As the Roller Coaster Continues Into Jobs Day, I Went on a Buying Spree
Call it 'Liberation Day' or call it 'Liquidation Day,' for me it was it a time to trade (Palantir, Peloton and many more added on vs. Microsoft, Nvidia and Amazon out).
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"The light was that of the full moon, of a blood red moon, which was now shining through that break in the front wall, that crack which I thought I had seen when I first saw the palace. Then only a little crack, it now widened as I watched. A strong wind came rushing over me — the whole face of the moon appeared. I saw the great walls falling apart. There was a long and stormy shouting sound — and the deep black lake closed darkly over all that remained of the House of Usher."
(The Fall of the House of Usher) - Edgar Allen Poe, 1839
Happy Jobs Day
For those of you who have already had too much fun this week, the aftermath of "Liberation Day" or "Liquidation Day" as many are now calling it, turns into March "Jobs Day." Markets were quick overnight Wednesday into the regular Thursday trading session to try to price in the Trump administration's new schedule of tariffs on many nations around the planet. Wall Street had expected a broad implementation of trade-related duties to be enacted. Financial markets were in no way prepared for the size, scope and apparent method used to create these new tariffs.
The investing public had prepared for reciprocal tariffs designed so as to perhaps equal those of U.S. trading partners and with some luck, force trading partners to reduce those barriers to trade as would the U.S. That goal would have been truly free trade or something close to it. What is in the process of being implemented appears to be designed or correlated along the lines of the size of any particular nation's trade surplus with the US. The goal here seems to be to try to re-shore as much of the former domestic manufacturing sector as possible or perhaps to bring in new manufacturing business.
As advertised, this very concept is going to be disruptive to the post-war U.S. and global economies as a trade war is now all but certain and a currency war appears just as likely. Disruption had been expected. Disruptive to this degree had not been. Markets are now trying to price in slowing to contractionary growth that could last from one quarter to as many as three or four, while simultaneously preparing for an end to the deceleration that had been the hallmark of early 2025 consumer-level inflation.
Will this force the Fed to cut short-term interest rates? Futures markets trading in Chicago seem to be pricing that in. Then again, that would mean that this Fed, under Jerome Powell would have to forsake the inflation fight. Powell speaks publicly at 11:25 a.m. ET this morning. That should be interesting, not to mention... algorithm-provoking.
To say that markets were caught off guard would be an understatement. The S&P 500 gave up trillions of dollars in market capitalization on Thursday, while capital flowed into safe haven assets. No, investors did not turn to gold and silver on Thursday. They turned away from the dollar as well. Investors did buy the staples and did try to load up on Treasury debt securities.
Marketplace
On Thursday, as U.S. dollar valuations dropped, the yield on the U.S. Ten Year Note fell 15 basis points to 4.05%, as the U.S. Two Year Note paid 3.71% (-19 bps) by day's end. As I work through the zero-dark hours on Friday morning, I see these yields dropping further. At the moment, US Ten Year [paper pays 3.96% as the Two-Year Note pays 3.65%.
Moving on to equities, readers who may have taken Thursday off and had not followed the activity until now should sit. Your retirement money, unless you were all in cash or bonds, has taken a serious hit. The S&P 500 gave up 4.84% on Thursday. The Nasdaq Composite gave back a jaw-dropping 5.97%. Still sitting? It gets worse. Especially for the parts of our market most dependent upon economic growth.
The Russell 2000 and S&P Small Cap 600 surrendered 6.59% and 7.13% respectively. The S&P Mid Cap 400 backpedaled 6.66%. The Philadelphia Semiconductors, Dow Transports, and KBW Banks were simply obliterated. Those three equity market indices gave up 9.88%, 9.15% and 9.86% respectively. The word "ugly" does not do these markets justice.
Breadth
Ten of the 11 S&P sector SPDR ETFs ended Thursday's regular session in the red led lower by Energy XLE, Technology XLK, the Discretionaries XLY and the Industrials XLI. Those four funds lost 7.85%, 6.82%, 6.04% and 5.41% in that order. Only the Staples XLP closed out the day in the green at +0.58%.
Losers beat winners at the New York Stock Exchange by a rough 7-to-1 margin and at the Nasdaq by about 5 to 1. Advancing volume took a 28.8% share of composite Nasdaq-listed trade and an amebic 11.1% of composite NYSE-listed activity. Aggregate trade increased on a day over day basis by 3.7% across Nasdaq-listed securities and a stunning 69.9% across NYSE-listed securities.
