Things you need to know.
– Stocks got pressured lower, which doesn’t mean the buyers walked away.
– Shorter duration bonds rallied; longer duration bonds declined.
– Oil down, Gold Up
– Trump’s speech was well received by those that actually listened to it.
– Did Howie hint at a Tariff deal? Markets think ‘YES’.
– Did Germany elect Fred (and Ethel) Mertz?
– Try the Lemon Sole Francaise (it’s Ash Wednesday).
And the hits keep coming….Stocks around the globe – in Tokyo, Sydney, London, Paris, Frankfurt, Milan, Madrid and New York continued to get hit (in the past few days) amid trade – ‘war’ jitters, economic uncertainty, and worldwide geo-political tensions………as investors moved into shorter duration T-bills, short term gov’t money market funds, gold which surged by $25 to end the day at $2,926/oz. In addition, while some investors chose to move out of stocks, there were plenty who chose to move IN to stocks….remember – for every SELLER there is a BUYER, the buyers though have been controlling the narrative lately…choosing to be LESS aggressive, choosing to bid lower, taking advantage of the angst…….causing sellers to puke…..
The Dow lost 670 pts or 1.5%, the S&P down 72 pts or 1.2%, the Nasdaq down 65 pts or 0.4%, the Russell down 22 pts or 1%, the Transports down 323 pts or 2% (that’s a reaction to an expected slowdown), the Equal Weight S&P down 80 pts or 1.1% while the Mag 7 lost 162 pts or 0.7%.
So, it looks like we might finally have a correction started; it’s been more than 18 months since we got a 10% correction. The Dow is now flat on the year, but is 5% off the highs. The S&P is down 1.8% and is about 6% off its highs, the Nasdaq is down 5.3% and 9.9% off the high (flirting with correction territory), while the Russell is down 6.8% and 16% off it’s high…. putting that well into correction territory.
Of the 11 S&P sectors though – we are seeing a different story – 8 of the 11 major sectors (72%) are HIGHER on the year…..…Healthcare is in the lead +8%, Real Estate +5.8%, Consumer Staples + 4.4%, Financials +3.5% Utilities +3%, Communications +3.5%, Basic Materials + 2%, Energy +1.5%. Industrials are flat.
Weakness can be seen in Tech – 6%, Consumer Discretionary – 7% and if we move down the chain a bit – we see weakness in Homebuilders – 6%, Retail -11%, Airlines -8%, Metals & Miners – 2%, Semi’s down 6%, Aerospace & Defense – 3.5%, Exploration & Production – 6.5% etc.…..
And we have seen some real price corrections in many of the ‘favorite’ names…….names that everyone is in, names that have been the centerpiece of the strength in the market…..You know the ones – the Mag 7 and other ‘sexy’ tech names…….and that index is down 18% off the December high with the individual names down even more….NVDA-26%, TSLA – 46%, AMZN – 18%, GOOG – 16%, PLTR -34%, AMD – 56%, MSTR – 56%, MSFT – 17%.
Investors, traders and algo’s seem to be concerned about the things he campaigned on and the things he is doing……He campaigned on cutting out ‘the fat’ and he is doing that – DOGE has identified massive waste. He campaigned on tariffs on Mexico, Canada and China and he imposed them (there is no surprise there)– sparking retaliatory tariffs that intensified concerns over an economic slowdown (again no surprise)…Fed Fund Futures are now pricing in 3 – 25 bps rate cuts by Christmas 2025, with the usual suspects (bears) calling for the current market weakness to get worse before it gets better….
He campaigned on closing the border – and he did that in 40 days…(remember we were told under the prior administration that it needed to be an ‘act of congress), he campaigned on ending the Russia/Ukraine war and that is coming….Vlad (Putin) has lost the war – let’s be honest…..he was supposed to take Ukraine in 3 days….How’d that work out? And now Zelensky wants the rare earth development deal, and he is coming back to the table signaling a renewed willingness to engage in negotiations after a freeze on US military aid…. …. Zelensky posting on ‘X’ – (I guess X is the new way of diplomacy)
“Ukraine is ready to come to the negotiating table as soon as possible to bring lasting peace closer. Nobody wants peace more than Ukrainians. My team and I stand ready to work under President Trump’s strong leadership to get a peace that lasts.”
