A Wild Ride Down (and Up and Down Again) Wall Street
Did we hit bottom or was that just another bump in the road? Also: the many trade-offs (and rumors) of tariffs and watch Apple roll (down).
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Hellraiser
Walking out on another stage
Another town, another place
Sometimes I don't feel right
Nerves wound up too damn tight
Don't you tell me it's bad for my health
But kicking back don't make it
Out of control, I play the ultimate role
Don't know how to make it
- John "Ozzy" Osbourne, Ian Fraiser (Lemmy) Kilmister, Zakk Wylde
- Ozzy Osbourne (1991)
- Motorhead (1992)
The Wild Side
Monday morning was probably one of the most volatile few hours that I have had to work through in quite some time. Sure, volatility is much quieter now, due to the lack of human participants, but the price swings and even the trading volumes have been simply gigantic. Stocks sold off fairly hard to start the Monday session as tariff-related concerns continued to hang over the global marketplace. North American stocks opened on Monday with Asian and European stocks having already traded sharply lower.
Then came the rumor that someone must have started for some reason. Never like to think about that. The idea that the Trump administration might implement a 90-day pause ahead of moving forward with the announced schedule of tariffs on global trading partners made its way around Wall Street and was even amplified by the financial media. The Trump administration denied the report and called it "fake news" but somehow, the rumor had made it into the news cycle without having been confirmed.
Hence, a sharp selloff turned into a significant rally and then back into a selloff. This went back and forth for several hours until stocks settled down in the afternoon. Treasury debt securities were far less volatile. U.S. sovereign notes and bonds opened on strength and proceeded to sell off over the balance of the session. The U.S. Ten-Year Note paid just 3.9% early on Monday. As I work on this piece, I see the Ten-Year yielding 4.18%.
There Was Plenty of Hard News
At a meeting in the Oval Office with Israeli Prime Minister Benjamin Netanyahu, President Trump mentioned that tariffs were "very important" to his economic plans, but that he was open to negotiation. The president said, "There can be permanent tariffs and there can also be negotiations because there are things that we need beyond tariffs."
From that same meeting, Netanyahu said, "We will eliminate the trade deficit with the United States. We intend to do it very quickly. We think it's the right thing to do and we're going to also eliminate trade barriers." Trump added, "We have many, many countries that are coming to negotiate deals with us, and they're going to be fair deals, and in certain cases, they're going to be paying substantial tariffs."
On Top of That...
The European Union has reportedly offered to bring tariffs on U.S. industrial autos and other goods down to 0%. Pres. Trump was apparently not impressed. The president commented, "The EU has been very tough over the years. It was, I always say, it was formed to really do damage to the United States in trade." The president added, "We have a deficit with the European Union of $350 billion -- it's going to disappear fast."
Japan has also made overtures to which the Trump administration seems more receptive. On Monday, President Trump told Japanese Prime Minister Shigeru Ishiba that his nation would have to "open up" to the import of U.S. goods. While no one thinks that negotiations with Japan will be anything other than tough, the administration has assigned Treasury Secretary Scott Bessent to take the lead on those talks which is encouraging. Bessent seems a bit more pragmatic than do tariff hardliners Peter Navarro (Senior Counselor to the President on Trade) and Commerce Secretary Howard Lutnick.
So, Has the Stock Market Bottomed?
That may be wishful thinking. While it is quite the achievement in itself to get Israel, the EU and Japan to the table in an effort to make concessions so quickly, the U.S. is still a long way from making serious deals with any key trading partners. While deals still have to be worked out with both Canada and Mexico, tensions between the U.S. and China appear to have worsened. China has already responded to the president's "reciprocal" tariffs with their own "reciprocal" tariffs and the president has already threatened to go well beyond those initial reciprocals as his response to China's response. That sounds a lot like a trade war from where I stand.
On that matter, BlackRock BLK CEO Larry Fink spoke from the Economic Club of New York. Fink said, "When you see a 20% market decline in three days, obviously, it has significant impacts, and the ripple effects of potential tariffs is going to be long-standing." Fink was quick to add... "But I would say in the long run this is more of a buying opportunity than a selling opportunity."
