Things you need to know.
- Soft and Hard Data – Mixed reports create Mixed results.
- Earnings continue to show mixed results – some guide, others don’t.
- Lots of Hard data today.
- Tech Earnings start tonight.
- Try Apple Pie.
So, we got 2 interesting economic reports yesterday that did NOT suggest to me an economy going off the rails at all…. but maybe I’m missing something….so let’s talk economic reports.
The JOLTS report (Job Opening & Labor Turnover Survey) came in at 7.192 million vs. the expectation of 7.5 million, the Quits Rate came in at 2.1% vs. last month’s 2%…. OK – so what? Well – the report has mixed implications and depending on who you are, you will either see it as bullish or bearish….
It’s BEARISH if – The sharp decline in job openings (310,000 fewer than expected) suggests cooling labor demand, potentially signaling economic slowdown or caution among employers. Or if fewer job openings reduce wage pressures, and if paired with economic slowdown fears, it might dampen consumer spending, which drives much of the economy.
It BULLISH if – A weaker JOLTS report increases the likelihood of Federal Reserve rate cuts, as it suggests the labor market is cooling, potentially easing inflation concerns or if despite the drop in openings, quits rose to the highest since July, indicating workers still feel confident enough to leave jobs voluntarily. This resilience could support consumer spending and economic stability.
In the end – My guess is that the market action is viewing the weaker JOLTS report as mildly bullish in the short term, primarily due to the expectation of a Fed rate cuts, which could support equities and bonds. However, the bearish undertone of a cooling labor market and potential economic slowdown warrants caution, especially if confirmed by other data like the upcoming ADP & NFP reports which start today….
And then we got –
Retail Inventories – which surprised everyone…..coming in at -0.1% vs. the expectation of +0.4%….and that suggests a decline in retail inventories and whether that is good or bad depends again on context.
It could be GOOD because a drop in inventories often indicates robust sales, as goods are moving off shelves faster than retailers can restock – suggesting a healthy consumer. It could also be GOOD because retailers may be intentionally keeping inventories low to avoid overstocking, especially amid uncertainties like tariffs or trade disruptions.
Now, on the other hand, it could be BAD because a decline in inventories could signal challenges in restocking due to supply chain disruptions, potentially worsened by tariffs or trade policies. Or it could be BAD if the drop is due to retailers deliberately reducing stock because of weaker expected demand, indicating caution about future consumer spending, potentially foreshadowing economic weakness. (think Self-fulfilling). Finally – it could be BAD because persistent inventory drawdowns without replenishment could strain retailers, especially smaller ones, leading to reduced operations or closures if operating leases and fixed costs become unsustainable.
In the end – the negative retail inventory report leans positive in the short term, likely reflecting strong sales and cautious inventory management.
And with that- some investors and traders added fuel to the fire betting ‘it’s all good’ and that corporate America will weather the storm (that’s me), while other investors and traders are betting on a rate cut (that’s NOT me) – so either way – stocks rallied yesterday…the Dow up 300 pts or 0.75%, the S&P up 33 pts or 0.6%, the Nasdaq up 95 pts or 0.6%, the Russell up 11 pts or 0.6%, the Transports up 15 pts or 0.1%, the Equal Weighted S&P up 38 pts or 0.6% while the Mag 7 Index added 130 pts or 0.6%.
Now interestingly enough no one paid any attention at all to the weaker Consumer Confidence report that came in at 86 vs. the expectation of 88 and well below last month’s read of 92.9….Now look – the index was weak – no two ways about it – and the Expectations Index (another sub read) was even weaker at 54.4, 12 pts below last month and well below the threshold of 80 – which typically signals an imminent recession and that just suggests a deep pessimism about future income, business conditions and employment and all this is driven by fears of tariff uncertainty. So, either they ignored it OR they are using it as a reason to tell JJ to CUT rates immediately….and a rate cut would support a rally in stocks…. Capisce?
Now, I have to be honest – the confidence report and the expectations index is what you call ‘soft data’ (think qualitative – opinions & perceptions) while the other reports are ‘hard data’(think quantitative – based on measurable metrics) that reflect actual economic activity or results – NOT opinions.
Just so you know – I’m in the HARD data camp. I’m not deciding on buying stocks based on someone else’s opinions – I have my own….and my opinion is we’re not getting a rate cut right now and the economy is not going off the edge and I am still a buyer of stocks. Not haphazardly – very methodically.
Remember – all of those Harvard educated guys (supposedly the smart guys) have been predicting a recession ever since the yield curve inverted in April 2022- in fact they all said ‘the inversion tells us that a recession is 16 – 18 months away’ which would have been the summer of 2023….Yeah! How’d that work out? No recession.
Now look at some point there WILL be a recession, and maybe it is now and if it is – then NOW is the time you WANT to buy stocks….because by the time the NBER tells us we had a recession – it has already HAPPENED (there is a significant lag period) – we lived it and are usually on the other side already, which is why you WANT to own stocks going into the recovery because buying stocks ‘ON SALE’ is always better than buying stocks that are not on sale. Remember, it’s like that dress – you’ll buy it at full price if you must, but you’ll buy 3 of them (in different colors) when they go on sale!
So, there are 4 types of buyers….. Investors like me who are bullish in America and buy stocks for the long term. There are FOMO (Fear of Missing Out) buyers (ones who are not sure if they are committed or not), then there are buyers that hit the sell button last month who are now trying to get back in and then there are ‘The Short’ buyers, the ones covering their short bets – that keep squeezing ‘their boys’ as stocks rally. Which one are you?
