Things you need to know.
– Mexico and Canada suddenly come to the table! Imagine that?
– Stocks while lower – did take back most of the losses.
– Oil up, gold up, mixed bonds.
– Overnight XiXi – threatens tariffs on Trump, futures mixed.
– Try the Simple Dover Sole
Stocks got slammed early yesterday morning in the usual ‘shoot first, ask questions later’ move – after news hit the tape that Trump hit Mexico, Canada and China with varying tariffs (something that the market knew was going to happen). In the pre-market, stocks around the world were deep in the RED, the VIX surging by 20%, and the moment the bell rang at 9:30 – the bleeding started….the Dow down 800 pts, the S&P down 100, Nasdaq, Russell, Transports, and the Equal Weight S&P followed suit. Individual ‘large cap names’ names getting clobbered – down 3%, 5% & 7% ….as the algo’s had a stroke – apparently never believing that Trump would follow thru. Were they not listening to the rhetoric over the past 7 months? And what about Mexico and Canada – did they think it was just words? Well, team – welcome to the NEW administration, that is taking NO prisoners….
As the sun rose across the Northern hemisphere – the ground shook….and woke up current Mexican President Claudia Sheinbaum- Pardo and lame duck Canadian Prime Minister Justin Trudeau…..25% tariffs on all imports coming from these two nations and that caused both of them to wet their pants….. – Suddenly the phone was ringing off the hook at the WH, everyone wanting to ‘discuss’ the tariffs and play ‘nicey nice’. Stocks continued to decline and then Claudia takes to Twitter announcing that she had a ‘very good conversation’ with Donny and that she suddenly found it advisable to send 10k troops to the border to stop the insanity that has been going on for 4 years….and Donny responded by saying that he would DELAY any tariffs on Mexico for 30 days….this gives her a chance to make good on her promise and stocks stabilized and started to take back the early losses….The question now, What happens if the ‘cartels’ force her to ‘change her mind’? Because who is kidding who? She does not run that country.
Then we got word that Justin was on the calendar for a 3 pm call, and stocks reacted again by taking back even more losses – the Dow actually going positive for a bit…. I was on with Liz Claman at 3 pm and we discussed this very point. See the clip here –
https://video.foxbusiness.com/v/6368217156112
In any event – while many view the tariffs as a negotiating tool, there are others that view it as the start of a trade war and that is what is causing the negative reaction…..some of the big banks warning us that a long drawn out process could create stagflation here leading to a decline in corp profits of about 2.5% while causing a market decline of about 5%, which isn’t really anything to get your panties in a bunch about – the S&P is already down 2.6% off the high, so another 2.4% would take us to 5840 ish on the S&P….just a bit below the intermediate term trendline at 5886. Hardly a disaster.
By the end of the day though, stocks did end lower as investors, traders and algo’s remain a bit uncertain about what happens next. Some calling it a ‘WIN’ vs. what it looked like in the morning, but I’d say – ‘Not so fast…’ The Dow lost 122 pts or 0.3%, the S&P down 45 pts or 0.8%, the Nasdaq lost 235 pts or 1.2%, the Russell down 30 pts or 1.3%, the Transports gave up 380 pts or 2.4% while the Equal Weight S&P gave up 58 pts or 0.8%.
Now overnight – 10% tariffs went into effect in China and XiXi responds immediately by imposing tariffs on some US goods – trying to avoid further escalation between the two countries. They put a 15% tariff on US energy imports and a 10% tariff on American oil and agriculture equipment – they are opening up an investigation on GOOG over anti-trust and data privacy concerns and in an odd way, they blacklisted PVH (the old Phillips Van Heusen that now represents Calvin Klein and Tommy Hilfiger) – they make clothing and accessories. But there is more to that story – PVH has had Human Rights controversies, and they have (apparently) made controversial statements about China’s leadership…. something that XiXi does not take lightly, so there you go! Latest word this morning is that the US and China are due to have conversations later today and this week, so let the games begin. BTW – PVH is quoted down $4 or nearly 5% while GOOG is up 0.6%.
In any event this whole thing remains a very fluid situation that will cause some to remain anxious while others will use any significant weakness as an opportunity to put money to work….….
Of the 11 S&P sectors – 6 ended the day HIGHER while 5 ended the day lower…. Energy led the pack up rising by 0.6%, Utilities +0.55%, Consumer Staples and Healthcare up 0.4%, Communications + 0.2% while Basic Materials gained 0.1%. On the downside – Consumer Discretionary and Tech plunged by 1.3%, Industrials lost 1%, Financials down 0.4% while Real Estate lost 0.2%.
Other sectors saw homebuilders lose 2.5%, Retail down 1.75%, Airlines -1.4%, Disruptive Tech – 1.7%, The Growth Trade – 0.8%, Value Trade – 0.5%, Semi’s – 1.8%, Cybersecurity – 0.6%, Aerospace and Defense – 0.35%.
