Things you need to know.
- Trump continues to threaten new tariffs on Film and Pharma
- Buyers pull back causing sellers to get anxious.
- The Saudi’s are mad as hell and announce June production increases.
- Bonds decline; yields rise – Gold making a run for it again as anxiety rises.
- The FED goes into lockdown mode.
- Try the Chicken Piccata
So, stocks fell – (no surprise) – this after Trump once again made new tariffs headlines….Remember – I keep reminding you that the market will try to digest all of the recent action, it will try to repair the damage suffered since Liberation Day, BUT (right now) it will be driven on any day by the comments that come out of the WH surrounding the latest tariff stance….and yesterday was no different.
On Sunday Donny announced 100% tariffs on the film industry and that was just another negative headline creating more angst for investors. As the day wore on – he pulled back a bit to say that he would meet with members of the film industry and that ‘no final decisions’ had been made, yet the damage was done and this was nothing more than another announcement that caused significant confusion…..this on top of the ongoing drama around all of the other ‘tariff negotiations’……and all this is, is more uncertainty and that uncertainty translates into volatility and weakness as global investors try to figure it out.
Scotty (Bessent) – speaking at the Milken Conference in CA did try to ‘clean it up’ a bit by shifting the conversation from just tariffs to the ‘larger’ story – emphasizing tariffs, tax cuts, and deregulation as interconnected components of an “America First” policy designed to drive long-term investment in the U.S. economy, saying
“Tariffs are engineered to encourage companies like yours to invest directly in the United States. Hire your workers here, build your factories here, make your products here,”
Making sure to highlight the goal of making the U.S. the “premier destination for global capital.” Bessent also tried to soften the blow by promising a favorable tax and regulatory environment, aiming to reduce the federal deficit by about 1% annually to reach a long-term average of 3.1% of GDP. (Currently, the federal deficit is 6.2% of GDP). He went onto describe the U.S. economy as “unstoppable” and “anti-fragile,” appealing to investors being the number 1 Cheerleader – saying, “It has never been a better time to invest in America.”
His remarks aimed to reassure global investors amid concerns about Trump’s tariff policies, failed to send stocks higher as critics continue to question the potential economic risks of these policies if these conversations drag on too long – believing that the longer the uncertainty exists the greater the hit to the economy.
And with that – stocks ended the day lower. The Dow ended the day -100 pts, the S&P down 36 pts, the Nasdaq -135 pts, the Russell +16 pts, the Transports lost 75 pts, the Equal Weighted S&P lost 26 pts while the Mag 7 Index jumped gave back 238 pts.
On the economic front –
The eco data remains ‘strong’ – the S&P PMI Services survey and the ISM Services PMI – both signaling strength as they came in at 50.8 and 51.6 – both in Expansionary territory. And remember – the US economy is a 75% services economy, so these hard data points are important. Now – Prices Paid – though were higher at 65.1 and that just suggests simmering inflation – which is just another data point for the FED to consider as they begin their two-day FOMC meeting today.
The attention is now focused squarely on JJ and the FED….as they begin their May meeting to decide what happens next in terms of rates…. NO ONE should expect to hear him announce a rate cut. Let’s be clear – it is NOT happening now or next month or even the month after that…as long as the economy remains firm – there is no reason for JJ to cut rates and he can easily justify that decision…..
Now, the markets are still betting on 2 rate cuts to begin in June – but I think the market is wrong. 4.25% rates are well within the normal range and I do not see them as restrictive at all, just look at the hard economic data – it remains strong…it’s the soft data that is weaker, but for me, the decision should be made on the strong data which is measurable vs. the weak data which is more about sentiment and opinion. But – let’s see how he lays it out on Wednesday at 2 pm. Will he cave? Will he suggest that we can expect a cut the ‘next time’ or will he remain as is – saying that he is concerned about the havoc created by the tariff conversations and until he sees more definitive results (think actual trade deals) he is holding steady.
Of the 11 sectors in the S&P – Industrials and Communications ended the day slightly higher while the other 9 sectors ended the day lower. Energy led the way – down 1.8% followed by Consumer Discretionary down 1.1%, Basic Materials down 0.8%, Financials down 0.65%, Tech – 0.5%, Utilities – 0.25%, Healthcare – 0.3%, and Consumer Staples down 0.1%.
