Things you need to know
– Markets stage a late day rally on Friday.
– JJ say’s “It’s all good….’ Don’t worry.
– NFP produces 151k new jobs, Unemployment ticks a bit higher.
– Bonds down, oil down and Gold about to do ‘something’.
– Futures are down, but it is early…
– Try the Roasted Chicken parts.
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***Markets are anxious, and that can make you uncomfortable….Click on the link https://slatestone.com/contact-us/ to send me a message to discuss your plan….or feel free to call me at 561-244-2504.
Stocks rallied into the end of Friday but closed lower for the week – after JJ told us to ‘all calm down, there was nothing to worry’ – in fact he said –
“Despite elevated levels of uncertainty, the US economy continues to be in a good place. We do not need to be in a hurry, and we are well positioned to wait for greater clarity”.
And with that the algo’s went from SELL mode to BUY mode.
The Dow added 222 pts, the S&P up 32 pts, the Nasdaq + 127 pts, the Russell +9 pts, the Transports ahead by 124 pts, the Equal Weight S&P gained 64 while the Mag 7 Index rose by 60 pts.
The whipsaw continued as investors tried to decipher the comments that run from minute to minute concerning tariffs (or not), peace (or not), DOGE cuts (or not), tax increases (or not)…and the list goes on and on……causing most of us to realize that NOTHING has really changed from one week to the next other than the date and the onslaught of selling that has now taken the Nasdaq, Russell & Transportation indexes into correction territory.
It has also taken the S&P down thru that 200 dma (5733) that we discussed….we tested it once last week then twice and then we tested a third time and failed – something I warned you about….the Algo’s taking then took the S&P to a low of 5666 (-8.2% off the highs) on Friday morning before JJ came out to speak to try to calm the markets…..by the end of the day – they managed to take the S&P back above the trendline to close at 5,770…..
But – Listen to me…..the damage has been done…. expect more sales in the days ahead. Where does it stop? 5600? 5400? That’s not clear at the moment…. the next move is going to depend on what happens next out of the WH…..more uncertainty will create move volatility and lower prices as many investors let fear drive their decisions…. the path of least resistance is now lower because the uncertainty is higher…..and if you look at the chart of the S&P – all you see are lower lows and lower highs…. since February 19th…. Now, my gut says it finds support at 5600- which is still considered within the range of normal trading…we need to see the S&P trade down to 5535 to be in a full-blown correction (down 10% off the recent high) ….. And IF that happens, then I think we could test as low as 5400 – taking us back to levels seen in July and September (recall that ‘August event’ – the whole Yen carry trade disaster…that took us down to 5100 right in the middle of all that…)
Next out was the eco data….The NFP report came out at 8:30 and contrary to what some assumed was going to happen (a huge miss) – it did not…..we created 151k new jobs – about 10k less than the estimate but well above the ‘disaster’ that some were trying to convince us was knocking at the door. (Sub 70K). And that actually means the 3-month run rate went UP – coming into Friday it was 170K, after Friday’s report it went to 183k (143k, 256k and now 151k).
Unemployment did tick up to 4.1% (from 4%) but that is not an issue…..I will say that there is no need to start to worry until the unemployment rate ticks closer to 5%. Now to put it in perspective – The historical range for unemployment in the United States varies depending on the time period you’re looking at, as unemployment rates fluctuate with economic cycles, policy changes, and major events like wars or recessions.
The lowest recorded rate was 2.5% in 1953, during a post-World War II economic boom fueled by industrial growth and low labor market slacking. The highest recorded rate was officially, 24.9% in 1933, at the depths of the Great Depression. And while the records were not as clear as they are today, that is an accepted rate for historical perspectives.
But since 1948 the rate has typically fluctuated between 3% and 10%, – so let’s not make a mountain out of a molehill. 4.1% is not a disaster by any stretch of the imagination, it is at the lower end of the range….….- I suspect that next month we will see it move up again as more and more gov’t workers ‘opted out’ of working and those claims will hit the tape – something that I do not see as a negative – Why? Because I think many of them have been working (from home) in the gig economy – double dipping…. getting a gov’t paycheck and a ‘gig’ paycheck. So, now they will file for unemployment because they can, but are they really unemployed? – so context is key…. Think about it….75k federal employees ‘took the offer to STOP working’….. Does that mean that they hate Trump so much – they are going to stop working? Really? Who is going to pay their bills? Unemployment is not a full replacement for a lost salary, it is temporary…. I guess where are about to find out….