Does this action make for a "Day One" change of trend? Though this really is a continuance of trend after a three-day break, you bet your tailbone it does. Remember that "Bear Flag" pattern that we warned about on Monday morning in this column? Yeah, unfortunately, that warning was indeed prescient.
Readers will see not only the patterns just described, but a reading for relative strength approaching very weak, but not yet oversold levels, and a daily Moving Average Convergence Divergence indicator (below the chart) that is now postured quite bearishly.
Economics
On Thursday, the Institute for Supply Management released its service sector survey of purchasing managers. For the month, New Orders remained in a state of expansion (just barely) at 50.4, which was a deceleration from 52.2 in February. Employment fell off of a cliff, dropping from 53.9 in February to a deeply contractionary 46.2. What that means for this morning's BLS data, we don't know. The ADP employment print was actually quite decent on Wednesday.
Unfortunately, as seen in the manufacturing sector survey on Tuesday, pricing is out of control. Service sector prices continued to expand in March, even if they did decelerate. That point hit the tape at 60.9, down from February's 62.6. Are you ready for this? March was the 94th consecutive month of higher pricing across the U.S. service sector. That's almost eight years.
Late Thursday morning, the Atlanta Fed revised their Q1 GDPNow model upward for a change to a still very ugly -2.8% (q/q, SAAR) from -3.7% after the above survey and after the US trade balance for February "beat" expectations at $-122.7B. Ex-gold, the model was revised up to -0.8% from -1.4%. We'll hear from New York, St. Louis and Cleveland over the weekend.
Quote of the Day
RH RH, the old Restoration Hardware, reported quarterly earnings on Wednesday evening. The stock would go on to lose 40% of its value on Thursday. During the post-release earnings call, when informed of where his company's stock was trading, CEO Gary Friedman exclaimed... "Oh really? Oh, sh%t, OK." I think that sums up market sentiment pretty well.
Bullish Pattern
Did someone mention the Staples?
Take a look at Coca Cola KO. No, I don't own any. I'm not that smart. I mean, yeah, statistically, I'm smart, but I should have seen this one coming. Here, we have an almost perfectly developed cup with handle pattern with a $73 pivot that has completed a 100% retracement of the stock's September into January sell-off. If I were long KO and at some point today, I probably will be, my target price would likely be in the mid -80s.
At Least...
Intel INTC and Taiwan Semiconductor TSM are reported (by The Information) to have reached a preliminary agreement to form a joint venture to operate some of Intel's foundry facilities. Intel was one of my few winners on Thursday. I may give that long position a haircut later today.
Trading
As one might have expected, I was quite active on Thursday. I added to long positions in stocks that were in my opinion oversold and traded out of stocks that had been high-fliers that were no longer holding significant spots on my books as I continued to narrow my portfolios and redeploy cash. On Thursday, I added exposure to SoFi Technologies SOFI, Rocket Lab USA RKLB, and Palantir PLTR. You expected that. Those are my generational investments. I also added to BlackBerry BB, and Peloton Interactive PTON (low price, less risk).
In addition, I added to Southern SO, SPDR Gold Shares GLD and iShares Silver Trust SLV (perceived safe haven). On top of all of that, I increased my exposure to Northrop Grumman NOC, CrowdStrike CRWD, Berkshire Hathaway BRK.B and SentinelOne S. I also initiated a long position in Ford Motor F. Lastly, I completed my exits from Nvidia NVDA, Microsoft MSFT and Amazon AMZN. For now. Reminder, in case you do something else with your productive hours... I do this for a living and watch the tape all day. I frequently change position sizing.
March Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 132K, Last 151K.
Unemployment Rate: Expecting 4.2%, Last 4.1%.
Underemployment Rate: Expecting 8.1%, Last 8.0%.
Participation Rate: Expecting 62.4%, Last 62.4%.
Average Hourly Earnings: Expecting 4.0% y/y, Last 4.0% y/y.
Average Weekly Hours: Expecting 34.2, last 34.1 hours.
Other Economics (All Times Eastern)
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 592.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 484.
The Fed (All Times Eastern)
11:25 - Speaker: Federal Reserve Chair Jerome Powell.
12:00 p.m. - Speaker: Reserve Board Gov. Michael Barr.
12:45 - Speaker: Reserve Board Gov. Christopher Waller.
Today's Earnings Highlights (Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long INTC, SOFI, RKLB, PLTR, BB, PTON, SO, GLD, SLV, NOC, CRWD, BRK.B, S, F
