Things you need to know.
– Stocks rally after Trump suggests that the tariffs may not be as bad as anticipated.
– Investors go on a shopping spree – looking for the bargains! (and there were plenty)
– Bonds down, Oil up and Gold churns.
– Lots of eco data this week.
– Try the Lemon Chicken.
***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 hard after Donny suggested that the tariffs may not be what the markets expected them to be….. with some countries receiving exemptions or reductions in tariffs, leading to a more focused approach than previously anticipated. This news spurred a broad market rebound – leaving ‘gaps’ in the charts….. – sending the Dow up 600 pts or 1.5%, the S&P up 100 pts or 1.8%, the Nasdaq rose 404 pts or 2.3%, the Russell added 52 pts or 2.6%, the Transports gained 320 pts or 2.2%, the Equal Weight S&P added 110 pts or 1.6% while the Mag 7 soared….adding 800 pts or 3.4% mitigating the losses seen from weakness driven by concerns over high valuations.
Only Utilities saw a decline yesterday and that makes sense – utilities are boring – why would you want to buy utilities when you could go shopping in the other parts of the market that have seen some real destruction…..such as TECH! Like I said, the Mag 7 rallied really hard – but remember the index was down 21% – with some of the individual names down even more….NVDA -24%, TSLA -52%, AAPL -19%, MSFT -20%, GOOG -21%, AMZN -20% & META -22% – so why wouldn’t you go shopping in names that are a bargain? These same names went up sharply yesterday but are still very much on sale.
Consumer Discretionary – a sector that was down 12% coming into yesterday – also rallied hard – as investors went shopping there as well – sending the group higher by 3.5%! Industrials +1.5%, Financials +1.4%, Communications +1.1%, Basic Materials +0.9%, Real Estate +0.75%, while Energy and Healthcare rose by 0.4%.
Down the chain – Homebuilders jumped by 2.9%, but it was down 7%, Retailers + 3.10% – they were down 13%, Airlines + 3.4% – they were also down 13%, Disruptive Tech surged by 5.2% – they were down 10%, the growth trade – SPYG + 2.8% – that was down 7%, the value trade – SPYV + 0.8% – that was only down 1%. Cybersecurity + 1.6%, Semi’s + 3%, Aerospace & Defense + 2.8% and the list goes on…..
Meanwhile, bonds sold off and that sent yields higher…both the TLT and TLH -1% sending yields up a bit…the 2yr is now yielding 4.01% – this is up from 3.92% last week while the 10 yr is yielding 4.35% – this is up from 4.22% last week.
Oil rose 1.3% to end the day at $69.17…. taking it just below the trendline…. the rise being credited to the announced 25% tariff on ANY country that buys and imports oil from Venezuela. This is in addition to the sanctions imposed upon Iran. The rise suggests that the market expected these tariffs to ‘constrain global supply’ – putting upward pressure on prices. Remember that oil is Venezuela’s main export and China is their main buyer…..so if China buys Venezuelan oil – then they are going to get hit by a 25% tariff – in addition to the tariffs that already exist. Expect more to come….
Gold continues to thrash around between $3,030/3,060 – yesterday it pulled back a bit (on stock strength) and today it is up $12 at $3,056 (as futures point to a lower open) – I still think that while I am bullish on gold, I would not be surprised to see it pull back to the $3,000 level after the recent surge…..Trendline resistance is up at $3,095….
And as you would expect – yesterday’s surge sent the VIX lower….ending the day sitting atop the trendline at 17.35….the VIX is now down 40% since the highs of early March…..as the market attempts to repair itself and then build a base off of which it will surge higher.
US futures are a bit lower (almost flat) and that should not surprise you…..Dow futures are -11, S&P’s down 1, the Nasdaq down 20 while the Russell is down 7. But it does feel like it wants to push higher.. The S&P took back trendline resistance yesterday at 5745 – so that now become support…. fragile, but it is now considered support. The Nasdaq is still well below its trendline resistance – the level to watch is 18,446 – the index stands at 18,188.
Market analysts at some of the big banks and asset management firms are suggesting that the worst of the pullback might be over, though volatility could persist depending on tariff policy outcomes. Remember – there was a fair amount of damage done to the markets so do not be surprised if we test lower once again…..
Eco data today includes the Philly FED Non- Manf Survey, New Home Sales – which are expected to be up 3.5%, Building permits down 0.1%, and the Richmond Fed Manufacturing Index. We will also get the Consumer board Consumer Confidence index and that is expected to be 94 – down from 98.3…..so that’s a bit of a negative. Tomorrow brings us the final 4th Qtr. GDP read and that is expected to be +2.4%. The biggie this week is Friday’s PCE report…. because that is the FED’s favored gauge….it is expected to be unchanged over last month.
For this rally to continue – earnings growth will need to replace valuation expansion as the primary market driver. Now we have seen a bunch of ‘adjusted earnings’ ahead of the official start of the earnings season….and that has also added to the pressure on markets…..What was 12% earnings growth coming into the qtr. is now about 8%…., We will learn more in the weeks ahead about what the C suite thinks the future looks like.
European markets are higher…. Italy and France fighting for first place – up 1.1% with the UK carrying up the rear – up 0.6%.
The S&P closed at 5767 up 100 pts…. Now I thought 5743 would be resistance and that didn’t happen…. we blasted right thru – but let’s see what happens today…..
Yesterday’s action did create a 50 pt gap – 5670/5720 – and while I love the action – I suspect that we will have to back fill that gap in the near term…..before we just move up…..If not – then trendline resistance is now at 5914….and if we got there – then that would represent a V shape recovery – which I do not think will happen….I think we back off – fill the gap and then push to the trendline.
Remember – the end of the qtr. is only days away….and I expect a fair amount of volatility in the next 3 trading days…..
Get comfortable by being a bit uncomfortable, stay defensive while being cautiously optimistic. 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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Lemon Chicken
For this you need – Chicken Breasts – cut into cubes. Flour, Lemon, white wine, Chicken Stock.
Start by rinsing the chicken and patting dry with a paper towel Then toss it in a bowl of flour – – Shake off the excess and then sauté in a frying pan with olive oil and ½ stick of butter. Season with s&p. – when cooked – add in a cup of white wine.
Next, add fresh lemon juice and a bit of zest. (You can use chicken stock if you prefer). Add parsley and another knob of butter. Cover and cook for 10 mins on low.
When done – your chicken should be in a nice, thickened sauce. If not- you can always add a bit of chicken stock.
Serve on a platter – with a mixed green salad. Simple Do not complicate it.
Buon Appetito
