, Tech down 2.7%, Home builders – 2.7%, Retailers down 3.2%, Airlines down 4%, Disruptive Tech – 6%, Metals & Miners – 4.2%, Cybersecurity – 3.6%, Semi’s – 3.1%, Aerospace & Defense – 2.9%, Exploration & Production down 3.1%.
The contra trades had a great day – the DOG + 1.8%, PSQ + 2.2%, SH +1.8%, VIXY + 7% and the SPXS + 5.5% and the Disruptive Tech Short – SARK – had an even better day closing up 11.5%.
Bonds rallied hard on the weaker eco data.…. the TLT + 1.2%, and the TLH + 1% and this sent yields lower. The 2-yr yield fell by 7 bps to end the day at 4.19% while the 10 yr fell 7 bps as well to end the day yielding 4.43%…. again – stuck in that 4.4% – 4.6% range.
Energy took a punch as well – falling 3.1% or $2.25/barrel to end the day at $70.40 leaving it down 8.5% since Trump took office. This morning it is down another 5 cts at $70.35 – taking it below all 3 trendline supports…. putting us now in the $68/$70.50 trading channel. Now, the weakness in the oil market being credited to the Supply/Demand equation – where supply is outstripping demand – which might be true, but not because demand is waning, but because supply is plentiful and while OPEC+ is trying to take control of the narrative – it is the Non- OPEC producers that are muddying the waters – producing more oil than ever and that is putting pressure on prices…..
You can also point to the ‘weaker’ eco data as a reason for the weakness, but I’m not buying that argument….….I’m in the oversupply camp – which says nothing about a weaker economy – it just says there is an oversupply of oil…..which will naturally put pressure on prices. And if the Saudi’s reconsider their production stance and begin to increase in April – then we call all expect prices to go lower and that is a good thing for the economy and the inflation outlook.
Gold continues to churn – up $5 at $2958. Trendlines drawn from the October high ($2845) to today’s highs ($2950) suggests that we are hitting our head on resistance….while a trendline drawn from the December low ($2632) to the today’s lows ($2930) forms a tight triangle right here….with support at $2836 and resistance at $2875. Gold will have to make a move this week – either it breaks down or it breaks out….Much will depend on what happens with the Russia/Ukraine negotiations….a settlement will take the pressure off of the ‘safety trade’ and that may cause gold to pull back – testing the $2850/$2900 range…..which will also allow it to consolidate a bit….after what has been nothing short of a spectacular move up 21% in the last 52 weeks.
US futures had a break over the weekend to digest all of the noise and this morning they are trading higher….attempting to take back some of Friday’s losses – the Dow up 300, the S&P’s up 30, the Nasdaq up 90 while the Russell is up 17. It is the final week of earnings…..(for the most part) but there are some big names reporting…..HD, LOW, DPZ, PZZA, CRM, DELL – now these names are about the housing market, the consumer and technology, but let’s be honest and call out the elephant in the room – it is also about NVDA – they report on Wednesday after the bell….…and their report is pivotal for a number of reasons…. Mostly because it is a CROWDED trade!
AI Market Indicator: As a leading supplier of AI chips, Nvidia’s performance is seen as a bellwether for the entire tech and AI sector. Investors are looking closely to gauge whether the ongoing demand for AI-powered solutions remains robust.
Blackwell Chip Performance: The report will shed light on the progress of its new Blackwell chip architecture. This is critical because any issues with production, such as reported shortages or overheating concerns, could impact future revenue and market share—especially amid rising competition.
Nvidia is the last of the Mag 7 to report. Their results are expected to reset the tone for investor sentiment in the broader tech market, particularly in relation to AI.
In short, Nvidia’s earnings are not just an ‘event’ – they serve as a lifeline for the broader market. If Nvidia is disappointed, its stock could face a significant decline, which may trigger broader volatility in tech and AI-related stocks. Investors might revise growth forecasts downward, leading to a re-assessment of the entire AI sector’s potential. A weak report could see the stock decline 5 – 10% but the depth of such a decline would be dependent on the size of the ‘miss’ or the perceived size of the ‘miss’.
On the other hand, if they surprise us – it could trigger a 5- 10% rally in stock, boosting investor confidence not only in Nvidia but also across the broader AI and tech sectors. An upside surprise would cause analysts to raise future growth forecasts, potentially leading to a broader re-rating of tech stocks and that would validate the market’s optimism around AI investments energizing the broader market.
The S&P closed at 6013 – down 105 pts…..after testing trendline support at 6009…..- today will be key – if we rally and bounce (which it appears we will) then it will be a reprieve and will give investors a chance to re-assess market dynamics…if today is just a dead cat bounce – then I would expect us to breach trendline support – and that could take us to the 5800 range….
Over the weekend – we learned that Uncle Warren (Buffet) has an enormous amount of cash on hand ($334 billion) – causing many to speculate about what that means….as they try to ‘read between the lines’ – asking if Uncle Warren is trying to send us a cryptic message about the markets. Well, sports fans – he did say that he thought ‘things were too expensive’ – so figure it out! Sounds like he is hoping for a pullback so that he can put that money to work…. It isn’t any more complicated than that. But that doesn’t mean you should be selling everything at all….it just means that he has more money than you do! $334 billion earning about 4.5% returns him some $15 billion in interest as he sits and waits…. No so bad….
Reach out – Send me an email to discuss. [email protected]
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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The (Classic) Luncheon Club Lobster Roll –
Back in the day, the Luncheon Club was the members’ restaurant at the exchange. It was on the 7th floor, tucked away from the chaos downstairs.
And it was full of old-world charm – 20-foot ceilings, gilded gold columns, mahogany walls, and an iconic grandfather clock anchoring the room. It was vintage Wall Street.
The classic clock was a timeless piece that had long been a silent witness to the ebb and flow of the market. And it was a steady reminder of the passage of time.
And so today I give you one of the club’s classics –
THE CATCH: 1 lb. fresh lobster meat, steamed (if you’ve got a good seafood counter at your grocery store, they can usually steam them for you if you want, too), Brioche roll, toasted and buttered up, Fresh lemon wedges.
WALL STREET SAUCE: ⅓ cup premium mayo, 2 tbsp fresh lemon juice, 2 tbsp finely diced celery, 1 tbsp fresh chives, minced, 1 tsp Dijon mustard, Sea salt & white pepper.
THE GARNISH: Fresh dill sprigs, Butter lettuce leaves and classic potato chips – (gotta be Cape Cod chips)
TRADER’S EXECUTION: Gently mix lobster with dressing, Butter & griddle rolls until golden, Line with butter lettuce, add the ‘lobstah’, Finish with herbs & lemon.
Buon Appetito