Of the 11 S&P sectors – only 2 ended weaker…Financials lost 0.25% while Consumer Discretionary fell by 0.35%. Leading the crowd higher were UTILITIES! The most boring sector in the group – investors flocked into the sector sending it up by 1.9%, (think stability and good divy payers), Energy +1.7%, Tech +1.45%, Industrials +1.2%, Communications +0.6%, Real Estate + 0.6%, Consumer Staples +0.35%, Basic Mats + 0.3%, and Healthcare was flat.
Down the chain – we saw Homebuilders + 0.4%, Airlines -1%, Semis +3%; Disruptive tech +0.6%, Aerospace & Defense +0.2%, Exploration and Production +1.7%+, Cybersecurity + 1%, The Value Trade – SPYV + 0.8% and the Growth Trade – SPYG + 0.4%.
And so, with stocks up – the VIX was down 6%, taking the VIXY down 4.5%. And that caused all the contra trades to have a bad day…. the DOG -0.5%, PSQ – 0.7% and SH -0.5%. But this morning the tone is weak – the VIX is up 7.6% – but again it is early….
Bonds traded lower – and that sent yields a bit higher…the TLT down 0.3% and the TLH lost 0.25% while the AGG lost 0.1%. The 2-yr yield is 3.97%, while the 10 yr is at 4.28%.
Oil did trade off the lows reached last week to end the week at $67.05 on what felt like a dead cat bounce…. Overnight it traded lower but this morning it is flat….. Look, I still think it finds support at $66…. but if not – then watch out for $64 and while I would like to see it go higher – that’s not happening at the moment.
Gold – we are moving further into the triangle….now defined by $2,900/2,930 – with gold trading at $2918….it is just a matter of days before we move into the tip of that triangle – where gold with either break down or break out…..…Remember – any closure to any of the issues concerning investors will cause gold to retreat….but if the issues remain unclear then gold will break out and trade higher – think safety trade….…..testing the most recent high at $2,970.
US futures are DOWN… – now it is 4 am – but I am writing this now because I will be joining Maria Bartiromo on set at Fox Business this morning from 6 – 9 am – so I have to get this done! Dow futures are down 190 pts, the S&P down 30, the Nasdaq -130 while the Russell is down 14.
Eco data today is a non-event…but tomorrow we will get the JOLTS report – the Job Openings and Labor Turnover Survey, then Wednesday we will get the February CPI report and the current estimates suggest that a slight decline of 0.1% across all the measures….something I find hard to believe. Remember – The PPI has been up for 3 months in a row…. And higher costs at the producer level typically end up as higher costs at the consumer level. But let’s see. Then on Thursday we will get the February PPI and those are expected to also be down 0.1%…..which also doesn’t make sense if the whole tariff thing is real, right? The anti-tariff set have been screaming about how prices will HAVE to go up – so if in fact they move lower – what will they say then?
The S&P closed at 5770 – up 32 pts… Futures are pointing lower this morning…..and the trendline is the level to watch….this morning it is 5733 – and if we breach that then 5,666 (Friday’s low) will happen fairly quickly….so the next question is will that hold or not?
European markets are mixed…. France and Germany are up, the rest are down, but neither is up or down significantly.
LOOK – get comfortable with being a bit uncomfortable…. If you are a baby boomer – Make sure you are well diversified and not overweight in any particular sector – if you are younger, then hold your nose and jump in…. And while it may become uncomfortable, it is not a disaster…. but again, it depends on who you are and where you are in the life cycle…. Your portfolio should reflect that.
Remember, while the weakness can cause you to be worried in the short term, you are a long-term investor, stick to the plan, modify it a bit if it makes you feel better, but the goal is to not panic….and to take advantage of the chaos.
Take good care,
kpolcari@slatestone.com
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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Pan Roasted Chicken w/Dijon Wine Sauce
For this you need: chicken breasts, legs and thighs, washed, cleaned, dried, Olive oil, Salt & pepper, White wine, Shallots, minced, Fresh rosemary, chopped, 1 tbsp Dijon mustard.
Sprinkle with salt and pepper and rub with fresh rosemary.
Preheat oven to 450 degrees.
In a heavy-bottomed ‘oven proof’ skillet heat olive oil on high until it shimmers, right around when it starts to smoke. Turn burner down to medium-high and cook chicken in batches, being careful not to overcrowd the pan, six minutes on each side until chicken is browned all over. Once every piece has been cooked, put it all back in the pan and put it in the hot oven for 12-14 minutes.
Remove and reserve chicken. Put the skillet back on stove on medium heat. Add shallots, additional rosemary, and white wine for sauce. Let mixture come to a boil and whisk in Dijon mustard and let cook for 5-7 minutes. Add chicken back to pan and let it heat through with the sauce on it. Once heated, serve with sautéed spinach or broccoli.
Buon Appetito
