Things you need to know
- Trump promises Insurance and Escorts thru the Strait
- Volatility is alive and well – Oil up, gold up, dollar down, bonds down.
- South Korea ‘blows up’ – the Kospi down 12% overnight!
- Politics – Crockett is OUT! Paxton and Cornyn in a faceoff.
- Mortgage Apps Surge – 30 yr rates below 6%.
- Try the 8 ‘P’ Pasta
And the selling just won’t quit. Stocks ended lower again yesterday — although well off the session lows — after Trump said the US would offer tanker insurance and escort oil tankers through the Strait of Hormuz in an effort to calm oil markets and ease international concerns about supply disruptions. The announcement helped cool some of the immediate panic, allowing equities to recover part of the early losses while causing oil to give back some of those 9% gains seen early yesterday morning. That said, Iran has yet to respond, and until we hear how Tehran intends to react, that remains the wildcard. For now, though, the temperature in the room continues to run a bit hot.
At the end of the day – the Dow finished lost 403 points, the S&P lost 65 pts, the Nasdaq gave back 232, the Russell lost 48, and the Transports gave back 72, the Equal Weight S&P fell by 101, while the Mag 7 gave up 178 points.
Volatility continues to push higher. Yesterday the VIX rose another 9%, and while that sounds dramatic, remember that earlier in the morning it was up nearly 25%, which is what initially sent stocks reeling — the Dow down more than 1,200 points at one point in the session. As the day progressed, the VIX backed off a bit and equities recovered some of those losses, suggesting that markets are at least trying to stabilize.
But let me be clear — they won’t fully calm down until the conflict in the Middle East ends.
Oil – spiked hard again yesterday – rising 5% to end the day at $74.80 after trading as high as $78 – this because of the news that Iran closed the Strait of Hormuz. This morning oil is trading up another 20 cts at $74.60 – and will hopefully find some relief if tankers start to move thru the Strait. For now, it is what it is – expect oil to remain volatile.
Now – speaking of volatility – one of the more dramatic headlines you’re going to see this morning, the one that might give you a little angst, takes us to the other side of the world—South Korea—where the KOSPI absolutely blew up overnight, falling about 12%, leaving the index now roughly 20% off the high it made just last Friday, February 27th.
But let’s add a little perspective here. The KOSPI was up 52% this year alone—that’s in just eight weeks—and up 165% over the past twelve months. So yes, it got slammed as investors rushed into risk-off mode, but this comes after a massive run – which means, I for one am not surprised, and nor should you.
The trigger? Really? It is about the conflict in Iran and the potential disruption in the Strait of Hormuz. Now understand something important—South Korea imports virtually ALL of its oil from the middle east – think OPEC+ and the broader Middle East—not Iran specifically—but oil that must travel through the Strait of Hormuz. So, when crude spikes – up roughly 19% since last week—energy-dependent economies like South Korea are gonna get hit and hit hard.
That’s why the selling was so aggressive overnight – (Iran announced that the Strait was closed). Technology, autos, and industrial exporters took the brunt of the hit as investors started pricing in the possibility of higher energy costs and supply disruption. But I remind you—no one was complaining two weeks ago when the index was up 50% – the Momo guys couldn’t get enough and now, the Momo guys can’t get out fast enough – which again speaks directly to ‘having a plan and not getting caught up in the FOMO trade’. Even after this selloff, the KOSPI is still up about 21% year-to-date, so there is still plenty of room for a further pullback – in my opinion.
Now, this should not be a big surprise – global markets have all been pricing in uncertainty (some faster than others). What should not be a surprise to the savvy investor is this – when geopolitical tensions rise and oil prices spike, energy-dependent economies tend to react violently. The question for them now – Is this a short-term geopolitical scare or something that could escalate into a broader economic issue.
So, you ask – how come Japan isn’t getting cracked? They import 95% of their oil as well. And you would be correct – Now while the Nikkei was only up 18% ytd, it has given back 9% (which is 50% of the gain – so I’d say they did get cracked – but – optically – a 9% pullback is not the same as a dramatic 20% pullback in 3 days) – but the bottom line is – South Korea’s market tends to react more violently because its economy is smaller, more export-concentrated, and heavily tied to global manufacturing cycles. Japan feels the impact too, but they absorb the shock more gradually than South Korea because their economy is larger and more diversified, with a broader industrial base. Japan also tends to hedge energy risk better through strategic reserves.
