Things you need to know
- Stocks continue to advance, S&P, Nasdaq & Russell all in overbot territory.
- Dow and Transports are not confirming the push higher.
- Eco data remains mostly strong.
- Oil lower, gold lower, VIX lower and bonds steady.
- Try the Pan Seared/Roasted Thighs
Stocks wrapped up another week of gains and yes, the headlines feel great – the record-breaking run drove stocks to new highs in their longest weekly advance since 2024….…Hopes of a deal to end the Iran conflict and strong earnings were the drivers …. But let’s be clear – Earnings have been strong and the narrative is bullish, but under the hood there are things to consider.
On Friday, the Dow lost 152 pts, the S&P added 22 pts, the Nasdaq was up 222 pts, the Russell gained 13 pts, the Transports – like the Dow lost 195 pts, the Equal Weight S&P lost 21 pts, while the Mag 7 added 363 pts.
That divergence (Dow and Transports not confirming) is your tell. This is not a broad-based ‘melt-up’ — this is mega-cap tech, AI, and growth doing the heavy lifting. The Dow and Transports lagging – suggests rotation, maybe a bit of fatigue, maybe managers locking in gains after a big run – I mean the Transports are up 18% ytd. And yet, here we are — six straight weeks of gains.
On the economic front, the data remains ‘OK’. S&P and ISM Manufacturing PMI’s both remain in the expansion zone, but inflation remains sticky – the prices paid component rising to 84.6 up from 78.3 last month and up from 58.5 in January. That is a 45% increase in the prices paid component in 4 months. (not good). Remember – prices paid are the prices that manufacturers have to pay for raw materials that they need to purchase to manufacture the products they produce.
So, the fact that this data point continues to rise gives the FED the cover to stay patient, (think NO rate cuts) which keeps upward pressure on yields. The two other data points from Friday suggest continued caution in the outlook – Total Vehicle Sales dropped to 15.9 million (down from 16.0 million – not a huge data point, but a data point none the less) and ISM Manufacturing employment dropped to 46.4 down from 48.7. Remember – 50 is the dividing line – greater than 50 equals expansion, less than 50 equals contraction, so at the moment – that reading suggests that manufacturing is in the contraction zone.
Now, it’s not bad enough to break the market or the investor psyche, but it’s not good enough to justify this kind of complacency that we are seeing, because the VIX closed at 17 on Friday. Recall, the VIX is essentially the market’s insurance policy. It reflects the cost of protecting portfolios against downside risk. So, when the VIX is below 20, it’s telling you that investors see very little near-term threat. They’re NOT buying protection. They’re NOT hedging and for me, that is a contra-indicator.
In fact — historically, when the VIX is below 20, it signals a market that’s relaxed…maybe too relaxed. Because remember, risk doesn’t disappear – it just gets temporarily mispriced and with the ongoing geo-political chaos in the Mid-East – a VIX of 17 not only suggests a mispricing to me, but it also seems to suggest an end to that chaos – and that’s where I differ. While I do think the chaos ends, I am just not sure that it’s going to end as quickly as the VIX or the market is suggesting. Thus, I am not chasing names that have surged in the past 5 weeks, but I am finding opportunities in other sectors of the market. (Remember, I own these names, and I bought more when they went on sale – but now, I am putting money to work in other sectors).
So yes — as always, you should stay invested and stay disciplined, but don’t confuse calm with clarity. Because when risk is being mispriced, that’s when you have to be the most thoughtful about where you’re putting new money to work. Of the 11 S&P sectors, I like Financials – which are down 5% ytd and Healthcare down 6% ytd. Now, certainly, there ARE plenty of other sectors to consider – you just have to do your homework.
And then there are earnings…because right now, they are clearly the engine powering this rally. So far, we’re running at about an 80% beat rate — and all the handwringing around the hyperscalers — think Amazon, Microsoft, Alphabet, and Meta Platforms — did very little to derail the excitement.
In fact, Thursday night, Apple delivered…and investors loved it — sending the stock to new all-time highs. But then came Friday morning — and we heard from Chevron and ExxonMobil. Both beat expectations…yet the reaction? Choppy. Mixed. XOM lost 1% and CVX lost 1.4%. And that tells you everything you need to know. This is a stock picker’s market. Not everything is working. Not every beat is being rewarded. Investors are being selective…rewarding quality, as they should, while punishing anything that doesn’t live up to the narrative.
And let’s not forget the geopolitical backdrop — U.S. and Iran tensions, the ongoing risks around the Strait of Hormuz, and what that all means for global supply chains and the pressure building on the global economy. Yes, headlines softened a bit on whispers of negotiations… but don’t kid yourself — this is far from over.
In fact, if you step back, you’ll see how this is beginning to play out….. because there’s a bigger game being played here. Iran has every incentive to stretch this out. Why? Because time becomes a weapon. The longer this drags on, the closer we get to that 60-day threshold under the War Powers Resolution — and that’s when Congress has to step in, debate, and potentially constrain the administration’s next move.
Now — here’s where it gets even more interesting… and more complicated.
Some members of Congress are already arguing that we’ve hit that 60-day window — that the clock started the moment U.S. forces were engaged, and a ceasefire doesn’t erase that obligation. On the other side, Secretary of Defense Petey Hegseth is suggesting that a ceasefire paused the clock, effectively buying more time.
So, which is it? As usual – it is a gray area…. Because the law is vague – which leads me to ask – Is that on purpose? Look, both sides will interpret it in a way that fits their agenda. But for the market it remains uncertain. Because if this drags on and Congress gets pulled into the fight it’s gonna get really messy… and potentially less predictable.
So, while the market is reacting to every “possible deal” headline — pushing stocks higher, calming volatility, you have to ask yourself… is anything actually being resolved? Or is this just being delayed?
