Things you need to know
- AI scare slams IBM and continues to cause angst.
- Gold surges up thru $5200, Dollar teasing resistance.
- HD reports and beats, NVDA reports tomorrow and is now the focus.
- Trump takes Capitol Hill tonight in his SOTU address.
- Try the Lardiata Napolitana.
Well, stocks got crushed yesterday — but it wasn’t the Supreme Court tariff decision, even as Trump continues to stir the pot. It was, once again, an AI scare trade triggered by an Anthropic headline and what it could mean for the world — and specifically for IBM.
IBM got slammed — down 15% in a single session, now off 24% ytd – on the idea that Anthropic is “coming after” COBOL. Now COBOL – Common Business-Oriented Language was developed by the Dept of Defense in 1959 – is the backbone of large-scale global data processing: payroll, banking transactions, insurance records, government benefits, airline reservations. It’s not flashy, sexy or modern — and that’s exactly the point. It runs on IBM mainframes and handles enormous volumes of critical data with precise reliability. These systems are deeply embedded in IBM mainframes and replacing them is complex, risky, and extraordinarily expensive.
So, while IBM didn’t invent it nor do they own it – they dominate mainframes, they became the commercial force behind it BECAUSE they own the infrastructure and services around it. And that’s the key.
The news from Anthropic is threatening because it claims that Claude AI tools can analyze, document, and help modernize massive COBOL databases far faster and cheaper than traditional consulting-led approaches – hitting IBM below the belt because IBM has long monetized COBOL maintenance (which is a high-margin business) through their mainframe hardware and software services. If Anthropic can meaningfully reduce the time and human expertise required to service these legacy systems, it will slaughter IBM’s services revenue and weaken part of its ‘legacy moat’ — and that’s what investors reacted to.
So, you ask – what is a ‘legacy moat’ and why is it important? A legacy moat is a competitive advantage (anyone can have a legacy moat) built not on innovation or growth, but on entrenchment, and since IBM’s legacy moat is its deeply embedded mainframe infrastructure that keeps customers and revenues locked in and recurring – any threat to this ‘moat’ is a threat to the company – thus the disaster that happened yesterday to IBM that took it back to prices last seen in April 2025 when the market got hit over the head on the Tariff Tantrum.
And just like two weeks ago when an Anthropic headline hit the tape that threatened the legal and financial industries, investors, traders and algo’s reacted negatively.
By the end of the day – the Dow gave back 820 pts or 1.7%, the S&P lost 72 pts, or 1%, the Nasdaq lost 260 pts or 1.1%, the Russell lost 42 pts or 1.6%, the Transports gave back 565 pts or 2.8%, the Equal Weight S&P lost 92 pts or 1.1% while the Mag 7 gave back 490 pts or 1.5%.
This ongoing selloff in tech is a clear reminder of what happens when the narrative shifts and momentum flips. When leadership breaks, it doesn’t just impact one stock or one sector — it pressures sentiment and spills over and into the broader market. That’s exactly what we witnessed yesterday.
And just like when this AI wave slammed the legal and financial industries two weeks ago, I said it was only a matter of time before it washed across other sectors. That’s what disruption looks like. It doesn’t knock once — it keeps knocking.
And this isn’t Bob Dylan “Knockin’ on Heaven’s Door.”
This is about AI burning the door down! So, buckle up. This isn’t just the beginning of the story…. it’s the beginning of a much broader change….and potentially a broader re-pricing – something I have been talking about for a while.
Now — to be fair — it wasn’t just tech. The Supreme Court decision and ongoing geopolitical unrest continue to add more layers of uncertainty, and we saw that in gold. Gold surged $120 or up 2.35% yesterday – blasting through resistance at $5,100 taking it up and thru $5,200. That’s not just the Momo guys, that’s about policy risk and global trade uncertainty. Gold’s move yesterday now puts it into a new trading range – $5100/$5,500 and as long as the unrest continues, expect the BIG money guys and anxious retail investors to flock into gold as the ultimate safe haven investment.
And then there’s the dollar. The Dollar Index continues to hug that trendline around 97.95 — unable to break higher, for now. If it clears that level, the next real test is 98.60, where intermediate and long-term resistance live. My sense is the first attempt gets rejected. But once we bust up and thru then look for the dollar to test 100 and that should pressure commodities, tighten financial conditions for foreign borrowers, and adds another layer to this repricing.
Bonds rose – the TLT and TLH both up 0.4% and that leaves 10 yr yields at 4.03% and 30 yr yields at 4.69%.