He campaigned on lower oil prices and guess what – the Saudi’s are going to raise production to bring more supply to the markets and that is not because demand is surging, demand is steady. He suggested to the Kingdom that bringing down the price of oil will HURT Russia by slashing their oil revenues and that too would help bring an end to the war. And by the way – it will also help inflation – falling oil prices affect transports, manufacturing, utilities etc.….and in the end – it is a good thing, no?
So why hysteria? Is it just because ALL of this is happening at once? Is it because no one thought he would be that aggressive? Or is he not doing enough? Or is it because we can expect some pain as we pull back on spending and waste as these issues correct and the global markets adjust. Look – could we see a slowdown? Sure. Could this get uncomfortable, sure…Is that a reason (yet) for you (the long-term investor) to light your hair on fire? No.
You have to take a step back and look at the 10 yr chart of the S&P…..which will show you that the S&P is up 178%, the Nasdaq +265%, the Russell +65%, The Equal Weight S&P + 120% and the Mag 7? That’s +2200%…. So, what am I missing? Now, I understand that a lot can happen in 10 yrs and that you may not be in the same place you were, then you were working, now you’re retired – ok? Then your portfolio should reflect that. You should be appropriately invested – you should not be way out on the RISK scale – you should not be overweight in tech…. Capisce? And if you are in your best earning years – then go all in……be smart but go all in…. the lesson – Talk to your advisor…get comfortable with being ‘uncomfortable’….
The VIX continues to surge…. teasing the highs seen in December…. before backing off a bit….and that means the contra trades did well. The DOG +1.5%, SH + 1.3%, PSQ + 0.5%, the VIXY + 2.6%, and the SPXS + 3.5%.
Shorter duration bonds advanced while longer duration bonds declined…. The 3- & 6-month bills are now yielding 4.3% and 4.26% respectively, while the 2 yr and 10 yr are now yielding 3.97% and 4.24% respectively. And 30 yr mortgage rates? They are the lowest they have been in 3 months…. coming in at 6.27% – as long as you put down 20% and have a 740+ fico score…
Oil continues to decline….this morning it is down $2 at $66.98/barrel…down nearly 14% since Trump took office….looking to likely test $66 sooner rather than later…..Recall – the Saudi’s are going to start producing more oil next month and that will increase global supply and the will drive energy prices lower…..and that is good for the global economy and for hints of inflation. And if we end the war in Ukraine – then I think oil goes even lower and lower prices will spark demand…..and if that’s the case you want to own the oil ‘service’ companies….think SLB, HAL, BKR or an easy way is via the OIH ETF – and these names are on sale right now….the OIH is down 32% off the April highs…
Gold has rallied back to the 29th century – up $5 this morning at $2,925. – after falling nearly $100 to $2,865– on the latest angst driven by all of the issues defined above. For now, we are in the $2,800/$2,975 trading range and if the angst subsides, I expect gold will retreat.
And then there was last nights speech at the capitol…..By all accounts it is getting positive reviews this morning….CBS – reports that 76% of the viewers approved of the speech, CNN reports a slightly lower number at 64% – Now to be sure – those reads are about the people that watched…..NOT the people that didn’t….but in any event – It was a 2 hr. long speech and not once did anyone on the democratic side of the house chamber acknowledge anything he said…..not one of them, but that does not mean they didn’t disrupt the chamber…and to be clear, many of them didn’t even bother to show up….so there were not that many of them…..I have my own thoughts on that, but that’s another conversation.
And this morning US futures are in rally mode…..The Dow up 225, the S&P up 33, the Nasdaq up 142 and the Russell is up 26 pts….rumors this morning coming from Howie Lutnik – Commerce Secretary – that there just might be a deal on tariffs today….between the US and Canada & Mexico. And if so, that didn’t take very long…. but let’s not jump the gun just yet. There is sure to be all kinds of chatter and analysis today….
