Things you need to know
- Tensions surge overnight – Iran makes more threats on its neighbors.
- Oil kisses $100 again on heightened concerns.
- It’s not just oil, it’s fertilizers, agriculture and financial centers.
- Try the Pasta & Broccoli.
Good morning America—
After the violent swings earlier this week driven by geopolitical headlines and the spike in oil prices, markets are trying to settle down a bit. Investors were beginning to separate fear from fundamentals. While it wasn’t a disaster, the broader market ended lower once again.
And that left investors less than excited and so stocks got sold. By the end of the day – the Dow lost 290 pts, the S&P down 6 pts, the Nasdaq rose 19 pts, the Russell lost 6 pts, the Transports lost 130, the Equal Weight S&P lost 25 pts while the Mag 7 gained 118 pts.
Where did we see any strength? Technology. The XLK was up 0.5%. Semi’s +1%, Disruptive Tech + 0.25%, Software + 0.1%, Ark Web + 0.8%. And why? Because the sector has been so beaten up over the past three or four months that bargain hunters are shopping for opportunity.
We also saw strength in energy – the XLE up 2.5% on the back of the strength in oil. The other nine sectors got hit – Consumer Staples the hardest down 1.3% – which is a bit confusing to me…. Why sell consumer staples in this environment – OTHER than only because it was up 10+%? Whatever!
And if you don’t think there is opportunity in some of the biggest tech names that are getting repriced due to overblown fears of AI – I’d say – go back and do your homework. Think about it – MSFT was down 30% from the November high – think about it – it’s MSFT! It was down 30% – let that sink in. PLTR another sexy name – it was down 40% as well. My buy thesis – It’s about 3 simple reasons for both (for me).
MSFT remains one of the highest-quality companies in the market (for three very simple reasons).
First — it sits right at the center of the AI revolution, with its partnership with OpenAI and the integration of AI across its entire ecosystem driving demand for its cloud and software platforms.
Second — Azure cloud continues to grow at a powerful pace, creating highly recurring and sticky revenue as corporations move more of their computing workloads to Microsoft’s infrastructure.
And third — Microsoft generates enormous free cash flow and maintains one of the strongest balance sheets in corporate America, allowing it to invest aggressively in AI while still returning billions to shareholders through dividends and buybacks.
Here you have a company with dominant technology, recurring revenue, and financial strength, and it’s on SALE! Which is why it remains a core holding for many long-term investors including me! MSFT is up 7% in the past week.
Or PLTR – it was down 40% off the November high. Palantir has become one of the more interesting AI names in the market (also for three simple reasons).
First — it sits right in the middle of operational AI, meaning it helps governments and corporations actually use their data to make real-time decisions, not just analyze it. Platforms like Foundry (commercial use) and Gotham (gov’t use) are designed to turn mountains of data into actionable intelligence — and that’s incredibly valuable.
Second — Palantir has built deep relationships with government and defense agencies, including the U.S. military and intelligence community, which creates long-term contracts and very sticky revenue streams.
And third — the company is now seeing explosive growth on the commercial side, as corporations rush to adopt AI tools that improve efficiency, productivity, and decision-making. Put it together and what you realize is that Palantir sits at the intersection of AI, national security, and enterprise software. Over the past week – PLTR has risen by 21% as opportunistic buyers take advantage.
And remember — I always use my Bloomie’s analogy. When Bloomie’s puts a 30% OFF sale on dresses, people go running in to buy three of them…because why not? They’re on sale.
What always makes me laugh is that investors tend to do the exact opposite in the stock market. When high-quality, mega-cap tech companies (or other high quality, mega-cap names in their respective sectors) go on sale — when their prices fall 20% or 30% — investors suddenly get nervous and run the other way.
I mean look at MRK – in the Big Pharma space! They crushed it from June 2024 until June of 2025 – taking it down 45% in 12 months……and then – a bell goes off, sellers become exhausted and the opportunistic buyers take control….the stock is up 70% in 8 months….Look – MRK owns one of the most powerful drugs in the world in Keytruda, which has become the dominant immunotherapy treatment across multiple cancers and continues to generate massive and growing revenue globally. And I have personal experience with this drug – so far it has kept my cancer in remission.
Second — Merck has built a deep pipeline of new drugs and oncology treatments, meaning it is not just relying on one product but is developing the next generation of therapies that can drive growth for years.
And third — Merck remains a cash-flow machine with a strong balance sheet and a reliable dividend, making it attractive for investors who want exposure to healthcare innovation while also collecting steady income. If you recall – I pointed all this out on Varney & Co back over the summer. And you can find me on with Stuart this morning at 9 am on Fox Business.
Now, as long as you believe in the long-term fundamentals of those companies, and the thesis has NOT changed, then a pullback is simply the market putting them on sale. And just like at Bloomie’s…sometimes the best thing to do is walk in and buy the dress while it’s discounted. And all that says is – no matter your level of angst – there is opportunity everywhere you look.
Ok – but let’s move on to today….and global markets are under pressure…..again. Asian stocks all lower – Taiwan, Australia and Japan all down more than 1%. In Europe – mkts across the region are down about 0.2% – 0.4%. And in the US – futures at 6:30 am are getting slammed – Dow futures – 245 pts, S&P’s down 27, Nasdaq – 87 and the Russell is down 26.
Overnight the Mid-East situation escalated.
Iran expanded its retaliation across the Gulf region, reportedly launching strikes toward targets in Dubai and Kuwait, raising fears that the conflict may now be spreading beyond military targets and toward economic infrastructure across the region. At the same time, the biggest shock to markets came reports that three commercial cargo vessels were struck in the Strait of Hormuz overnight, with at least one ship catching fire. That development immediately raised concerns that commercial shipping through the strait — not just oil tankers — could be at risk.
