Things you need to know
- Dow and Transports fell the pain.
- VIX surges by nearly 8%.
- Yields up, bonds down, Oil up, gold down.
- PLTR crushed it, and the earnings parade continues.
- Try the Creamy Chicken Breasts
Good morning…. stocks came under pressure yesterday, the Dow and the Dow Transports suffered most of the damage – we’ll get to that in a moment…. ….. Let me remind you, for the past couple of weeks, investors, traders and even the algo’s have been walking around like it’s all wine and roses – stocks hitting new highs, a strong earnings season and a VIX that has been declining – suggesting complacency – (I have been beating this theme to death) – sounds like everything is just fine…Well, it is UNTIL it isn’t.
Yesterday was the reminder. This market is not operating in a vacuum. And when the geo-political narrative heats up – it hits you over the head. No need to overcomplicate it – because it’s not complicated.
The strait is still shut down, Trump threatens to ‘blow the place apart’ if Iran gets in the way of ships navigating the strait. Iran got in the way…..
Oil surged – WTI surging to a high of $107.46 – before settling at $106.30, while brent hit $115.
Rates rose – the 2-yr ended the day yielding 3.95%, the 10 yr – 4.43% while the 30-yr ended the day at 5.01% and that pushed 30 mortgage rates to 6.5%.
The VIX? That surged as much as 12.4% before settling up 7.6% to end the day at 18.28 – still in what is considered ‘calm’ – yet – maybe not so much.
And so, stocks got sold…. also recall, I did tell you in the last paragraph (yesterday) that the S&P, Nasdaq and Mag 7 were all in ‘technically’ overbot territory – so a pullback should not surprise anyone. (Technically overbot means the RSI was kissing or penetrating the 70 line).
That’s not noise. That’s the market repricing risk in real time.
Because once oil made that move? It forced the conversation right back to inflation. And once inflation re-enters the chat? Rates respond immediately. And when rates rise? Equities have no choice but to adjust (lower). And yesterday – that chain lit up like a Christmas tree.
At the end of the day – the majority of the tree was RED – with just one strand of GREEN. The Dow lost 557 pts or 1.15%, the S&P lost 30 pts or 0.4%, the Nasdaq gave up 46 pts or 0.2%, the Russell lost 17 pts or 0.6%, the Transports – like the Dow – got crushed – losing 992 pts or 4.8%, the Equal Weight S&P lost 50 pts or 0.6%, while the Mag 7 added 12 pts or 0.05%.
Now let’s talk about the elephant in the room. The situation in the Strait of Hormuz is not calming down — it’s becoming more complicated. We continue to talk about disruptions to shipping lanes, attacks on Mid-East allies tied to Iranian forces or proxies, energy infrastructure at risk, and we haven’t even talked about tanker insurance costs – that are surging, never mind the rerouting of global supply chains.
And remember – the media has been making it all about the 20% of the world’s oil – going thru the strait – but guess what?
It is SO much bigger than that…..they’re actually underselling it. Besides oil, there is LNG, fertilizers, petrochemicals, plastics, and general cargo all flowing through the strait, that Iran has essentially closed. So, this isn’t just an energy story — it’s a global supply chain story. And the longer it stays disrupted, the more that pressure works its way into prices for everything from gasoline to grocery bags. So, buckle up.
Now yes, they (Trump, Bessent, Hegseth etc.) tell us that-
“Talks are progressing, Negotiations are ongoing, A deal is close. They have no navy; they have no intel…. blah, blah, blah….”
But let’s be honest here, then why hasn’t it been resolved? Because that’s the issue. Because this market continues to trade as if every problem is solved. But in reality? It has not. I mean, who is kidding who? But let’s move on……
So why did the Dow get hit so much harder than the S&P and the Nasdaq on Monday? Simple — it comes down to composition and weighting. The Dow is price-weighted, just 30 stocks, and when high-priced names get crushed, the index feels it disproportionately. It’s just math. The names that got punished most? Consumer discretionary – 0.8%, Basic Materials – 1.4% and Industrials – 1.15%. Home Depot off 3.5%, Nike down nearly 3%, Boeing dropping 2.6%, Linde fell 2.8%, Freeport lost 1.7%.