On the earnings front – KO stayed the course and found little reason to throw a fit over tariffs – it closed up 0.8% at $72.35 leaving it up 16% ytd. Both GM and JBLU ‘suspended’ their guidance – GM also halted their buyback program, – GM ended the day -0.7% and is down 12% ytd while JBLU added 2.7% to it’s price but is still down 46% ytd….HON raised their forward guidance and investors rewarded management by taking the stock up 5.4% leaving it down 6.3% ytd, all while UPS beat the estimates, refused to offer any updates about the future, announced they are cutting 20k jobs and closing ‘dozens’ of facilities leaving the union to threaten ‘one HELL of a fight, if they violate the contract’….the stock closed down 0.4% and is down 23% ytd…. Should I go on? I don’t think so, you get it, right? It’s a MIXED bag….
Today starts the hyperscaler results…. MSFT (after mkt), META (after mkt), AMZN (after mkt on Thursday) & AAPL (after mkt on Thursday). Yesterday we discussed the this…. I’ll recap – tariff and trade agreement uncertainty has been front and center for these stocks and the markets – so these issues will be top of mind as investors, traders and algo’s anxiously await the results post the close of trading…. Expectations are for generally strong results and if so, then watch out…..because these names are still trading below levels seen on Liberation Day and my assumption is that the algo’s will go nuts in the post market IF they surprise. Cloud spending, digital ads and the ongoing AI Tech Revolution are all KEY. Additional stock buyback announcements would only sweeten the pot. And if these guys were going to disappoint – they would have ‘pre-announced by now’.
Bonds rose again yesterday and that continues to put pressure on rates…. The 2 yr is now yielding 3.65%, down 5 bps yesterday, while the 10 yr is yielding 4.17% also down 5 bps yesterday.
Gold gave back $18 to end the day at $3,329/oz and this morning it is down another $50 – slicing right thru $3300 and you know how I feel – A break below $3300 – will take us to $3200 fairly quickly. (trendline support is at $3,100) And if those hyperscalers report what I think they will – Gold will see $3200 before the ink dries….
Oil lost $1.90 or 3% yesterday…..this on the back of what oil traders perceived to be negative economic data – think JOLTS, Retail Inventories and Consumer Confidence. The API reported that US Crude Stockpiles rose by 3.8 million barrels and that ‘suggests’ waning demand – I think it suggests an oversupply.
We can also point to all of the recent talk about new nuclear energy plants – that will reduce the NEED for oil to supply energy…. Both CEG & BWXT added 0.7%, DUK + 0.85%, NEE +1.6%, D +1.6% all are building new nuclear reactor projects.
In any event – I have been saying that I thought $60 was a key support level……should we fail to hold it, then we will test the lows of April that took us down to $55….Overnight we failed to hold it – and traded down to $59.20 – and are now bouncing between there and $60. If they continue with the global economy weakening/waning demand/oversupply theory – and if they push the renewable energy/nuclear option – which is gaining all kinds of speed – then $50 oil would not be out of the question at all. So, sit tight – I think we see $50 before we see $70.
This morning – Dow futures +30, S&Ps are down 8, Nasdaq – 60 while the Russell is flat.
We are going to get a lot of HARD data today….Mortgage Apps, ADP employment (exp of +130k new jobs), 1st qtr. GDP (exp of -0.2% down from +2.4% in the 4th qtr. – but we KNOW that), Employment Cost Index of +0.9%, Personal Income and Spending of +0.4% and +0.6% respectively while the PCE inflation report is expected to be better as well: 0% m/m and +2.2% y/y – both measures below last month (bullish) and all of those HARD data points are not suggesting an economy circling the drain.
European markets are also confused…. Spain is down 1.4%, while Germany is up 0.6%. The Eurozone economy grew by 0.4% in the 1st qtr. – exceeding expectations, marking the 5th consecutive qtr. of growth all while the ‘soft data’ surveys are suggesting weakness ahead due to damage from the US tariffs.
The S&P closed at 5,560 up 32 pts…Expect the markets to be on ‘edge’ today as we all await the hard data and more earnings, but specifically the ones after the bell…..
Expect markets to churn – back and forth as we repair the damage we sustained over the past month – it will continue to respond dramatically to any trade news…. While the tone is better, we know how fast that can change…..so stick to your plan and remain resilient. We remain in the 4835 (lows of April) / 5658 (trendline resistance) trading range. Feel free to call me to discuss.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
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.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
It’s time for APPLE Pie…..(see how I did that?)
Ingredients
For the Pie Crust – go out to the store and buy a Pillsbury pie crust…(make it easy on yourself).
Now – make the filling…. Peel, core, and slice apples into ¼-inch thick slices. Place it in a large bowl. Add sugar, flour, lemon juice, cinnamon, nutmeg, and salt. Toss gently (careful not to break the apples) to coat evenly. Set aside.
Preheat oven to 375°F. Place a baking sheet in the oven to heat up.
Pour the apple filling into the pie crust. Dot with small cubes of butter.
Place the top crust over the filling. For a solid crust, drape it over, trim excess, and crimp edges to seal. Cut 4–5 slits in the center for steam vents. For a lattice, cut it into strips and then weave the strips over the filling and crimp edges.
Brush the top crust with egg wash and sprinkle with coarse sugar.
Place the pie dish in the oven on the preheated baking sheet. Bake for 50–60 minutes, until the crust is golden brown, and the filling is bubbling.
Let the pie cool on a wire rack for at least 2 hours to set the filling.
Slice and serve warm with vanilla ice cream and watch you AAPL stock soar!
Buon Appetito