Oil ticked a bit lower yesterday after the push higher…. ending the day down 20 cts at $66.29. This morning it is unchanged and remains in the $62/$68 trading range.
Cryptos continue to weaken…. Bitcoin now trading at $63k, Ethereum is at $1800 and Solana is trading at $77.
Now earnings…. HD just reported…. $2.72 vs the expected $2.55. Steady revenue – no surprises. Demand remains stable but not accelerating, as consumer uncertainty continues to weigh on big-ticket home improvement projects. The company raised its qtrly dividend by 1.3% to $2.33/sh. They offered cautious 2026 guidance, reinforcing the idea that housing and discretionary spending are stabilizing — but not yet re-accelerating. It is quoted up 2.5% or $10 in the pre-mkt.
We are due to get earnings this week from DELL, CRM, CRWV and the biggie NVDA…..that comes out tomorrow after the bell.
The world is expecting another very strong quarter from NVDA! Revenues expected to be roughly ~$65-6 billion – reflecting nearly 70% year-over-year growth as AI infrastructure demand remains robust. But the real focus will be on the guidance, demand trends in data centers, margin outlook, commentary on China exposure, next-gen chips and the sustainability of capex spending.
NVDA is priced to perfection and without robust forward guidance – it could get very interesting. The options market is pricing in a +/- 8% move in the stock – (think $175/$206 range) depending on what we hear…cautious commentary will see the algo’s hit the sell button, while strong guidance- which reinforces confidence in the broader AI growth story – will see them go all in on the buy button.
European markets are mostly lower…. Spain down 0.7%, Italy 0.4%. – The others are off just slightly.
Trump heads to Capitol Hill tonight for the State of the Union address, and the stakes are high. Voters are weighing concerns around inflation, trade policy, immigration, and geopolitical tensions — and recent polling shows confidence has softened and his approval rating is plunging. The question is whether he uses the moment to calm the markets and the voting public. Can he lay out a clearer economic path, and secure control of congress for another 2 years? Prediction markets say he cannot. Tone will matter as much as policy. Even if he projects steadiness and direction, half the country won’t listen…so, it is what it is.
This morning US futures are higher… Dow futures up 130 pts after, the S&P’s up 14 pts, the Nasdaq up 70 pts, and the Russell is up 4 pts. And this make some sense after yesterday’s sell off. The HD numbers only helping the sentiment for now.
Expect to hear all kinds of commentary about NVDA as the markets await those results.
S&P closed at 6,837 — down 71 points — after breaching intermediate support at 6,823 and trading as low as 6,819. That breakdown matters. And you should expect volatility to continue — we’ve been discussing this for weeks.
If we decisively break this trendline, the chart suggests 6,535 — roughly a 6.5% move off the highs — which is still well within normal trading bands. That’s not panic. That’s reset.
We don’t enter true “correction territory” until we’re down 10% — around 6,300. And remember, this is a midterm election year. Historically, drawdowns can reach as much as 19%. That would imply an S&P closer to 5,670. I am not suggesting we are going there, but history suggests it is a real possibility…..I’m just doing the math. (7000 x 0.81 = 5,670).
Call me at 561-931-0190. Let’s talk about whether the risk in your portfolio actually matches your tolerance — because this works both ways. You may be taking too much risk… or not enough to reach your goals.
Take good care,
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Lardiata Napolitana – a Classic Neapolitan Pasta
For this you need: Lard – not oil, not butter, you need lard. (The lard – or rendered pork fat – is the KEY to this dish). You also need one med onion, garlic, sliced cherry tomatoes, s&p, tomato passata, fresh grated pecorino Romano cheese and the pasta of your choice. The recipe calls for Ziti, but you can use whatever you want.
First – bring a pot of salted water to a boil. Leave it on the back burner.
Take the lard – trim the sides and then dice. Set aside.
Next, chop the garlic and then chop the lard and the garlic together until it begins to melt into each other. The lard will get soft as you chop it.
Now in a cold pan – add the lard and garlic. Heat it up slowly…leaving the heat on med – you do not want to burn this at all. Once it is all melted, then add in the finely diced onion. Allow it to sauté for 5 mins.
Next – add in the sliced cherry tomatoes and allow to cook until they soften and break apart. Next add in 1 c of the tomato passata – season with s&p. Cook for 10 mins on med.
Now – add the pasta to the water and cook until aldente.
When done – add the pasta directly to the sauté pan. Mix to coat. Add in ½ ladle of the pasta water and a handful of the pecorino and mix.
Serve with more fresh grated Pecorino Romano cheese on the table for your guests.
Buon Appetito.