Because if you look under the hood — the market isn’t reacting to resolution… it’s looking through the uncertainty. It’s betting that this all gets cleaned up, that oil comes down, that supply chains normalize, that the Fed doesn’t have to respond.
But reality says something different. The Strait isn’t fully open. Shipping is still disrupted. Oil isn’t collapsing. And Iran? They are not rolling over…. So, stay awake.
Now flip over to bonds, because that’s where the truth usually lives. The 2 yr is yielding 3.877%, down from 3.94%, 10 yr is sitting at 4.36% down from 4.4%, while the 30 yr is yielding 4.95% down from 5.004%. The bonds are holding firm, that the quiet warning. While equities are celebrating, the bond market is essentially saying – not so fast cowboy!. The Fed is still in this fight, inflation isn’t dead, and “higher for longer” remains very much alive.
Oil is trading at $102.85 this morning…. after trading as high as $1l0 last week. This after the headlines continue to suggest that Iran floated some kind of negotiation proposal. And of course, the algos read that headline and reacted instantly. But let’s not kid ourselves — nothing is resolved. The Strait of Hormuz is still closed, supply is still tight, shipping costs are still elevated, and the geopolitical backdrop hasn’t improved. But over the weekend – On Truth Social – Trump said that the US will assist in guiding ‘neutral ships’ that have been trapped in the Strait. He also went onto to make it very clear……
“If in any way, this humanitarian process is interfered with, that interference will, unfortunately, have to be dealt with forcefully.”
Iran’s national security responded this way on X – “The management of the strait and the gulf won’t be dictated by Trump’s delusional posts.”
Welcome to diplomacy in the 21st century…. It’s ridiculous. But it is what it is.
Gold is telling you something too – This morning it is trading at $4,543 – down $70 – not acting like a safe haven at all…. …..Why? Because yields are rising and the dollar is firm. So instead of acting like a safe haven, gold is getting pressured by higher real rates. As discussed – gold remains in the $4,280/$4,760 trading range, but the path of least resistance appears to be lower.
Earnings today is more about confirming the narrative. We will hear from Palantir, Vertex Pharma, Cummins Engine, ON Semiconductor, Diamondback Energy, Williams Companies and BioNTech – these companies represent Tech/AI/Software, Healthcare, Industrials, Semi’s, Oil Exploration & Production, Nat Gas, Midstream Pipelines, and Biotech.
Eco data – includes Factory Orders, Durable Goods and Capital Goods Ordered and Shipped. All are expected to be unchanged or better than last month. (That’s a positive).
European markets are lower. The UK is closed for a holiday.
US futures are getting smushed….The Dow -375, S&P’s -42, Nasdaq -150 while the Russell is -35.
The S&P closed at 7,230 – up 21 pts…. We are now 6% above the short-term trendline at 6,858, but before we test that we will retest somewhere in the 7,000/ 7,100 level. Should we test that and hold, that would be seen as a positive, suggesting once again that investors are focusing on the data and not on the chaos. If we fail to hold – then the short-term trendline would be next. Remember – the S&P, Nasdaq, Russell & Mag 7 are all still in OVERBOT territory, so this morning’s pullback should not surprise you.
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
This media segment contains general market commentary based on publicly available information and is provided for informational and educational purposes only. It is not intended as, and should not be construed as, investment advice or a recommendation to buy or sell any security.
Any references to specific securities, asset classes, market levels, technical indicators, or sectors are provided solely for illustrative purposes to support market commentary. Such references do not represent recommendations and should not be interpreted as reflecting the performance of any SlateStone Wealth, LLC investment strategy, portfolio, or client account. Past performance of any referenced security or index is not indicative of future results.
Forward-looking statements, including projections of market levels, technical support or resistance ranges, economic outcomes, or potential market reactions, are based on current opinions and assumptions and are subject to change without notice. Actual results may differ materially. Investing involves risk, including possible loss of principal.
Discussion of market opportunities, valuation compression, or sector rotation does not imply that any particular investment is suitable for any specific investor. Investment decisions should be made based on an individual’s objectives, financial situation, risk tolerance, and time horizon.
The firm and its clients may hold positions in securities discussed, and such holdings may change at any time without notice.
Advisory services are offered through SlateStone Wealth, LLC, a registered investment adviser. Registration with the U.S. Securities and Exchange Commission does not imply a certain level of skill or training. An advisory relationship is established only pursuant to a written agreement. For additional information regarding our services, fees, and conflicts of interest, please review our Form ADV Part 2A, available at www.adviserinfo.sec.gov or upon request.
If you contact our firm to request a consultation, any discussion would be preliminary in nature and would not constitute personalized investment advice unless and until an advisory agreement is executed.
Pan Seared/Roasted Italian Thighs
Had this last night for dinner – delicious.
For this you need: Thighs on the bone, skin on, seasoned breadcrumbs, s&p, eggs, butter, olive oil, cherry tomatoes and baby potatoes.
Preheat your oven to 350 degrees.
Begin by seasoning the thighs with s&p.
Make an egg wash – scramble 4 or 5 eggs in a bowl.
Spread the seasoned breadcrumbs out on an aluminum pan. Yesterday, we used Panko breadcrumbs.
*Seasoned Breadcrumbs – s&p, onion powder, Garlic powder, fresh grated parmegiana and Pecorino Romano cheese.
Now – dip the thighs in the egg wash and then roll in the breadcrumbs.
Now – heat up a large frying pan – add a dollop of butter and some olive oil. When hot, add the thighs and brown on all sides.
Now place the thighs in a Pyrex baking dish. Add the potatoes and the cherry tomatoes and place in the oven – covered for 30 mins. Then uncover and cook for another 15 mins or so.
Serve with your favorite vegetable. We had broccolini.
Buon Appetito