Things you need to know.
– Stocks continue to bounce around – looking for a bottom.
– A weak ADP causes all kinds of speculation about the NFP.
– Bond yields rise, oil declines and gold is at a breaking point.
– Futures are DOWN….
– Have some Chicken Soup
Stocks ended the day higher, a late day runup led by ‘the’ technology names being credited for the excitement as the volatility and unrest continues…..at 4 pm – the Dow advanced by 485 pts or 1.15%, the S&P’s up 65 pts or 1.1%, the Nasdaq rose 268 pts or 1.5%, the Russell up 21 pts or 1%, the Transports gained 174 pts or 1.15%, the Equal Weight S&P gained 67 pts or 1% while the Mag 7 surged ahead by 445 pts or 1.8%.
Now, yes it was about the Trump speech, about tariffs, about DOGE and about Russia/Ukraine…. but it was also about the eco data……
They all jumped on the ADP report that many suggested was a disappointment – we only created 77k new jobs vs. the expected 140k…. Additionally, the previous month was revised downward from 183,000 to 176,000 jobs. Annual wage growth remained steady at 4.7% year-over-year, consistent with January’s rate, but the sharp drop in job gains from January to February did cause some to ring the alarm bells. Remember economists and market strategists often use the ADP report as a preview for the official government jobs report, so a miss of this size can stoke concerns about weakening labor demand.
However, the ADP report, while influential, isn’t perfectly correlated with the NFP. Historically, ADP can diverge from the NFP due to differences in methodology—ADP relies on its payroll data from over 25 million employees, while NFP surveys a broader sample, including government jobs. ADP sometimes overstates or understates slowdowns, “likely exaggerating the labor market slowdown” and has “no correlation” with the NFP in certain cases. February’s low number could also reflect seasonality, policy uncertainty (e.g., tariff talks or DOGE cuts), or sector-specific softness—trade, transportation, healthcare, education, and information saw job losses, per the ADP release.
On the flip side, 77,000 jobs is NOT a collapse—it’s still growth, just slower than anticipated. Context matters: if the economy is cooling intentionally (say, due to Federal Reserve policy) or adjusting to external shocks (like tariffs or spending cuts), then this might not be a shock, and it is intentional. ADP’s chief economist Nela Richardson puts it this way – “policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring,” and this suggests it could be a rational employer response rather than a disaster. Just sayin’!
So, was it “really that disappointing”? Well, I guess we will find out tomorrow when we get the February NFP report which is expected to show an increase of 160k new jobs…. Understand that it wasn’t’ negative growth, and ADP’s track record isn’t flawless for predicting broader trends. We’d need the NFP report to see if this is just a blip or is it a longer-term signal. For now, I’m not lighting my hair on fire…. Why?
Because the other data points suggested strength…Services PMI’s both in expansionary territory, Factory orders strong at +1.7%, Durable Goods Orders at +3.2%.
Now, I have been saying that I think inflation will be the issue this year, not tariffs…and yesterday the Prices Paid component of the ISM Services index rose to 62.6 up from 60.4…and that suggests that higher labor costs which will most likely be passed onto the consumer….Now, that is the second month in a row that we saw Prices Paid rise and it was the 3rd month in a row that we saw PPI rise and the first month that we saw CPI rise….Just sayin’……
Today we are going to get Challenger Job Cuts, Initial Jobless – expectations of 233k (vs. last month’s 242k) along with Continuing Claims of 1.874 million up from 1.862 million.… and while these don’t usually create havoc – if the numbers veer substantially away from the expectations – expect the algo’s to overreact. The real read is tomorrows NFP…. you can feel the tension…. Expect all kinds of pre-game analysis today and then ‘real’ time analysis at 8:30 am tomorrow.