As I pointed out in yesterday’s note – the contra trades benefitted – the DOG +0.3%, PSQ + 0.8%, SH + 0.7%, VIXY + 2%, SPXS + 2.2%, SARK (the contra of Disruptive tech) +3.2%. The VIX which was up 20% in the pre-mkt ended the day up 13% – reflecting the moves that came out of the WH. Overnight, the VIX surged again, but at 6 am – it is flat on the day – suggesting that the tone may be calming down a bit….which does not mean that stocks will rally, it just means we may not see the panic in trading that we saw yesterday. In fact – US futures are all lower, but not substantially…. We’ll come back to this…
Oil rose yesterday on all of the excitement – WTI rising to a high of $75.18 before closing at $73.16 up 70 cts vs. Friday’s close. This morning oil is under pressure because of the China tariffs – sending it down $1.16 to $72. A look at the chart shows one trendline at $72.05 while another one is at $71.50…. Let’s see if this holds, if not, oil could test the $70 level fairly quickly. Now, I think the path of least resistance is lower – but that will depend on what we hear over the next few days concerning the tariff talks.
Gold rose by $15 yesterday because of all the chaos….as investors ran for the ‘safety trade’. Gold traded up to $2870 in the early morning before closing at $2850 after the panic subsided and cooler heads prevailed. This morning, gold is down $14, leaving $2800 as support. My sense is that at the moment – we have seen the highs, unless of course the narrative changes dramatically again.
Eco data today is all about the JOLTS report- Job Openings & labor Turnover Survey – which is expected to show 8 million openings – down from 8.1 million last month. Now, look at the Quits Level – it is expected to be 3.1 mil up from 3.06 million. Now, The JOLTS Quit Rate refers to the percentage of workers who voluntarily leave their jobs in a given month, it is considered a key indicator of worker confidence in the labor market. A higher quit rate (which is what is expected) means that workers feel confident that they can find a BETTER job, suggesting a STRONG labor market with better wages. This is a good indicator but goes to my point that the FED has NO reason to cut rates any time soon. Because if this is true, then the labor market is healthy and robust – hardly a reason to slash and burn rates – Capisce?
We are also due to get Factory orders down 0.8%, and Durable Goods Orders down 2.2%. Tomorrow brings the ADP report and Friday brings the NFP report…. That is expected to show an increase of 170k new jobs while unemployment remains at 4.1%.
And the earning parade continues…. Yesterday we had a 100% hit rate yesterday…. everyone that reported – BEAT the estimates. The big one was PLTR while they beat the EPS, they gave robust forward guidance saying that their growth will be fueled by ‘UNTAMED’ AI demand (not sure about you, but there is something sexy about that, no?) In any case -the stock traded up 18% in the after-hours session. This morning it is up $16 or nearly 20% trading at $100.25.
Today before the bell includes PFE, MET, PEP, BALL, APO, EL, REGN & MRK – and they all BEAT as well…. It’s like a never-ending romantic comedy…. Everyone is happy! After the bell we will hear from 20 more and they include AMD, MOD, SPG, SNAP, AMGN, OSCR, GOOG, CMG and more…. I would say its AMD and GOOG that are the ones to watch.
So, US futures are churning….at 7 am – the Dow is down 115, the S&P’s down 5, the Nasdaq is now UP 11 pts while the Russell is down 2. Investors need to remain vigilant, while the tone is better today than it was yesterday, we know how that can change on a dime – in either direction. Which is why I keep telling you, make your shopping list, know what you want, take advantage of weakness in good names when it is nothing more than ‘panic’ – yesterday was a perfect example of that.
European markets are mostly higher – not by much but they are up…. Italian car maker Ferrari posting a 21% uptick in full year profits while making positive forward guidance for 2025. Europe remains on alert as they monitor any new developments surrounding tariffs and trade policy that may come out of the WH. There are no eco data reports, so the focus is on earnings.
The S&P closed at 5994 – down 45 pts. Yesterday we breached trendline support at 5994 to trade down to 5923 – just 30 pts away from testing intermediate trendline support at 5886 before taking most of it back – ending the day on the north side of the trendline. Yesterday’s move – did cause some internal damage that will need to be repaired, and we will do that over the next couple of weeks as the headlines become clearer….
Remember, this is not the time to fall asleep – and it is not a time to chase…..make your list and get ready to pounce, remembering that you are invested so if the market moves up, you are participating….and if it moves lower, you can put more money to work.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Quick and easy Dover Sole
This dish comes together in 20 mins…add in some steamed broccoli and a salad and you are done.
For this you need: 1 lb. of dover sole, flour, lemon juice, capers, butter, white wine and s&p.
Begin by rinsing the fish and patting dry.
Season the flour with s&p, then dredge the fish in the flour.
In a large sauté pan – melt the butter, when hot, add the fish and fry – 3 mins per side (depending on thickness). Remove the fish and place it on a warmed plate.
Now – melt more butter, add the capers, the juice and the white wine. Let the wine burn off a bit – taste and adjust seasoning.
Place the fish on the plate, drizzle the sauce over it and serve with steamed broccoli and a salad. Simple, quick and delish.
Buon Appetito.