Before happily deciding that the CEO of the world's largest asset manager (roughly $11 trillion under management) thinks that this is a better time to buy stock than sell, Fink made sure that he mentioned that stocks "could fall another 20% from here" and that "most CEOs I've talked to would say we are probably in a recession right now." Hmm...
Marketplace
On Monday, the S&P 500 gave up 0.23%, closing in the middle of the day's range. The Nasdaq Composite gained 0.1% on the session, also closing in the middle of the range. So, not much happened? At least after the morning's dust had finally settled? Not so fast. On the plus side, The Philadelphia Semiconductor Index gained 2.7% as the KBW Banks gained 0.96%. But the Dow Transports were slapped around for a loss of 1.34%. Are we in a recession? The Dow Transports have posted seven consecutive weekly losses and are now working on an eight. On top of that, the Russel 2000, S&P 400 and S&P 600 all closed between 0.92% and 1.36% lower.
Nine of the 11 S&P sector SPDR ETFs closed in the red on Monday, led lower by the REITs XLRE at -2.14% as yields ran higher. Growth was in vogue on Monday as Technology XLK and Communication Services XLC were the two of these funds to close in the green. I thought it interesting that the Semis closed higher, the Dow Jones US Internet Index closed higher, but the Dow Jones U.S. Software Index did not join the party.
I thought it notable that Sarge names Rocket Lab USA RKLB, Palantir PLTR and SoFi Technology SOFI closed out Monday up 7.03%, 5.17% and 3.03% for the day. As a matter of fact, the top eight most heavily weighted stocks in the Sarge-folio all closed in the green on Monday as at least some significant ground lost over recent days had been made up.
If you've been with me on these trades, this morning, they are all trading nicely above where we added on Thursday and Friday. Do not be afraid to trade around one's core positions and take short-term profits in times like this. That is how we manage risk and that is how we to some degree, mitigate paper losses when those core positions take their lumps. (Not actual paper loses as all of these positions have lower average points of entry, but you know what I mean.)
Breadth
Losers beat winners by a rough 15 to 4 at the NYSE and by more than 2 to 1 at the Nasdaq. Advancing volume took a 34.3% share of composite NYSE-listed trade, as aggregate trade across those names contracted slightly from Friday's levels. Advancing volume took a nearly impressive 49.9% of composite Nasdaq-listed activity as aggregate trading volume increased by 13.1% from Friday's total.
Though several indices traded lower on Monday, the Nasdaq Composite did not, and NYSE-trading volume contracted. For those looking to confirm the bearish change in trend initiated on Thursday and Friday, Monday would be the first day of a necessary pause that would be required in order to do so. This pause can last anywhere from a single day to several days. We would then need to see a day of confirmation for the bearish change in trend to be confirmed as fact and investing behaviors would have to be adjusted further.
Apple Rolls (Off a Table)
The Wall Street Journal reported on Monday that Apple AAPL was seeking to quickly move some iPhone production to India from China in an attempt to circumvent the now high cost of doing business in China. This is being done as Apple CEO Tim Cook seeks to gain an exemption from these tariffs as Cook had been able to do during President Trump's first term.
Chinese exports to the U.S. will face a tariff of at least 54%, but possibly as much as 104% once all tariffs that have been threatened by all sides are actually implemented. Goods imported to the U.S. from India will face a 26% tariff. Analysts are expecting this trade war, if prolonged, to negatively impact Apple's 2025 earnings by more than 25%.
Economics (All Times Eastern)
06:00 - NFIB Small Biz Optimism Index (Mar): Expecting 101.3, Last 100.7.
08:55 - Redbook (Weekly): Last 4.8% y/y.
4:30 p.m. - API Oil Inventories (Weekly): Last +6.037M.
The Fed (All Times Eastern)
2:00 p.m. - Speaker: San Francisco Fed Pres. Mary Daly.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: RPM (.50)
After the Close: CALM (10.91)
At the time of publication, Guilfoyle was long RKLB, SOFI, PLTR equity.
