Things you need to know.
– Friday was a wild day in the markets, but stocks closed higher.
– Lots of Eco data, Key inflation report was in line.
– Drama in the WH – Trump and Zelensky go head-to-head.
– Will Mexico and Canada join the US in China Tariff policies?
– Try the Torta di Cavolfiore.
It was a wild day on Friday….the Dow swinging 700 pts from high to low, the S&P swung 122 pts the Nasdaq swung 490 pts, the Russell had a 37 pt swing, the Transports swung 234 pts, the Equal Weight S&P swung 109 pts while the Mag 7 moved 913 pts from high to low….as investors tried to digest ALL of the headlines hitting the tape….
By the end of the day though, stocks surged, taking back some of the losses suffered earlier in the week….The Dow up 600 pts or 1.4%, the S&P up 93 pts or 1.6%, the Nasdaq gained 305 pts or 1.6%, the Russell up 24 pts or 1.1%, the Transports gained 233 pts or 1.4%, the Equal Weight S&P up 80 pts or 1.1% while the Mag 7 gained 510 pts or 2%.
The VIX surging by 6% to tick at 22.40 – just a hair below the highs reached in January…. before plummeting – ending the day down 7% as stocks rallied. And so – what was all the action about?
First it was the economic data- Personal Income +0.9% (much stronger), Personal Spending -0.2% (much weaker), and then it was the all-important PCE index – the FED’s favored inflation gauge and that showed that inflation moderated in January with prices rising only 2.6% y/y on the core rate – which is down from an upwardly revised prior month of +2.9%. And this caused the rate cutters to suggest that 2 cuts are coming…. with the September cut now expected to happen in June…. Oh boy….
And then it was drama at the WH between Trump and Zelensky, as they argued over bringing the Russian/Ukraine war to an end…. that ended in a shouting match for all of the world to see……. Bloomberg defines it as a ‘fiery exchange’…. Zelensky leaving without signing the mineral deal that had been negotiated only added to the drama……
Over the weekend – there have been significant efforts and proposals from European leaders and countries to address the conflict, particularly in light of shifting U.S. policy under President Trump.
European leaders, notably from the UK and France, have been actively working on initiatives to influence the war’s trajectory. On Sunday, British Prime Minister Keir Starmer announced that the UK, France, and Ukraine had agreed to collaborate on a ceasefire plan to present to the United States. Their plan has 4 key principles…. sustaining aid to Ukraine, maintaining economic pressure on Russia, ensuring Ukraine’s involvement in peace talks, and arming Ukraine to deter future aggression. The plan aims for a lasting peace rather than a temporary pause, reflecting concerns about past failed agreements and the risk of renewed Russian aggression. So, let’s see how that works out…
Toss in the trade war and upcoming tariffs on Mexico, Canada that are supposed to take place tomorrow (markets are split on this – as there is NO clear consensus on the odds of them going into effect – but I think the markets have priced them in, so if we don’t get them, you can expect stocks to rally…..) all while investors continue to struggle with ‘lofty valuations’…. It was an interesting day…. for sure….
And then Treasury Secretary Scotty Bessent – told us that Mexico was considering ‘matching US tariffs on China’ while urging Canada to do the same – this would give us a “Fortress North America’ protecting us from a flood of Chinese imports….and that would put more pressure on XiXi to come to the table to consider renegotiating current trade agreements…. Which is exactly what the tariffs are meant to do…. bring everyone to the table to discuss what future trade agreements will look like.
Now tariffs on Europe – while suggested have not happened yet and that is only adding to the drama…. the first round of tariffs on steel and aluminum are expected on March 12th…with broader tariffs hitting the union on April 2nd. But to be clear – no executive orders have been issued yet – those tariffs are still in the ‘threat stage’ – but the situation is fluid – so this could go either way.
Bonds rallied – the TLT + 1.25% while the TLH rose 0.7%. – the latest moves in the bond market that began two weeks ago has now taken the TLT up 5.8% ytd and the TLH up 5% ytd. Recall, it was February 21st – when the TLT ‘broke out’ of the downtrend it has been in since September 2024….That move has taken us up and thru intermediate trendline resistance (at $90.38) and this morning leaves us tapping our heads on long term trendline resistance at $92.72….If we pierce that – then we could see the TLT move to $95 fairly quickly – that would be a 2.4% move up from here.
Oil lost 40 cts to end the day at $69.76 and this morning it is trading at $69.80. We remain below all 3 trendlines, leaving us in the $68/$70.50 range. The arguments remain the same….building supply coupled with waning demand will put more pressure on prices….UNLESS of course – China’s demand suddenly increases….My gut says that prices are going a bit lower…and if we fail to hold $68 – then $66 is the next stop.