Eco data includes Mortgage apps, ADP Employment expected to show +140k new jobs….S&P Services PMI of 49.7 – which is just below the neutral line, ISM Services PMI of 52.5 – which is just above the neutral line, Factory Orders of +1.7%, Durable Goods of 3.1% and we will get the Fed’s Beige Book…..
And then Friday brings us the all-important NFP report on Friday…. that is also expected to show 143k new jobs with the unemployment rate remaining at 4%. Avg Hourly Earnings m/m up 0.3% while y/y is up 4.1%.
OK – let’s think about that – unemployment rate remains near historic lows at 4%, suggesting the labor market is strong, Wages are up and estimates for S&P earnings growth remains at 10% for this year and 12% next year. DOGE has ‘found’ billions of $ of waste, the war in Ukraine is about to end, oil prices are in decline and spring is just a couple of weeks away! That is hardly a recipe for disaster….
European markets are all higher…. Germany gaining 3.5%, Italy +2.4%, France +2%, Spain +1.7%, Euro Stoxx +2.5% while the UK is up 0.5%…..Autos up 3.4%, Construction, Manufacturers, Financials, and Defense sectors all higher….Germany is forming a new gov’t as the conservatives and the Social Democratic Party come together….Friedrich Merz expected to be the next Chancellor of Germany….(his name reminded me of Fred Mertz – Remember him? Think: I Love Lucy!) In any event – that political situation appears to be coming to a close and that is good.
The S&P closed at 5778 – down 71 pts – this after testing as low as 5732 – just 7 pts away from the long term trendline at 5725……Now, I thought we would find support at 5800 – but once we failed – the algo’s went into overdrive again…..forcing stocks lower….this morning it feels like we will retake 5800….and if we get good news of Ukraine and/or tariffs – then I suspect the algo’s and investors will go into ‘overdrive’ BUY mode….for today at least….Look, there is still a lot to consider in the weeks ahead….so stay awake.
Remember, while the weakness can cause you to be worried in the short term, you are a long-term investor, stick to the plan….
Click on the link https://slatestone.com/contact-us/ to send me an https: 561-244-2504.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Today is Ash Wednesday – the beginning of the Lenten season for Christians around the world….and for Italians – it means no meat so here is
Lemon Sole Francaise
You need: 4 lemon sole fillets (about 4-6 oz each), patted dry, all-purpose flour (for dredging), 3 large eggs, grated Parmesan cheese, s&p, olive oil, butter.
For the Lemon Sauce:
½ cup dry white wine, Pinot Grigio Santa Margherita, Juice of 1 lemon, butter, fresh parsley, chopped (plus more for garnish), s&p and 1 tsp of capers.
Place the flour on a shallow plate and season it with a pinch of salt and pepper. Whisk the eggs with the Parmesan cheese and a pinch of s&p until well combined.:
Season the sole fillets lightly with s&p on both sides. Dredge each fillet in the seasoned flour, shaking off excess. Dip the fillets into the egg mixture, coating them evenly and letting any excess drip off.
Heat the olive oil and 2 tablespoons of butter in a large skillet over medium-high heat until the butter foams.
Add the fillets to the pan (work in batches if needed to avoid overcrowding). Cook for 2-3 minutes per side, until golden brown and the fish flakes easily with a fork. Remove and place on a warm plate and cover loosely with foil to keep warm.
In the same skillet, pour in the white wine and lemon juice, scraping up any browned bits from the bottom of the pan. Bring the mixture to a simmer and let it reduce by about half, about 2-3 minutes.
Stir in the remaining 2 tablespoons of butter, swirling the pan until it melts and the sauce thickens slightly. Add the chopped parsley and capers (if using), then season with s&p to taste.
Spoon the warm lemon sauce over the cooked sole fillets. Garnish with additional fresh parsley and serve immediately with a large mixed salad dressed in lemon juice and olive oil seasoned with s&p and dried oregano.
Buon Appetito