Now – here at home – sector performance found Basic Materials got hit the hardest yesterday – down 2.5%, Industrials down 1.9%, Tech down 1.5%, Healthcare down 1.1%, Consumer Staples down 1%, Energy – down 0.9%, (energy is now up 25% ytd), Consumer Discretionary down 0.9%, Utilities – 0.6% and Financials lost 0.2%. Only Communications showed a gain – up 0.1% on the day.
The contra trades were all winners – the SH + 0.9%, PSQ + 1.1%, DOG + 0.8%, SPXS + 2.7% and the VIXY + 4.6%.
Bonds got hit again – the TLT and TLH lost 0.2%. 10 Yields are 4.08%, while the 30 yr is yielding 4.73%. 30 Yr mortgage rates continue to decline – today you can get one for 5.98% while 15 yr rates are 5.4%. This morning, we learned that Mortgage Apps surged by 11% and that is a direct result of lower rates and affordability. If you want to lock up your money for 11 months – Capital One will pay you 4%, 12 months it drops to 3.75% and 5 yrs – they will pay you less – 3.6%.
Gold is up $105 at $5,200 – which is down from Monday’s $5,400 as the conflict rages on.
The dollar – which has been on a tear as a result of the conflict – is trading just a bit lower this morning…..down 26 cts at 98.8 and that is giving life to the move higher in gold.
And now the mid-terms…. The primary season officially kicked off with key contests in Texas, North Carolina, and Arkansas, setting the stage for several high-profile races heading into November.
In Texas, Democrat James Talarico won the Democratic Senate primary – taking Crockett OUT of the race – but before conceding she accused voter suppression for her loss (of course she did) , while Republicans John Cornyn and Ken Paxton failed to clear 50%, sending their race to a runoff – setting this up for a major national political battle. In North Carolina, former Democratic governor Roy Cooper and Republican Michael Whatley each won their primaries. And as expected – there was NO drama in Arkansas. The GOP – Tom Cotton remains favored in the general election over Democrat Hallie Shoffner.
Now, the fight has just begun, and these results only mark the beginning of the 2026 midterm campaign season and highlight how control of the Senate could hinge on a handful of closely watched races. And expect to hear more about the mid-terms as the year unfolds – because while politics won’t price stocks in the long term – they will create short-term chaos and opportunity – which is why you need to be aware.
European markets are higher this morning – all up better than 1.5% across the board.
U.S. futures are UP! Dow futures + 42 points. S&P’s up 12, Nasdaq up 67 pts, while the Russell is up 12 pts. Eco data does include – ADP employment – expected to show 50k new jobs, S&P and ISM Services PMIs of 52.3 and 53.5 respectively. Leaving up well in the expansion zone. The negative might be Prices Paid – that is expected to be 68.3 which is up from last months 66.6.
Broadcom earnings are due out after the bell. EPS expected to be $2.02/sh, with Revenues of $19.2 billion. What’s important? AI semi demand, Infrastructure Software and of course the guidance…so sit tight…AVGO is quoted up $4 in the pre-mkt…. but remember – it is down 26% off the December high…..Are you hearing me? Opportunity???
The S&P closed at 6,816 – down 65 pts. This after piercing Intermediate trendline support at 6835 – taking us down to 6,710 – a level that does not really have any support…real support is down at 6,570.
The tone remains skittish…..the headlines will cause ongoing concerns… I still suspect – a test of the long term trendline is now in sight…..If we go there, it would be a 6.5% pullback off the S&P high -a move that is well within a ‘normal’ trading range.
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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The 8 ‘P’ Pasta
Penne, Porro, Piselli, Pomodoro, Pepperoncini, Panna, Pancetta & Parmigiano.
Ok – so in English- you need: The Penne pasta, leeks, Peas, crushed tomatoes, 1 diced Pepperoncini, Pancetta, Heavy Cream and finally the Cheese. You also need olive oil and s&p.
Bring a pot of salted water to a rolling boil.
Begin by sautéing sliced leeks – the light green part, in olive oil. Next add in the diced pepperoncini – sauté for 3 mins. Next is the diced Pancetta. Sauté for 5 mins.
Next add in the defrosted peas – Sauté.
After 5 mins, add in the crushed tomatoes, season with s&p and sauté on med high heat for 5 mins.
Now you need to add in ½ cup of heavy cream. Stir to mix and you should have a thick creamy sauce.
Add the pasta to the water and cook until aldente. When done – add the pasta directly to the sauté pan, add in a ladle of the pasta water and mix well. Yum.
Top this off with the fresh grated parmegiana – and toss to create a delicious dish.
Buon Appetito.