Things you need to know.
– Stock slide gets uglier…Nasdaq now in the ‘correction zone’.
– Street strategists calling lower 2025 targets.
– NFP report due out at 8:30…. will it disappoint?
– Oil up and Gold Steady.
– Try Potato & Eggs
***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.
There is no sugar coating this…it was ugly….stocks fell – the Dow lost 427 pts or 1%, the S&P’s gave up 104 pts or 1.8%, the Nasdaq fell by 485 pts or 2.6%, the Russell down 34 pts or 1.6%, the Transports lost 65 pts or 0.4%, the Equal Weight S&P gave back 80 pts or 1.1% while the Mag 7 surged choked – giving up 720 pts or 2.9%.
The contra trades surged – the DOG + 1.1%, SH + 1.8%, PSQ + 2.8%, VIXY + 11% while the SPXS + 5.3%.
Bonds gave up a bit of ground – the TLT down 0.3% while the TLH gave back 0.25%. Yields rose – the 2 yr is now yielding 3.95% while the 10 yr is yielding 4.27%. 12-month CD rates vary anywhere between 4.4% – 4.65% while your gov’t money market fund is paying you 4.25%.
The only 2 sectors bucking the trend were Consumer Staples + 0.2% and Energy + 0.3%….the other 9 sectors ended lower with Real Estate, Tech and Consumer Discretionary all down better than 2.5%, Utilities lost 2.1%, Communications – 1.8%, Financials – 1.6%, Industrials – 0.9%, Basic Materials – 0.5% and Healthcare down 0.3%.
Yesterday we learned that the Challenger Job Cuts rose by 103% y/y – but remember – they track announced layoffs by U.S.-based employers each month. It’s one of several indicators used to gauge labor market health, though it’s not a direct measure of actual job losses (like unemployment claims or the official BLS jobs report) but rather a signal of employer intentions.
Interpreting this requires context. The surge is heavily driven by federal government layoffs, with 62,242 cuts attributed to 17 agencies, largely tied to the DOGE initiative. (Which some might find a positive). This aligns with a broader policy push to shrink federal spending and workforce size, as the top reason for 63,583 of the layoffs (including contractors). Beyond government, retail (38,973 cuts) and technology (14,554 cuts) also contributed significantly, suggesting sector-specific pressures like trade war fears, canceled contracts, or structural shifts (e.g., retail adapting post-pandemic, tech adjusting after over-hiring).
However, announced cuts don’t always translate to immediate job losses—some may occur through attrition, be delayed, or never materialize.
Remember the old adage – ‘Eliminate the Negatives and Accentuate the Positives’ – well they have flipped that on its head…. investors, traders and algo’s are ‘Eliminating the Positive and Accentuating anything perceived as being a Negative’. At the moment – nothing will be interpreted as a positive – they will look past it – finding a negative – so they can reconcile the selloff in their heads. And when the momentum builds, it builds, taking stocks lower and lower, breaking trendline supports which only ignites more ‘algo’ selling….and down we go….
Yesterday saw the S&P test (for the second time) the long term trendline support at 5730…..and while we breached it – trading as low as 5711 – we managed to take it back closing at 5738…..but like I said the other day…..I expected to test it twice and then when we test it for the 3rd time – it would fail….and that will cause the algo’s to continue to push stocks lower….. Now, that may not happen today – futures at 6 am are a bit higher…. but I will not be surprised to see that happen in the days ahead. As of this morning – the S&P is down 6.9% – still within the normal trading range – and just so we are clear – the S&P would have to trade down to 5530 for it to be in the ‘correction zone’ (down 10% off the high).
Recently – we are hearing a lot of noise around street strategists calling for lower S&P targets for 2025…. they range in the 5200/5400 zone…. but yesterday I read a piece from First Trust’s Brian Wesbury…. (who I have complete respect for). In it he said:
“Our 2025 forecast for the S&P 500 was that it would end 2025 at 5,200. Not many street forecasts had the market trending lower, we did. For the record, our Capitalized Profits Model says that the S&P 500, with a 4% 10-year yield, has a fair value of roughly 4,500. This forecast was based on profits* and discount rates* (giving us an estimate of fair value) …not policy changes. So, while you may be blaming Trump policies (like tariffs), he inherited an over-valued market”.
*- Understand that they make assumptions that you may not agree with – so take everything with a grain of salt. In addition – markets do not like ‘uncertainty’, so the path of least resistance is lower when uncertainty is high.
‘An over-valued market’…….remember that…..he is using a 4% 10 yr yield……currently the 10 yr is yielding 4.27% – which only means that his valuation target has to go lower….So, all else being equal (e.g., no changes in earnings growth expectations or risk premiums), moving the 10-year yield from 4% to 4.25% would indeed push the S&P 500 target lower. The exact impact depends on the specific model and assumptions you’re using, but directionally, higher yields = lower equity targets……. unless something changes….