And then we saw Homebuilders – 0.7%, Retailers – 0.5%, the Value Trade down 0.6%, the Growth Trade – 0.5%, Semi’s down 0.7%, Exploration and Production down 1.8%, Big Pharma down 0.5%, & Biotech – 1.2%.
The contra trades though ended the day higher as the VIX (fear Index) gained 4. % causing the SH to gain 0.5% the DOG + 0.2%, PSQ + 0.6%, VIXY +2% while the SPXS (triple levered Short) gained 1.6%.
Bonds declined a bit yesterday – the TLT – 0.6% while the TLH lost 0.4 – leaving the 2-yr yield at 3.8% and the 10 yr at 4.34%.
Oil – continues to come under pressure – this as the Saudi’s are not happy with some of the members of OPEC+ who are not playing by the rules….and so – the Kingdom announced an accelerated oil output schedule increasing production by 411,000 barrels per day (bpd) in June – this despite falling oil prices.
This decision was influenced by Saudi Arabia’s push to discipline members like Iraq and Kazakhstan for overproducing beyond their quotas. And this caused oil to decline by 1.8% or $1.10 barrel to end the day at $57.23 leaving us just $2 away from testing the April low of $55 – a level I have been suggesting was going to happen. This morning, we are seeing a bit of a bounce – with oil up $1.13/barrel at $58.36 – leaving us in the $55/$60 range.
Gold – which had traded down to $3209 last week – is now in rally mode again – this morning up $67 at $3390 – this a direct result of the ongoing ‘chaos’ and the lack of any definitive trade deal with anyone – that Scotty promised was ‘just around the corner’. Add in the latest drama over tariffs on the film industry and tariffs that are yet to be announced on Big Pharma – due out any day now and you have another ‘flight to safety’ move into gold. This leaves us in the $3200/$3500 trading range.
This morning US futures are down again….. Dow futures -340 pts, S&Ps -55, Nasdaq is -240, while the Russell is -25 pts. The chatter all day will be about tariffs and what everyone expects out of the FED…Period.
European markets are all lower as well for all of the same reasons.
The S&P closed at 5,650 down 36 pts – we almost kissed the intermediate term trendline at 5746 last week – but just couldn’t get it done….and I am not surprised….the move off the April low was a bit dramatic and too fast….Like I said – we created more gaps on the way up that will need to be filled, so don’t think it’s all just yet…. And that is just what we are seeing…. the backing and filling…. what was short term trendline resistance at 5575 is now (maybe) support…You can expect us to test it to see if the that is true. A failure to hold at 5575 will once again cause the markets to test lower and my guess is – don’t be surprised if we test 5300 – a level that fills all of the gaps created in the chart. More negative or confusing headlines will only make that happen faster…so sit tight. NO need to chase anything….
Expect the excitement to continue…. stick to your plan and remain resilient –
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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Chicken Piccata – Delish…
For this you need: Thin sliced chicken cutlets, capers (rinsed), 2 large lemons cut into slices, fresh parsley minced, 4 cloves garlic sliced, 1 cup flour, chicken stock, 1/4 cup dry white wine, butter, olive oil, s&p.
Mix the flour with the s&p in an aluminum dish. Dredge chicken cutlets in the flour and set aside on wax paper. Save the flour for use later in the recipe.
Heat a large sauté pan to medium heat for 2-3 minutes, then add a splash of olive oil and a ¼ stick of butter. When hot, sear the cutlets in the pan until they are just done (approximately 2-3 minutes total) then set aside on a plate. Repeat until you have cooked all the chicken – using more olive oil and butter as required for each batch.
After all the chicken pieces are cooked turn heat to low and add the garlic into pan. Sauté for 1 minute then add the capers and cook for 1 minute more.
Next – add the wine, chicken stock, and lemon slices to the pan and turn heat to high. With a wooden spoon scrape the bottom of the pan – bring to a boil for 2 mins or so…. long enough for the alcohol to burn off.
Next, turn the heat down to medium – remove the chicken and set aside. Add ½ stick of butter and melt. Now add a tsp of the flour to the sauce. Using a whisk, stir the sauce to emulsify. Taste test and adjust salt, pepper, add more lemon juice IF required.
When satisfied with the taste of the sauce, Put the chicken back in the pan and gently coat all pieces. Cook for 2-3 minutes to warm through. Turn off heat and add the parsley. Serve immediately on warmed dishes with roasted potatoes and a large mixed salad.
Buon Appetito
