Things you need to know.
- Stocks continue to advance – indexes all up more than 10% off the lows.
- Big Earnings week! Look for more than 140 S&P companies to report.
- Big Eco data week – ADP, GDP, NFP all top of mind.
- Trade negotiations continue, bonds advance, yields decline.
- Gold declines, oil holds steady.
- Try the Spring Chicken Soup.
The Mega caps dragged stocks higher – the index which had gained 11.5% going into Friday morning added another 2.7% to end the week up 14+%…. ….TSLA +10% (On Friday alone) and NVDA +4.3% were the ones that powered the move – but the others did follow – GOOG +1.5%, AAPL + 0.5%, AMZN +1.3%, MSFT +1.2% & META + 2.6%….this despite the fact that trade negotiations remain cloudy at best….and 45% of analysts surveyed are calling for a recession within the next 12 months….. All this as Trump suggested that no one should expect any more delays on reciprocal tariffs while vowing that he will not drop levies on China ‘without something substantial’ happening in return.
By the end of the day – the Dow added 20 pts, the S&P up 40, the Nasdaq gained 217 pts, the Russell ended the day flat, the Transports lost 265 pts, and the Equal Weighted S&P lost 10.
Bonds rose and that kept yields in line…. The 2 yr is now yielding 3.77% while the 10 yr is yielding 4.27% down significantly from where they were on the days following ‘Liberation’. 4.01% and 4.57% respectively and that is good….and all that talk of foreigners refusing to buy or selling US treasuries? Yeah, that is not happening either…. Last week – Scotty (Bessent) confirmed an ‘increase in foreign demand’ countering the speculation of foreign selling…..citing the recent weakness by large ‘leveraged players’ (think hedge funds, prop trading firms, Leveraged bond funds and ETF’s) rather than systemic issues.
Now, the latest AAII (American Association of Individual Investors) survey – has declined by 50 pts in the past few weeks is near the lowest level since the 2022 bear market low….and that suggests that 55.6% of all respondents were and are bearish expecting stock prices to decline over the next six months. This is significantly higher than the historical average bearish sentiment of 31.0%, marking one of the most pessimistic readings in recent times. Bullish sentiment dropped to 21.9%, well below its historical average of 37.5%, while neutral sentiment rose to 22.5%, still below its historical average of 31.5%. The bull-bear spread is reflecting a deeply negative investor mood.
This high bearish sentiment is often viewed as a contrarian indicator, suggesting we have hit potential market bottoms, as extreme pessimism can precede a move higher…. Historical data supports this: when bearish sentiment exceeds 55.5% (three standard deviations above the mean), the S&P 500 has averaged a 23.7% gain over the next 12 months. But this alone is not a reason to think the volatility is all over – as tariff threats, sticky inflation, the tax bill and a supposedly slowing economy all remain top of mind.
**it is important to note that while the survey suggests heightened bearishness – retail investors have NOT been selling stocks the way the results might suggest and that suggests that they don’t think the weakness will be protracted**
While the rebound in the indexes is impressive – S&P +14%, Dow +9.5%, Nasdaq + 16.3%, the Russell +12% – the VIX while down 55% off the April high remains 67% above the complacency line…suggesting that periods of angst will remain until we get a ‘win’. It doesn’t have to be a homerun – a couple of base hits will do – we just need one or two to help settle down the angst.
Now we are told that trading partners are ‘rushing to secure deals’ in order to avert tariffs (supposedly 50+ countries are knocking on the door with 18 of them fully engaged)….and that is at the root of the rebound…besides the fact that the markets were in extreme oversold positions…all breaching their RSI’s in early April when tariffs kicked in – launching ‘Liberation Day’ and we saw the start of the earnings season that caused some companies to refuse to offer guidance while others offered extremely cautious guidance causing the VIX to surge, yields to surge, rhetoric to surge all causing anxiety to surge. As of today – all of the indexes remain in the middle of the 30/70 bands (oversold/overbot) suggesting a neutral momentum state of mind. Remember- the RSI is a momentum oscillator and at the moment it is consolidating…as the market digests the recent volatility as it awaits the next catalyst – which just might be this week’s slew of earnings…
Now, speaking of earnings – this is the BIGGEST week of the season….with more than 140 S&P companies (representing $20 trillion) about to walk the runway spanning critical industries, reflecting diverse economic drivers….….and they include 4 BIG tech names… AAPL (Tech/Consumer Electronics/Software and Services), AMZN (Tech/E-commerce/Cloud Computing), MSFT (Tech/Software/Cloud Computing), META (Tech/Social Media, Advertising). It includes V & MA (Financial services/payments), KO (Consumer Staples/Beverages), PFE & LLY (Healthcare/Pharma), MCD, EAT & DPZ(Consumer Discretionary/Restaurants), UHS & THC (Healthcare Facilities), NUE (Steel Producers), WELL (Healthcare REIT), SOFI & PYPL (Consumer Finance), SHW (Specialty Chemicals), XOM, CVX, TTE, SHEL, & BP (Integrated Oils) – the 5 major oil companies and the list goes on…Again, watch for the guidance because that is what is important….