The Nasdaq though is now in the ‘correction zone’. Yesterday’s decline now puts that index down 11% off the high…. making this the third one to fall…. Recall, the Russell is down 16% and it entered the ‘correction zone’ on February 24th while the Transports entered the ‘zone’ on February 26th. The Mag7 is also in the ‘zone’ – it is down 17% – it also entered the zone on the 26th – but to be fair that is really a subset of the broader Nasdaq. The Industrials are down 5.5%, while the Equal Weight S&P is down 7%.
So, are we in a trade war or is this just an overreaction? Have we been getting ‘ripped off’ and will this action make it right? We are about to find out…. What I do know is that volatility seems like the only thing that is certain at the moment….so investors should make sure they understand that and are prepared for what that means. So, make sure you are well diversified for this ride.
Today brings us the all important NFP report….and the expectation is for 160k new jobs…. with an unemployment rate of 4%…. avg hourly earnings m/m +0.3% and y/y at 4.1% – all healthy numbers. Now like I yesterday – if we get a significant miss…and that would have to be sub 70k, then I would expect the markets to go lower… If we come in anywhere above that, I think the markets holds steady….
The 3 month run rate this morning is 170k (111k, 143k & 256k) – so even if today comes in at 70k – the new 3 month run rate would be 156k (143k, 256k & 70k) – which is still a healthy rate….But, while ‘we’ may not over-react, you never know what the algo’s will do….
US futures are higher…. The Dow +85 pts, the S&P up 20, the Nasdaq up 95 while the Russell is higher by 5. Part of this is (imo) is just sell exhaustion and part of this is the expectation that the NFP report is not going to surprise us… Look – nothing has really changed……while the tariffs have been delayed until April 2nd, they have not been cancelled….Expect the pressure to remain on our trading partners until trade policy becomes fairer and clearer….….and so, we can expect the markets to remain anxious until that happens.
Oil also remains volatile as traders try to measure the risk of a widening trade war along with the recent OPEC+ decision to raise output in April. This morning it is up $1 at $67.40 – still below all 3 trendlines but holding the range we defined…. $66/$70.
Gold also continues to trade in the tight range we discussed yesterday…. if you look at the chart and draw the trendlines – you see we are in a tight triangle right now…..with $2,882/$2,932 defining support and resistance….so once again – gold will break out or break down as we move deeper into the triangle – Now if the NFP report is weak (soft & disappointing) then that could spark a rally in gold as it heightens the fears of a slowdown…..If the NFP report is ‘ok’ then look for gold to retreat…..
Yesterday the VIX traded in the 22.37/25.92 range….leaving it just below the high on March 4th at 26.35 -…this morning it is down 23 cts at $24.64 – and if the NFP report is well received – then the VIX will fall and stocks will rise and that seems to be what the market is expecting…..
European markets are all lower……this after the ECB cut rates by 25 bps…leaving investors to digest the messaging on inflation and growth….The latest cut – puts them squarely in the ‘less restrictive’ space – and that suggests that maybe future cuts are off the table for now. Just fyi – headline inflation is expected to go to 2.3% up from 2.1% while growth is expected to decline from 1.1% to 0.9%.
The S&P closed at 5738 – down 104 pts… Leaving us right on the trendline…..futures in the premkt are showing the S&P up 17 pts,….as we bounce back and forth….look for the trendline (5730) to be tested again – maybe not today or maybe yes today….Again if it does will it hold? Most likely not…. If it fails, then expect the sell algo’s to go into a free fall frenzy….and expect the buyers to step aside to see how frantic the selling might become…. it is Friday, going into the weekend – it’s been a tough week, do not be surprised if we see this morning’s ‘strength’ turn into weakness as we move thru the day.
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….
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
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.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Potato & Eggs
After the move yesterday – many investors just want to find some comfort….and what better way than Potatoes & Eggs? It’s also Friday in Lent…
For this you need: Eggs, potatoes, garlic, onion, s&p, butter, olive oil, fresh grated Parmegiana Cheese and if you prefer a pinch of Italian seasoning.
Preheat the broiler (oven) to high.
Peel a couple of russet potatoes and then slice – now toss into a pot of boiling water – bring the pot back to a boil and blanch for 3 – 5 mins…. Remove – strain and set aside.
In a large bowl – crack 6 to 8 eggs – Beat well – add a splash of whole milk (or 1/2 & 1/2), season with s&p (and if you like a pinch of the Italian seasoning). Add a handful of grated cheese. Mix well – set aside.
In a large oven safe frying pan – melt a dab of butter, add a squirt of olive oil and heat. Now add chopped garlic and sauté. Next add some sliced onions and sauté – until soft and golden…. add back the potatoes and brown on both sides – sautéing for maybe 10 mins or so.
Next – pour the egg mixture into the pan and allow it to set. Twirl the pan to allow the egg to spread and cook. Once the edges begin to pull away – place the pan into the oven under the broiler…. Watch as it quickly cooks the top of the “frittata”. Remove and slide onto a large serving platter – cut like pizza.
Have toasted slices of Italian bread on the table for your guests to make a sandwich. Serve with Ice Cold whole milk.
Buon Appetito
