Things you need to know
- Narrow rally is raising caution flags all around
- Oil kissing $100, Yields up, Gold down – also a caution flag.
- Complacency vs. Reality – let’s discuss.
- GM, HLT, UPS – all reported and all BEAT.
- Still NO deal with Iran.
- Try the Roasted Chicken
**I will be joining Charles Payne today in studio in NYC on the Fox Business Channel in the 2 pm hour – please join us**
Good morning – So we had another ‘mostly up’ day yesterday – At the closing bell – the Dow lost 63 pts, the S&P gained 9 pts, the Nasdaq rose 50 pts, the Russell added 1 pt, the Transports lost 48 pts, the Equal Weight S&P lost 13 pts while the Mag 7 added 221pts.
S&P and Nasdaq are printing new highs, but don’t get seduced by the headlines because underneath, the market is flashing caution everywhere you look. The Dow is rolling over, the transports are weak, and the equal-weight S&P is lagging — all signs that participation is thin, and the average stock is not confirming the move.
And now layer in the technicals — the RSI on the S&P, Nasdaq, and the Mag 7 are firmly in overbought territory, (and that is just another near term caution flag), the Dow is kissing that level, while the transports aren’t even close and the equal-weight index is already backing off. That divergence matters. It tells you this rally is being stretched again by a narrow group of names while the rest of the market is either exhausted or not participating at all.
And oil remains the inflation narrative — locked in that $90 to $100 range — and in fact, overnight it surged higher again. This morning, WTI is up $3.15, or 3.1%, at $99.53, after a whole lot of nothing yesterday and overnight when it comes to any real progress on reopening the Strait of Hormuz or clarifying Iran’s role in the global order. And that lack of progress? It’s only deepening the energy supply shock rippling through the global economy. This is turning into a game of chicken – the question is who flinches first? – and that is also not really helpful.
All while bond yields push higher…the 2 yr yield closed up nearly 2 bps at 3.79%, the 10 yr ended up nearly 4 bps at 4.339%, and the 30 yr added nearly 4 bps as well – ending the day at 4.946%…both the 10 and 30 yr inching closer to ‘danger zones’ – 4.5% and 5% respectively. And this morning – those yields are only pushing even higher – the 2 yr is up 2 bps at 3.81%, the 10 yr is up 1.7 bps at 4.356% while the 30 yr is up 1.01 bps at 4.957% – and guess what? That’s just another warning sign.
The VIX actually closed lower at 18.02 — which on the surface signals calm…maybe even complacency. But I’d argue caveat emptor — buyer beware – because THIS is important. Overnight the VIX rose just a bit and is now up 1% at 18.20 – while still ‘complacent’ it is also another data point to consider – Read below.
Let me explain why. They call the VIX a “fear gauge” because in moments of real stress, it behaves like one — but that’s just a nickname, not its actual function. The VIX measures the price investors are willing to pay for downside protection in the S&P over the next 30 days. And when investors get nervous — I mean really nervous — they rush to buy puts. That surge in demand drives option prices higher, which sends the VIX spiking. So, during market selloffs, geopolitical shocks, or financial stress, the VIX explodes higher — and it looks like a direct read on fear.
Now here’s the nuance — the VIX measures the cost of insurance, not the emotion. When investors are complacent, they don’t hedge, demand for protection falls, option prices stay low, and the VIX stays low. When investors get anxious, they rush to hedge, demand rises, option prices jump, and the VIX spikes. So yes — a lower VIX suggests investors are feeling calmer. That’s directionally true… but it’s incomplete.
Because right now, there are real risks building beneath the surface — oil, rates, inflation, geopolitics — and yet the options market isn’t pricing that in – the VIX remains in the complacent zone. That’s the disconnect.
Bottom line? It doesn’t tell you WHETHER investors should be afraid — only when they ARE afraid. Capisce? And right now, apparently no one is afraid.
Gold – now this is a tell. Because on the surface, with no deal on the Strait of Hormuz and geopolitical risk still front and center, gold should be surging. That’s the classic playbook. But it’s not. In fact, it’s under pressure — down another $70 this morning to ~$4,610/oz, on top of yesterday’s $30 decline, taking it down about 5% — or roughly $245 — since last week.