In any event – like I said yesterday – maybe the correction is upon us and that would not be a bad thing….prices got stretched, and if we are intentionally trying to slow the economy then prices will and should reset…..On Tuesday we tested the long term trendline support on the S&P at 5728….(we traded to 5732)….and then yesterday we bounced……to end the day at 5842…..This morning futures are getting smashed again….despite a tariff reprieve on the auto industry between the US, Mexico and Canada. We are about to test trendline support again…
US futures this morning is down in a big way and the VIX is up in a big way – currently up 8.5% – the 1% gains we saw in the indexes yesterday are the 1+% losses this morning…. Dow futures are down 420 pts, S&P’s down 68, the Nasdaq down 275 while the Russell is down 24.
The VIX is trading at 23.76…..yesterday’s high was 24.71 and Tuesdays high was 26.35…both levels to watch….as we pierce those levels – expect more downward pressure on stocks….the high beta names – think tech – are sure to get punched in the face today, dragging the broader market lower all while the contra trades are all expected to advance…..
Bonds yields are higher…. the 10 yr is up 2 bps yielding 4.3%, the 2 yr is now yielding 4% – both remain well below the most recent highs of 4.6% and 4.3% respectively – but are up from their most recent lows of 4.13% and 3.85%.
Yesterday oil collapsed (again) falling $1.90 or 2.7% to end the day at $66.39 – but not before piercing $66 too test as low as $65.22. and this morning it is down 9 cts at $66.30. I had identified $66 as a level we would test and we are testing it right now….if we fail to hold here then $64 is in the bulls eye…..and before you go and say – this is a disaster – remember – this is what he campaigned on – LOWER OIL PRICES. None of this should be a surprise to anyone – not only did he tell us to expect lower prices, the charts also suggested lower oil prices… and lower oil prices are good for the economy, good for inflation, good for demand and good for us to refill the empty SPR (Strategic Petroleum Reserve) that the Biden’s depleted….….so that’s just another reason NOT to light our hair on fire…..
Gold is down $16 trading at $2,910/oz…. leaving us in the $2,850/$2,950 trading range. But if you look at the chart and draw the trendlines – you see we are in a 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…..
Remember – Gold is seen as a safe-haven asset when economic uncertainty spikes. A disappointing NFP—say, job growth well below the expected 140,000 – say sub 70k…. coupled with a sharp upward tick in unemployment – say 4.3% up from 4% in one month —could signal a cooling U.S. economy. This might spook investors, driving them into gold as a hedge against potential instability. And if that happens – then we could see gold move towards the most recent highs of $2,950. Now if NFP does not disappoint and unemployment remains at 4% (which is the expectation) then I would expect Gold to trade down towards the lower band.
European markets are all lower……as they await the expected ECB rate cut….
The S&P closed at 5842 – up 65 pts….futures in the premkt are showing the S&P down 66 pts…so we bounce back and forth….look for the trendline (5728) to be tested again….the question to ask today is ‘Will it hold?’. 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…..a 10% decline from the high (6175) in the S&P would take us to 5532 (down 310 pts from here)…… A level that some think could happen over the next couple of months…and a level that would be right on the cusp of normal trading and a correction…..And while that is 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….
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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Chicken Soup
So, as your mother always says: “Have some chicken soup – it’s good for you”.
For this you need; 2 large breasts on the bone, onions, carrots, celery, water, a package of chicken bouillon & s&p. Beans are optional but if you are going to use them use cannelloni or cecci.
Rinse the chicken place in the pot and fill it with water. Now add the chopped veggies. Season with s&p, add the bullion and bring to a boil. Once it boils – turn the heat to med low and let it simmer for about 1 1/2 hrs. Turn heat off – remove the meat and allow it to cool. Add in a can of the beans of your choice.
When cool – remove the skin and debone the chicken. Slice into chunky pieces and return to the soup. Now – place the pot in the fridge and allow it to cool overnight – the fat from the chicken will rise to the top and form a ‘skin’.
Remove from the fridge and take the fat off and discard. Re-heat and serve alone or with rice or with elbow macaroni. Have plenty of fresh grated Parmigiana cheese.
Buon Appetito
