Like the Plot of a Bad Movie: Wall Street Starts to Bleed Again
Netflix, Comcast and Walt Disney trade lower on filming tariff as trade deals yet to develop; also, Sarge fav Palantir reports.
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It had to happen sooner or later. Equity markets experienced an end to their winning ways on Monday with both the S&P 500 and Nasdaq Composite suffering red candlestick days.
The S&P 500, our marketplace's broadest measure of large cap equity performance, gave up 0.64% for the session as the Nasdaq Composite gave back 0.74%. The S&P 500 had put together a nine-day streak of "up" days, the longest such streak since 2004. Alas, now that this run of good fortune has come to an end, it is now time for investors and traders to figure out if the U.S. stock market just went through what we call a "bear market rally."
The investing public must decide if there actually was enough momentum to break out of what had been a downtrend that reached its nadir about a month ago in the wake of Pres. Trump's "Liberation Day."
Monday brought with it profit taking on a broad scale as there has been to this point little visible progress made on getting hoped-for trade deals across the finish line. Also the Fed's policy decision on Wednesday afternoon looms over U.S. financial markets. Instead of headlines proclaiming a deal with India, South Korea, Japan or anyone else, and instead of headlines describing meetings or at least scheduled meetings between U.S. and Chinese representatives, markets were, on the contrary, met with new tariffs. The president authorized the Department of Commerce on Monday to begin the process of implementing a 100% tariff on all cinematic productions originating on foreign soil. In response, Netflix NFLX, Comcast CMCSA and Walt Disney DIS traded lower for the session.
On Trade: (Uh) O Canada!
On Monday, Bloomberg News reported that India had proposed zero tariffs on steel, auto parts and pharmaceuticals on reciprocal basis up to a predefined limit. Beyond that limit, imports of industrial goods would face the regular rate whatever that might be at the time. Indian officials apparently made that offer in late April when visiting Washington. There is no reported news in whether or not the U.S. responded or if this offer was part of the supposedly almost done deal that Commerce Secretary Howard Lutnick mentioned last week.
This morning, new Canadian Prime Minister Mark Carney, formerly the top central banker at both the Bank of Canada and the Bank of England, will be in Washington to meet with Pres. Trump. Going into the potentially contentious meeting, the Prime Minister has pledged that Ottawa would look to forge new trading alliances and that this particular U.S. president would "never break" Canada.
On the other side of the line of scrimmage, Pres. Trump has repeatedly joked about annexing Canada (It is a joke, right?) which has not amused the Canadians who I know. The president also said recently, "We do very little business with Canada. They do all of their business practically with us. They need us. We don't need them."
What could possibly go wrong?
Making matters more interesting, ahead of the recent Canadian national election, which was won by Carney's Liberals, an Angus Reid poll offered the Prime Minister what appeared to be only fractured support. According to the poll, if Liberals formed the next government, 33% of those living in Saskatchewan, 30% of those living in Alberta and 30% of those living in the province of Quebec would vote to either seek provincial independence from the federation of Canada or seek to join the United States.
Marketplace
The selloff across U.S. Treasury markets eased a bit on Monday ahead of Tuesday afternoon's auction of $42 billion worth of new Ten-Year paper. On Monday the yield for that US Ten Year backed up three basis-points to 4.33%. That yield has backed up another three basis-points overnight to 4.36%.
That selloff extended broadly if not deeply across U.S. equity markets on Monday, which was not the case on Friday. On top of the backpedaling by the S&P 500 and Nasdaq Composite, all of our major to mid-major equity indexes gave up some ground on Monday without giving up serious ground.
The KBW Banks and Dow Industrials outperformed the broader marketplace at -0.18% and -0.24% respectively, while the Philly Semiconductor Index at -0.93% underperformed. The Communication Services sector SPDR ETF XLC easily led the eleven sector SPDRs at +0.24% as nine of those 11 funds closed in the hole. Both Energy XLE and the Discretionaries XLY gave back more than one full percentage point for the session.
Breadth was sloppy. Losers beat winners at the NYSE by a 2-to-1 margin and by a rough 7 to 4 at the Nasdaq. Advancing volume took just a 37.3% share of composite NYSE-listed trade and a 42.5% share of composite Nasdaq-listed activity. So, did we have a potential "Day One" reversal of trend on Monday? The short answer is "no." On a day-over-day basis, aggregate trade was 13.5% lower across Nasdaq-listings and down 10.2% across NYSE-listing. Aggregate trading volume was also lower across the membership of the S&P 500 than it had been for any of the four preceding days, which were all green candlestick sessions.
In short, professional money did not leave the market to any significant degree on Monday. That doesn't mean that the Trump administration can drag their feet on providing some positive trade news. I am sure that a good number of these portfolio managers are a bit on edge headed into the middle of the week. Equity index futures are weak on Tuesday morning. Ford Motor's F guidance or lack thereof, sort of told us that despite the great Q1 earnings for many firms, all is not well.
Palantir Reports!
Readers likely know that my beloved Palantir Technologies PLTR posted very strong earnings and still got rocked overnight. This is why I had readers taking some profits on Friday as our target price was breached. Remember, target price discipline is a necessary component of risk management. This earnings release will require its own piece, so I'll be back in a couple of hours with that story and our updated attack plan.
Note to Readers: I'm on Diary Duty
I'll be playing Earl Morrall to Doug Kass' Johnny Unitas today. Yes, I'll be filling in for legendary hedge fund manager Dougie Kass at his Diary here at TheStreet Pro all day on Tuesday, while Doug travels. I want every swinging one of you wonderful readers hitting the deck, banging out your morning push-ups, pounding that coffee, and joining me in search of victory this day. Fix bayonets, my friends. Remember, that fear is but for the wicked. So let the wicked tremble before us. Sarge out.
Economics (All Times Eastern)
08:30 - Balance of Trade (Mar): Last $-122,7B.
08:55 - Redbook (Weekly): Last 6.1% y/y.
1:00 p.m. - Ten Year Note Auction: $42B.
4:30 - API Oil Inventories (Weekly): Last +3.76M.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: ADM (.67), DDOG (.42), LDOS (2.50), ZTS (1.40)
After the Close: AMD (.93), DVN (1.22), WYNN (1.24)
At the time of publication, Guilfoyle was long F, PLTR equity.
