Things you need to know.
- Stocks rally but was it a head fake?
- Early headlines suggest progress, but were they Bull….
- Overnight headlines suggest ‘not so much’.
- China says they won’t come to the table until Donny says, ‘I’m sorry’.
- Brace yourself for more volatility.
- Try the Mediterranean Salmon
My appearance yesterday with Stuart Varney on Varney & Co on Fox Business
https://app.box.com/s/9ku0maloaipiz0sks0wxk2ghvczppqry
So investors, traders and algo’s reacted to the headlines (again) taking stocks higher for two days in a row…..as it appeared that trade talks were in fact moving along……that Donny was reconsidering his ‘harsh’ stance, promising to ‘play nice’ with both China and Fed Chair JJ Powell, all while Scotty (Treasury Secretary Bessent) appeared to confirm this by suggesting that there was some ‘flexibility’ in trade negotiations with China……and market participants loved it…..jumping in with both feet as many are finding lots of opportunities in some really good names….BA, GS, AXP, MSFT, AMZN, CRM, AAPL, CAT, IBM, NVDA, HD, UNH, NOW, KLA, CRWD, GRPN……
And so while buyers were active – remember that it was the sellers that controlled the action…..They see the news, they see the reaction and so they ‘back off’….leaving the buyers no choice but to ‘pay UP’ and UP they did – by the end of the day the Dow gained 420 pts or 1.1%, the S&P up 90 pts or 1.7%, the Nasdaq added 407 pts or 2.5%, the Russell up 29 pts or 1.5%, the Transports added 142 pts or 1%, the Equal Weighted S&P up 64 pts or 1% while the Mag 7 stole the show – rising 715 pts or nearly 3.5%…..
Now, longer dated bonds advanced on the news that JJ isn’t going anywhere – the TLT (20 yr bond etf) gained 1%, the TLH (10 – 20 yr bond etf) added 0.75%, while the shorter duration end of the curve ended the day flat…the BSV – tracks the 1 – 5 yr gov’t & corp investment grade bonds while the SHV tracks US treasury bonds with 1 – 12 month maturities. 2 yr yields are now at 3.82%, while the 10 yr is yielding 4.34%.
Oil – which is up 16% since early April – feels a bit exhausted…..over the past 3 days – we tried to continue to push higher but ran into resistance at $65….which is below the trendline at $66.50 but my sense is that the recent push higher just ran out of ‘gas’ – (see how I did that?)….
The idea that trade deals with China as well as 2 dozen other countries is what gave oil life – is only challenged when those deals are not as secure as the original headline suggested and that causes investors/traders and algo’s to ‘re-think’ the push higher. While any indication of ‘real’ deals will help support prices, this back and forth will continue until we get clarity….so for now – we remain in the $60/$65. This morning oil is trading at $62.50.
Gold – had a tough day – falling $118 to end the day at $3,300 (down 6% since the top tick at $3509 on the 22nd) – this on the idea that a trade deal or deals were within reach and that any suggestion that JJ was about to get a pink slip faded……recall – the massive move up in gold ytd (30%) – was all due to the global uncertainty over trade and leadership causing investors to seek the ultimate ‘safe haven’ play.
Additionally, we have seen a range of emerging market central banks -India, China, Turkey, Qatar, and many of the ‘Russian satellites’ – think Moscow, Uzbekistan, Kazakhstan along with Poland, Czech Republic ‘back up the truck and load up on the precious metal’. This morning – gold is up $50 at $3,350 as ‘uncertainty’ once again slaps us across the face.
But to be clear – while stocks rose yesterday, they did not close on the early morning highs and that is because investors are not completely convinced that the latest headlines were real – some questioning whether the headlines were ‘bullish’ or ‘bullsh*t’…. Because we all know how the headlines can be ‘misleading’ causing excitement or angst….and so, while it appears to be better, I am not in the camp that this is anywhere near over yet…..
And this is confirmed this morning…US futures are under pressure…. Dow futures – 200, S&P’s down 22, Nasdaq down 100 while the Russell is down 9 pts. Asian stocks fell overnight, and European markets are trading lower in early morning trade.
Headlines out of China suggesting that yesterday’s narrative may NOT be true is now causing some renewed angst….. He Yadong – the Ministry of Commerce’s talking head- disputes the idea that they are engaged in trade talks…in fact – he made it very clear that they are not….in fact – they (China) are demanding that we revoke ALL unilateral tariffs BEFORE they even come to the table saying that Trump needs to ‘show respect’ to Xi Xi. They go on to warn of a global economic system in danger if the US refuses to cooperate causing trading partners to lose trust in the negotiations. He went on to say that ‘any reports on development in talks are GROUDLESS’! So now, you have to ask yourself – how come there is such a different perspective on this…. Why does Scotty think there is flexibility while He Yadong says absolutely NOT!
And with that US futures are tumbling….
And, again, no one should be surprised about the way the algo’s are reacting….all this says is that the uncertainty remains high…….so don’t expect the turbulence to end just yet…..While the move lower may have been overdone, it is not a surprise….remember – when the angst rises, it’s easier to hit the sell button vs. the buy button…and when the headlines suggest success, then it’s easier to hit the buy button vs. the sell button. Again, you need to ask yourself – whether the story for the stocks you own, the reason you bought them has changed. If not, then there is no need to panic, if yes, then do something about it, but understand that while the volatility is uncomfortable, the selloff has created (IMO) some greater long-term opportunities.
Now this morning we are getting results from another 20+ names….so far 9 have reported beats while 5 have missed – we are hearing more CEO’s warn of ‘uncertainty’ in forward guidance due to the ongoing tariff war….MRK lowered their profit outlook on an expected $200 million tariff hit…..Pepsi CUT their full year forecast due to the ‘uncertainty’, this on top of what we have already heard from names like UAL, WMT, etc.
So, this is why I keep saying that you need to do a ‘reality check’ and assess your portfolio – making sure that you own fundamentally strong, diversified, stable, high-quality companies that will recover much faster. Talk to your advisor and know your risk tolerance, know what you own and why you own it. And remember – dollar cost averaging and reinvestment of dividends becomes even MORE important during market drawdowns. (You buy more shares for the same amount of money!)
Yesterday’s eco data showed that Mortgage apps declined by 12.7% while Building Permits rose by 0.5%. Both Manufacturing and Services PMI’s are in the expansionary zone 50.7 & 51.4 respectively. New Home Sales jumped by 7.4% vs. the expected 1.3%…. Today’s data includes – Durable Goods, Initial and Continuing jobless claims, and Existing Home Sales – which are expected to be down 3.1%.
The S&P closed at 5375 – up 88 pts…Yesterday’s excitement only created yet another gap in the chart…..a gap that will most likely get filled today if the tone remains weak. We remain in the 4835 (lows of April) / 5658 (trendline resistance) trading range.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Mediterranean Salmon
This comes to you straight from Sicily..
For this you need: Salmon filets, shallots, garlic, onions, Gaeta olives, capers, cherry tomatoes, oregano, s&p.
Begin by seasoning the salmon with s&p.
In a large sauté pan – add in the shallots, onions, olives, capers and cherry tomatoes. Season with s&p and Oregano.
In another pan – heat up some olive oil and then sear it skin side down – flip and continue to cook.
When done – plate the salmon and then dress with the onion/caper/olive/tomato mixture.
Simple and so good.
Buon Appetito