And that matters because the Gulf region sits at the center of several critical global supply chains.
It’s not just oil moving through those waters. The region is also a major hub for fertilizer production and exports, particularly ammonia and urea — key ingredients used in agricultural production around the world. Any disruption there raises the possibility of higher fertilizer costs, which eventually translate into higher global food prices.
Iran has also issued warnings targeting financial centers across the Gulf, adding another layer of concern for global markets. Dubai, Abu Dhabi, and other Gulf cities serve as critical financial and logistics hubs for global trade flows. Threats directed at those centers naturally raise the stakes for investors and in fact – the big banks in those countries have asked employees to stay home and shelter in place.
And so, today we are forced to process energy risk, food supply risk, and geopolitical escalation all at the same time, the result is exactly what we are seeing this morning — a broad risk-off tone across global markets.
And investors are reconsidering yesterday’s announcement that the IEA plans to release a record 400 million barrels of oil into global markets. Investors are asking a very practical question: How long will it actually take for that oil to reach the market and ease supply concerns?
So, despite that announcement, oil continued to climb, rising roughly $5 — about 6% on the day — to close near $87.50 a barrel and overnight they ran it to $100 once again – as tensions in the Mideast build and the naysayers are poo pooing the IEA initiative.
And what about the CPI report? Yes — it came in exactly as expected. Not a tenth of a percent higher, not a tenth lower. Right on the number.
But as we discussed yesterday, the market really wasn’t focused on yesterday’s inflation data. The real concern is what next month’s CPI report will show — and the one after that — given the recent spike in oil prices and the ripple effects it could have on gasoline, manufacturing, transportation, food costs, and housing.
Now remember what I said earlier this week — I’m still in the “this is temporary” camp. My expectation is that oil prices will eventually return to pre-conflict levels once this crisis stabilizes. The problem is timing. Is that next week? Next month? A couple of months from now? That part remains unclear — and that uncertainty is exactly why markets remain so volatile and anxious right now. Because if there’s one thing markets hate more than anything else… it’s uncertainty.
Bonds continue to get sold. The TLT lost 1.3% while the TLH lost 1% sending yields up again…. The 10 yr is now yielding 4.22% while the 30 yr is yielding 4.88%.
Gold continues to trade in line. This morning it is up $4 at $5,180 – leaving it well within the trading range that we have been discussing – $5,200 appears to be resistant while $5,000 is support.
The Volatility Index – VIX- the market’s fear gauge appears to have found a bottom for now at around $24 ish. This morning it is up $1 at $25.20 – keeping us in the ‘elevated uncertainty’ zone. Keep your eyes on $30 – a breach of $30 raises the temperature in the room and that will send stocks reeling.
Eco data today includes Initial Jobless Claims expected at 215k and Continuing Claims at 1.849 million — and frankly, those are not concerning numbers. They continue to suggest that the labor market remains stable.
On the housing front, Housing Starts are expected to fall 4.5% and Building Permits are expected to decline 3.1% — but I’m actually challenging both of those forecasts.
Why? Because mortgage rates have now slipped back into the high-5% range, and we’ve already started to see more activity in the housing market. And don’t forget — we are now firmly entering the Spring selling season, which is historically the busiest time of the year for housing.
Now take a look at the homebuilders. The SPDR S&P Homebuilders ETF it is essentially flat on the year, up less than 1%. But here’s the bigger story — the group has been absolutely hammered over the past month, down about 21%, breaking through all three key trendlines and taking the ETF back to the November lows around $100, where it’s currently trying to find support.
If that level fails to hold, the chart suggests the next stop could be around $95. If it does hold then it has to get thru trendline resistances at $107, $109 & $112.
But here’s the question investors should be asking themselves — Do I smell opportunity? Because if the spring housing season shows even modest strength, this sector could quickly start to look oversold.
Next week, is all about the Fed here in the US, but even the FED will take a back seat to what is happening in the Mid-East.
The Fed’s policy decision is due on Wednesday. Rate cut? Not happening.
In fact, under the circumstances — with oil prices rising and geopolitical uncertainty building — I suspect Jay Powell might actually sound a bit more hawkish when he steps up to the podium. And if that’s the case, markets may have to recalibrate their expectations once again. Probabilities of a June rate cut (which is what many people are pricing in) are now below 25% – down from 55% only 2 months ago. In fact – it is below 25% for the rest of the year…..So, those 2+ rate cuts that are coming??? Yeah, not so much. I have been saying it for months now.
The S&P closed at 6,775 – down 6 pts leaving us in the same trading range we have been discussing – 6,586/6,840 as we wait for the next catalyst to determine whether we test support again or break up and through resistance. My gut says a test of the long term trendline is next – we almost kissed it on Monday, and we will attempt to kiss it again (maybe Wednesday?) – the KEY? It has to hold – if it doesn’t then it opens the door to 6,290 ish… but let’s not get hysterical –
Call me at 561-931-0190 and 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.
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Pasta and Broccoli
We need simple today….it was a long note.
For this you need: Penne, broccoli, onion, garlic, olive oil, chicken stock and fresh grated parmegiana.
Bring a pot of salted water to a rolling boil.
In a large sauté pan – add the oil and the sliced garlic – like 3 cloves. Sauté for 3 mins and then add in the sliced onion and sauté for 5 more mins.
Next – add in the broccoli – that you have cut up into bite size pieces. Season with s&p and cook for 8 mins.
Next – Add in a cup of chicken stock – turn heat to med.
Add pasta to the water. Cook for 8 mins until aldente.
When done -add the pasta to the sauté pan with the broccoli and toss. Add in 2 handfuls of parmegiana cheese and toss again. Serve immediately.
Buon Appetito.