And then we have a big week of eco data…..Dallas FED Manufacturing & Services, Retail Inventories, Housing Price data and Mortgage Apps, JOLTS Survey, Consumer, Confidence, ADP Employment (expectations of +125k), GDP (Expectations of +0.4%) although the Atlanta GDP Now forecast is still calling for growth of -2.5%. Now no matter what we get, they will both be viewed as a negative number when you compare to the 4th qtr. of +2.4% – but this is NOT a surprise at all….
Wednesday brings us the latest PCE data – which is supposed to be improving – showing top line inflation declining to 2.2% (down from +2.5%) while CORE PCE declines to +2.6% (down from +2.8%). We will get Pending Home Sales, Challenger Job Cuts, S&P and ISM Manufacturing PMI’s, Factory Orders, Durable Goods Orders and the BIGGIE – Friday’s NFP report – which is supposed to show 130k new jobs created, and unemployment rate of +4.2% (unchanged), and weekly and hourly avg earnings of +0.3% and +3.9%. So, let’s see what the data reveals…..and strong data will only be another reason to keep rates where they are……. which is sure to make someone unhappy.
This morning – US futures are a bit weaker…. Dow futures – 50, S&P’s down 12, Nasdaq – 44 and the Russell down 7. This as we await all the data this week….
Gold – which has enjoyed a massive rally up 30% ytd going into last week dropped by about 4% as traders took profits after the push upward that may have been too much too fast….gold which traded as high as $3509 ended the week at $3300 and this morning is churning right there. Trendline support is way down at $3,082 – although we should see short term support at $3,200
Oil is holding at $62.50 ish….as it also awaits the next shoe to drop….We remain in the $60/$66.20 (resistance) trading range….Look Big Oil is facing a tough choice due to Trumps call for lower prices…..so look for them to prioritize stock buyback and divvy’s over capex spending. Look for the 5 major oil companies to report this week to see what they have to say…
European markets are all just a bit higher – France up 0.6% while the UK is ahead by 0.1%.
The S&P closed at 5,525 up 40 pts…the move up while it feels good, still needs to some work. The speed at which we sold off created all kinds of breaks in technical chart patterns – and that needs to be repaired and the only way to do that is to test lower and make sure that the bulls defend the position… any realization that the eco data remains strong, earnings guidance is real, that the tariff conversations are proceeding that the tax bill is making its way thru congress will only help in that repair. While the tone is better, we know how fast that can change…..so stick to your plan and remain resilient. We remain in the 4835 (lows of April) / 5658 (trendline resistance) trading range.
So, this is why I keep saying that you need to do a ‘reality check’ and assess your portfolio – making sure that you own fundamentally strong, diversified, stable, high-quality companies that will recover much faster. Not making emotional decisions during tough times is KEY to creating long term wealth. The investment decisions you make today have the potential to shape the rest of your lives, and long-term investment remains a proven key to financial success. While today’s markets are more complex and volatile than ever, market corrections are an inevitable part of the landscape. Talk to your advisor and know your risk tolerance, know what you own and why you own it. At SlateStone Wealth, we expect every stock to decline to some degree during corrections, but our philosophy is built on resilience and so should yours. Call me to discuss.
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.
Spring Chicken Soup Recipe (quick and easy)
For the Soup Base: 1 lb. boneless, skinless chicken breasts or thighs, olive oil, onion, finely diced, garlic, minced, chopped carrots and celery, bay leaf, fresh thyme leaves, s&p and chicken broth.
Spring Vegetables: asparagus, trimmed and cut into 1-inch pieces, fresh or frozen green peas, zucchini, halved lengthwise and sliced, baby spinach or chopped kale.
For more flavor: fresh lemon juice, fresh parsley, chopped & fresh dill,
Instructions
Cook the Chicken:
Heat olive oil in a large pot. Season the chicken pieces with s&p and add to the pot and cook for 5–7 minutes, stirring occasionally, until lightly browned and just cooked through. Remove the chicken to a plate and set aside. Once cooled – you can shred or cut into bite sized cubes.
Using the same pot – Add the onion, carrots, and celery, and cook for 5 minutes, stirring occasionally, until softened. Stir in the garlic and cook for 1 minute.
Pour in the chicken broth, scraping up any browned bits from the bottom of the pot.
Add the bay leaf, thyme, and a pinch of salt and pepper. Bring to a boil, then reduce to a simmer. Cover and cook for 10 minutes.
Now add the spring vegetables: Stir in the asparagus, peas, and zucchini. Simmer for 5–7 minutes, until the vegetables are tender. Add back the chicken and cook for 10 mins. Now add the baby spinach or kale and cook for 1–2 minutes until the greens wilt.
When serving – Remove the bay leaf. Stir in the lemon juice, parsley, and dill to brighten the flavors and make it ‘springy’.
Taste and adjust seasoning as needed.
Buon Appetito