Meanwhile, the Nasdaq barely flinched because tech does NOT care about oil the way retailers and manufacturers do.
And it wasn’t just the Industrials taking the hit — the Transports got crushed too, and that matters more than most people realize. The Transports were already down 17% from its April 22nd peak, and then Monday happened. Think about it…..
Fuel (oil) is the single largest variable cost for every trucker, every railroad, every airline in this country. When oil spikes 4-5% in a single session, their cost structure blows up, and unless they (rails, truckers and airlines) pass those costs through fast, which is nearly impossible in a softening freight environment, it goes straight to the bottom line. Old Dominion dropped 6.8%. Avis Budget fell nearly 8%, FDX fell 9.1%, UPS fell 10.5%, JB Hunt lost 4.2%.
And it wasn’t just the fuel cost shock — it was the routing problem on top of it. Ships now have to reroute around the Strait of Hormuz and that means longer voyages, more fuel burned, more delays, and a logistics chain that is getting more expensive and more complicated by the day.
But here is what you need to understand…..the Transports matter beyond just the sector itself – it goes back to Dow Theory. Charles Dow made it clear – You can’t confirm a bull market in the Industrials without the Transports confirming it. When the Industrials drop 550 points AND the Transports continue to get slammed – that’s not just a bad day. That’s the market sending you a warning about the real economy. We need to manufacture goods and then those goods have to move. When moving them becomes dramatically more expensive and more complicated, everything down the chain feels it.
Now gold – well that continues to come under pressure because investors are focused on inflation and rates, Period. And yesterday it fell by $93 or 2% to end the day at $4,520…. It remains in the $4,290/$4,770 trading range. This morning it is bouncing a bit – up $23 at $4,543.
After the bell, we heard from PLTR – and they blew the roof and the windows off the house. Revenues grew 85% – coming in at $1.63 billion vs. the expected $1.54 billion. EPS of 33 cts vs. the expected 28 cts estimate. Net Income quadrupled y/y and they RAISED their full year guidance to $7.65 billion…. The stock closed up 1.4% during the trading day, but got clocked after the bell…this morning it is down 2.6% in the pre-mkt.
Norwegian Cruise Lines – they beat but CUT their guidance – think geopolitics and rising fuel costs…. The stock got smashed down 8.6% and that dragged RCL and Carnival down as well – 2.3% and 3.7% respectively.
Today we await – ADM, DUK, PFE – before the bell while we expect AMD, PYPL, KKR, – all after the bell.
Eco data – includes S&P and ISM Services PMI’s – both expected to be in the expansion zone, New Home Sales, Building Permits and the JOLTS report.
European markets are mostly higher…..Italy up 2.2% while the UK is down 1%.
US futures are higher….The Dow +121, S&P’s +30, Nasdaq +150 while the Russell is +10. .
The S&P closed at 7,200 – down 30 pts…. I suspect we continue to churn in here as investors are once again forced to focus on the geopolitical issues. But remember – in the long term – those issues do not price stocks, they create chaos and that chaos creates long term opportunity. I am happy to discuss. Staying invested in a diversified, well-balanced portfolio is KEY. And taking advantage of price dislocations due to geopolitical chaos is also KEY.
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 Seared Chicken Breasts in a Silky Cream Sauce.
Are you tired of the same old chicken cutlets? Try this. Easy, quick and delicious.
For this you need: Thin sliced breasts, olive oil, lite cream, flour, s&p, paprika, onions, butter and parsley.
Begin by marinating the breasts in a pan with olive oil, s&p and paprika. Massage the seasonings so that the cutlets are nicely seasoned.
Now – slice your yellow onion – thin. Add to a large sauté pan with a dollop of butter. Sauté the onions for 10 min – careful not to burn – so keep the heat on med high.
Now – remove the onions and set aside. Add another dollop of butter and let it melt. Now add the seasoned breasts to the pan and brown on each side – maybe 4 mins or so. Add back the onions and mix.
**Here you could add in ½ c of white wine if you want – it is NOT necessary, but it gives it a flare. If you do, allow the wine to evaporate and then continue. **
Next add in 2 tablespoons of flour – spreading it over the breasts. Add in 1 c of lite cream. Turn heat to medium and allow it to become ‘creamy’.
Now dress with chopped parsley and enjoy.
Buon Appetito