Gold was weaker on Friday…..falling $28 to end the day at $2,867…..taking us closer to the $2,800 level that we have been discussing….the pullback a direct result of ongoing discussions between Russia and Ukraine, ongoing tariffs and ongoing speculation about weaker economic data. Gold is down 3.5% since the highs last week….and a test of $2800 should not surprise anyone.
Over the weekend – the Atlanta GDP Now forecast suggests that US GDP in the 1st qtr. is expected to be negative…. going from +2.3% in the 4th qtr. to -1.5% in the 1st qtr. of 2025…. This sharp reversal was driven primarily by two fresh economic data points released on Friday….
First, it was the weaker-than-expected PCE for January 2025. In the GDPNow model, this slashed the contribution of personal consumption to GDP growth by a full percentage point, from 2.3% to 1.3%. Consumer spending accounts for about two-thirds of U.S. GDP, so this decline hit hard.
Second, and even more impactful, was a dramatic widening of the trade deficit. The Commerce Department’s advance report on international trade showed a $250 billion shortfall in imports over exports for January 2025—far worse than anticipated, but let’s not get our panties in a bunch yet…..it’s early in the quarter, it is not ‘gospel’ yet – there is still more data to come to help define the picture.
US futures are higher….The Dow up 100, the S&P up 22, the Nasdaq up 102 and the Russell is up 16 pts….there is a lot going on this week….Eco data includes: S&P and ISM Manufacturing PMI’s – both expected to remain in expansionary territory, ADP employment of 146k new jobs, S&P and ISM Services PMI’s – the jury it out on what they are expected to say and 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%.
In addition to that we will get Eurozone CPI, China’s National People’s Congress and Trumps speech to a joint session of Congress followed by the first-ever White House Crypto Summit on Friday, March 7th. This was announced over the weekend with Trump delivering the opening remarks. Participants will include “prominent founders, CEOs, and investors from the crypto industry, as well as members of the President’s Working Group on Digital Assets.” The event is chaired by David Sacks, the White House AI and Crypto Czar.
When this news hit – Bitcoin, Ethereum & XRP all surged higher…. This morning Bitcoin is trading at $93,100, Ethereum is at $2,375 while XRP is trading at $2.65.
European markets are all higher…..Aerospace and Defense names are surging, the sector is up 6% today……….the UK’s BAE up 13%, Rolls Royce + 5%, Germany’s Rheinmetall is up 11%, Italy’s Leonardo is up 11%, France’s Thales up 12%, and Sweden’s SAAB up 11% – this after leaders across the zone held security talks with Zelensky….and JPM upgraded the group. At 7 am – France, Germany and the Euro Stoxx are all up better than 1%.
The S&P closed at 5954 – up 93 pts…taking back the 95 pts it lost on Thursday…. Last week we reached Intermediate trendline support at 5945 and when we did the sales increased, taking us to 5837! We remain in the trading range defined by the long term trendline support at 5716 and the short term trendline resistance at 6000……. My gut says that while futures are in rally mode this morning…. The level of anxiety remains high, and markets could turn on a dime.
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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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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Torta di Cavolfiore (Cauliflower Tart)
This is a great way to enjoy Cauliflower, and it presents beautifully.
For this you need 2 heads of cauliflower – separate into florets. Ham, shredded Gruyere cheese (or any cheese of your choice), fresh grated parmegiana cheese, corn starch, s&p, 2 eggs, breadcrumbs (or panko) and olive oil.
Begin by steaming the cauliflower for 5 – 8 mins…just long enough to soften them so that you can break them up with the back of a fork.
Remove and place in a bowl – break them up, then add in 2 eggs, 1/3 c of corn starch, ½ c of parmegiana, s&p – mix well.
Now in a non-stick frying pan – add some olive oil, dust with the breadcrumbs. Now make a layer of the cauliflower mix…. spreading it out in the pan. Now add 3 or 4 slices of thin sliced ham and top with the shredded Gruyere. Now use the rest of the cauliflower mix to cover the top…. dust with the breadcrumbs.
Now cook this on med low heat – for 15 mins…. Then carefully, place a plate over the top and flip it onto the plate. Then slide it back into the frying pan and cook the other side for another 15 min on med low.
When done, flip it back onto a plate. Let it cool and then serve as a side dish or you can eat it for dinner with a side salad. Easy. (see the pics on my X acct- @kennypolcari)
Buon Appetito