So, what’s going on? Rising yields are overpowering the safe-haven bid. As real yields move higher, the opportunity cost of owning gold rises and that’s forcing money out of the trade, so gold remains in a tug of war.
Gold has now breached intermediate trendline support ($4,750) and is now in the $4,250/$4,750 trading range. The contra message here is that the move in gold is not panic – because if it were – gold would be ripping higher regardless of yields, and it is NOT.
Eco data today includes the Richmond Fed Manufacturing Index, the Business Conditions Index, and the Consumer Confidence Index — which is expected to tick lower, suggesting that consumers are becoming a bit more cautious about the outlook. And that’s where it gets interesting…because it stands in sharp contrast to stocks making new highs.
So, what does that tell you? It tells you the market is doing what it always does — looking forward and pricing in optimism, while the consumer is reacting to what they’re feeling right now — higher prices, higher rates, and uncertainty. That divergence matters. Because at some point, Main Street and Wall Street need to reconcile. Either confidence stabilizes and catches up to the market…or the market has to adjust to the reality of a more cautious consumer.
Today is the start of the April FOMC meeting and the decision is out tomorrow just hours ahead of what many will say is the most significant day for tech earnings….
In any event – I do not expect to hear anything other than rates to remain on hold, but I do expect JJ to emphasize that rising costs – energy and raw materials – are presenting a problem for the FED – which only means that he will say that cuts will be pushed further out on the timeline, leaving Kevy Warsh with a mess on his hands…But that’s another story.
Earnings today include GM, KO, UPS, JBLU, SHE, CNC, & KMB before the opening and after the bell look for V, PPG, STX, BE, & HOOD. (there are more but these are most relevant to our conversation).
European markets are all up…. Italy taking the lead – up 1.25% with German carrying up the rear at + 0.2%. BoE and ECB monetary policy decisions are out on Thursday.
US futures are confused! Go figure! Today it is the Dow that is higher while everything else is lower – Dow +150, S&P’s down 16, Nasdaq -180 while the Russell is down 17.
We are now 60 days into this conflict – A rumor is still circulating that Iran has reconsidered yesterday’s peace plan and has tweaked it a bit and would be ‘willing to accept’ an interim deal to re-open the Strait if we end the blockade…Trump has summoned the national security team to the oval office to discuss – so we wait. Remember – the key here is their nuclear ambitions – and this latest proposal doesn’t speak to that – so the assumption is ‘No Deal’.
The S&P closed at 7,173 – up 8 pts…. closing at another new all-time high. So far we’ve heard from HLT, UPS, GM & CNC – all have beaten on the top line….GM completely crushed it!
Remember – tomorrow will be a HUGE day…. brace yourself for the FOMC announcement at 2 pm and for MSFT, META, AMZN & GOOG after the bell….
Call me at 561-931-0190 and let’s talk about how SlateStone Wealth can help you navigate all of this and reach your goals.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Pan Roasted Chicken in a Dijon Wine Sauce
For this you need: Chicken breasts and thighs – skin on. Olive oil, s&p, White wine, chicken stock, Shallots, minced, Fresh rosemary, chopped, 1 tbsp Dijon mustard.
Preheat oven to 450 degrees.
Season the chicken with s&p.
In a heavy-bottomed oven proof frying pan heat olive oil on high heat until it shimmers,
Add the chicken parts and turn the heat down to Med high. Now you will need to cook the chicken in batches, being careful not to overcrowd the pan, six minutes on each side until chicken is browned all over. Once every piece has been cooked, place it in a Pyrex baking dish and put it in the hot oven for 12-14 minutes.
While that is happening – add the shallots, rosemary and white wine to the skillet – allow the alcohol to burn off. Now add the chicken stock, and whisk in the Dijon mustard – let it cook for 3 – 5 mins.
Now – serve the chicken on warmed plate with sauteed spinach. Be sure to spoon the sauce over each piece.
Buon Appetito