Things you need to know.
– And the thrashing around continues…. Tech gets clobbered again!
– Gold pushes further north – Up $35 – up 16% ytd.
– Oil down – Russia/Ukraine ceasefire deal removes anxiety.
– FOMC announcement is coming at 2 pm, presser at 2:30 pm.
– Futures churning…..as mkts wait.
– Try the Pasta Rotta alla Romana.
***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.
And…..stocks got whacked again…..as the thrashing continues…..as investors, traders and algo’s collide in the marketplace….. – the MAG 7 getting hurt the most falling 575 pts or 2.5% (down 22% off the December high) as so many pare their exposure to the sector…. sending those names lower…. which provides another opportunity for a savvy, long term investor…
Eco data revealed that Housing Starts ‘exploded’ higher – rising by 11.2% vs. the expected +1.4% and up for last month’s disaster of -11.5%…In addition – Building permits declined less than expected, while Capacity Utilization rose and Industrial production rose…more than expected…..
Remember – yesterday I told you that the end of the quarter ‘marking period’ is only days away and we should expect more pressure on the Mag 7 as they are falling a bit out of favor (for current owners) and so asset managers do not want to show an ‘overweight’ position in the sector at qtr. end for fear of being accused of ‘not paying attention’ by their clients.
Ok, great….. but since there are always 2 sides to a trade – current buyers are clearly seeing and ‘finding value’ at much the much lower prices – which they then get to say to their clients – we bought these names down 15%, 20%, 40% and even 50%…. and so the game continues because, let’s be clear, the names on sale are not ‘Pet.com’ – they are real companies with real earnings and real products – their ‘investment thesis’ hasn’t really changed, the market cycle IS what has (is) changing…..so do your homework, understand what you own and use new money strategically to take advantage of this sale…..
Tuesday afternoon saw the Dow lose 260 pts or 0.6%, the S&P down 61 pts or 1.1%, the Nasdaq choked – giving up 305 pts or 1.7%, the Russell down 18 pts or 0.9%, the Transports down 139 pts or 0.9%, while the Equal Weight S&P gave up 38 pts or 0.5%.
Now the question is what are the sellers doing with the money they get for selling their stocks? Recall, If I sell $1 mil worth of AMZN, someone paid me $1 million – so its about the ‘transfer’ of that money….the buyer put it to work in AMZN but the seller now has a choice to make – do they buy JNJ, IBM, MRK, COST, KO etc. (the answer to that is yes)….or do they buy Gold – which btw – surged by $35 or 1.2% yesterday…(so I guess there ‘some’ money moving further into this asset), do they buy Treasuries (both the TLT and TLH were up 0.15%), or do they keep it in cash? The answer is ‘all of the above’….and while prices are lower across the board – it is NOT the end at all.
Then we had UCLA Anderson warning us that the Trump policies ‘could’ cause the economy to contract…the piece titled: (be careful it is very dramatic)
‘Trump Policies, If Fully enacted, Promise a Recession.”
‘If’ is key – because what happens IF they are NOT fully enacted? Then the promise isn’t a promise..
Now what is interesting is that the same piece also said this –
“While there are no signs of a recession happening yet, it is entirely possible that one could form in the near term” …. Really? It’s also entirely possible that it’s going to rain in south Florida in the ‘near term’…..
Now respondents to a CNBC Survey are betting on a 36% chance of a recession (up from 23% last month) happening in the ‘next year’ (not tomorrow, not next week, not even next month) – giving themselves plenty of room to ‘change their minds…. Recall that the same ‘group’ put a 50% chance of a recession happening in 2022-2023 – How’d that work out? Let me remind you – IT ‘never happened’ – and all that says is no one really has a clue….
In the end – recessions occur when multiple economic sectors shrink at the same time……. something that is NOT happening at the moment…. Which doesn’t mean it couldn’t happen, it just means it is NOT happening right now.
And we are only hours away from the latest FOMC rate decision…..and no one expects JJ to change rates at all…but the excitement is about what they ‘expect’ him to say at the presser at 2:30 pm. Will he tease us about a rate cut in the ‘near term’? Will he tackle questions about Trumps tariffs? Will he suggest that a recession knocks on our door? Will he tell us that inflation is no longer an issue? Will he tell us it is entirely possible for rates to go UP vs. DOWN? What will he say about the Atlanta FED’s GDP forecast? So many questions…….
Bonds were higher yesterday – the TLT, TLH and AGG were all up 0.1 – leaving yields essentially unchanged.
Oil – also continues to ‘thrash’ around – remaining in the $66/$70 trading range. This morning oil is down 23 cts at $66.70. Yesterday it was announced that Donny and Vlad have agreed on an ‘energy and infrastructure’ ceasefire after a 90 min conversation……and that took a bit of the pressure off of oil……As long as it remains – then I suspect the path of least resistance is lower….and if we get a complete ceasefire (which is closer than many think) then for sure we will be testing the lows of September – $64 ish….
And Gold continues to shine…..jumping $35 yesterday and up $2 this morning…. as investors continue to flock to the ‘safety trade’. It’s really not any more complicated than that.
US futures are flat this morning…. Dow futures + 33 pts, the S&P’s up 11pts, the Nasdaq up 56 pts while the Russell is up 6 pts. Mortgage apps just came out and are down by 6.2% reflecting higher mortgage rates – 30 yr money is now costing you 6.7% for a FICO score of 740 +. Less than that pushes your rate up to 7%…
Expect the market to churn until 2:30 pm… We get the announcement at 2 pm, but JJ speaks at 2:30 pm… so sit tight!
Remember – there was a lot of damage done to the internals, investors and the markets need to time to reassess the landscape…and while I am bullish long term, I keep saying that we should not expect a V shape recovery. I continue to expect more volatility thru mid-spring…. The end of the qtr. is coming and can be volatile….
European markets are mixed…. they too have a lot to digest…..Massive German policy reforms, a partial ceasefire in Ukraine, and the latest from the FED…. Mkts there are churning around the unchanged line…with France up 0.4% and Germany down 0.4%….
The S&P closed at 5614 down 60 pts yesterday…. If we test 5600 and fail – then I suspect that we will then test the March 13th low of 5504 – just to see where the bodies lie…..Trendline resistance remains at 5743.
Get comfortable by being a bit uncomfortable, stay defensive while being cautiously optimistic. In any event – you know the drill – stick to your plan, don’t panic and if the recent pullback is causing you undue stress then maybe you need to reconsider your plan….…. Call me to discuss.
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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Pasta Rotta (Broken Pasta) alla Romana
This is simple to make and is always a winner….and the best part is, you cook this all-in-one pot…..
You need – 4 zucchini’s (green), s&p, broken spaghetti, fresh grated Romano cheese, olive oil and I always put 2 cloves of garlic – chopped.
Start by cutting the zucchini into bite sized cubes….
Heat up some olive oil in a pot…..toss in the garlic and the cubed zucchini – cook for 8 – 10 mins – season with s&p.
Now add water to cover the zucchini. Bring to boil.
Take your spaghetti and break it in half and then break it in half again…. Add the broken pasta to the pot and cook – allowing the water to evaporate leaving you with a thick pasta / zucchini mix….
Next – add two handfuls of the Romano Cheese and some olive oil…mix well – allowing the hot pasta to melt the cheese creating a creamy texture.
Serve immediately and enjoy. Always have more cheese on the table for your guests. This whole dish should cost you ~ $20 to feed a family of 4….
Buon Appetito
