Tariff Day, the Tale of Two Markets, Are AI and Nvidia Back?

Deep in despair? Sure looked like it. Until markets turned. Of course. 

U.S. equity markets traded lower last Wednesday and Thursday. Then stocks were absolutely slammed on Friday. Overnight Sunday into Monday morning, the pressure intensified as global selling bled into the U.S. Then, with the S&P 500 back in correctional territory for the second time in March, the sun came out. Birds sang songs of joy. Children laughed. U.S. stocks rallied way off of the lows on Monday and closed near the highs of the regular session.

What manner of sorcery was that? Simple "end of month" or "end of quarter" window dressing? Maybe a little. Simple pension fund re-allocations that in some cases are mandated on a quarterly basis when the value of their debt and equity holdings become imbalanced. Certainly, there indeed was some of that. Perhaps a lot of that. Maybe Wall Street decided that tariffs are cool now and there won't be a U.S. recession or a global slowdown? I think that's a leap, but it is possible that to some degree, the algorithms that control price discovery in this modern era had let enough air out of the tires and purchased shares at or below the low end of their designated risk ranges.

It's not as if all algorithms are designed similarly and will pick market or single stock bottoms in unison. It is as if most algorithms are designed to identify technical levels, read keywords across news feeds and chase momentum. We definitely saw momentum chasing occur in both directions on Monday. Do the markets still fear the coming of the president's "Liberation Day" on Wednesday?

I think certainly, yes, they still do. But something close to bad news has already been priced in. As I wrote yesterday, I expected an opportunity or invitation to trade these markets to present itself this week. I expected that invitation to show up in the mail later this week. Monday's rebound, welcome as it was, surprised me a little. That said, I don't look a gift horse in the mouth and my bet is that Monday will not be the only day this week that volatility presents itself. The game, my merry band of jolly friends... is afoot.

Tick, Tick, Tick...

As the hours and minutes countdown to President Trump's announcement on the broad implementation of reciprocal tariffs on Wednesday, the president hinted at what was to come. He said that the U.S. was “going to be much nicer than they were to us.” in reference to U.S. trading partners. Concerning Wednesday's event, which is set to take place in the Rose Garden, White House Press Secretary Karoline Leavitt spoke to the press:

"The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decades." 

We'll see how the markets proceed from there.

For the day on Monday, the U.S. Ten Year paid close to 4.26% after yielding just 4.2% earlier in the day. The U.S. benchmark has rallied overnight, and I have seen the Ten Year Note yield less than 4.18% as the zero dark hours pass this (Tuesday) morning. The U.S. Two Year Note is yielding just 3.88% on Tuesday morning after yielding as much as 3.92% late Monday. Interestingly, in January of this year, the Ten Year paid as much as 4.79% and the Two Year paid as much as 4.39%. Talk about a flight to safety. On that note, Gold ended the quarter at just under $3,160 per ounce after trading as low as $2,647 in January.

The S&P 500 gave up 4.6% during the first quarter of the year, making Q1 2025 the first negative quarter for the U.S. market's broadest measure of large-cap performance since Q3 2023. This was due to a loss of 5.8% for the month of March alone, which was the worst month for this index since December of 2022. The five worst performing stocks in the S&P 500 for the first quarter 2025 were:

- Deckers Outdoor DECK -44.95%

- ON Semiconductor ON -35.07%

- Tesla TSLA -34.74%

- Teradyne TER -34.26%

- Western Digital WDC -31.88%

Oddly enough, the top two performing stocks in the S&P 500 for the quarter were....

- CVS Health CVS +50.92%

- Philip Morris PM +31.89%

Monday's Market

For the day, the S&P 500 closed up 0.55% after first marking a six-month low. The Nasdaq Composite closed down 0.14% after being down more than 2% early during the regular session. Performance across small to mid-cap stocks was scattered. The S&P Small Cap 600 gained 0.42%, as the S&P Mid Cap 400 gained 0.14% and the Russell (Small Cap) 2000 gave up 0.56%. The Dow Transports, interestingly, just as dependent upon economic growth as are the smaller caps, gained an impressive 1.05%.

All 11 S&P sector SPDR ETFs closed out the day in the green, led by the Staples XLP and the Financials XLF. Seven of these 11 funds gained at least 1% for the session. Overall, though, defensive sectors still led, as cyclicals followed, and growth lagged. This still expresses some degree of caution in where the flow of capital went even during the rebound.

Bifurcated Marketplace...

Winners beat losers at the NYSE by a slim margin as advancing volume took a 58.1% share of composite trade in NYSE-listed stocks. Aggregate trade increased across NYSE-listings on a day-over-day basis by an impressive 16.5%. This would almost be enough for "day one" change in trend if the Nasdaq had played along.

Losers beat winners at the Nasdaq by almost 2 to 1 as advancing volume took just a 34.2% share of composite trade in Nasdaq-listed stocks. Aggregate trading volume increased by an impressive 15.8% on a day-over-day basis across Nasdaq-listed securities. This would almost be enough to confirm the downward trend in equities if the NYSE had played along.

The AI Trade Is Dead?

On Monday, OpenAI, the maker of the ChatGPT generative intelligence chatbot, announced what looks to easily be the largest private-tech funding round in history. Apparently, OpenAI raised $40 billion with, according to Pitchbook, $30 billion of that number coming from Japan's Softbank. The balance came from a group of investors that included Microsoft MSFT.

Open AI plans to use the fresh capital that values the business at $300 billion to "push the frontiers of AI research even further." CNBC reported that roughly $18 billion of the funding total is expected to be used to fund OpenAI's commitment to Stargate, which is a joint venture between OpenAI, Softbank and Oracle ORCL.

For those wondering, this private tech funding round absolutely dwarfs the old record that had been Ant Group's $14 billion capital raise in 2018. There is a catch, though. $30 billion of the $40 billion will not be invested upfront. but will be invested by the end of the year. That $30 billion will become $20 billion, if by the end of the year OpenAI has not restructured itself into a for-profit business.

Change One to Change Two

Did we just witness Nvidia NVDA sell off January into March coming off of a "Double Top" pattern and then suddenly develop a "Double Bottom" pattern of bullish reversal? It is too early to tell, but last week I did write to you and told you that I would add at least for a trade if the stock tested the $105 level. 

Did you? The stock is trading above $109 this morning. I may take at least a partial profit on that trade this morning just to protect my pile and let the rest ride.

I do not trust the newly developed pattern just yet. But I am saying that there's a chance...

Economics (All Times Eastern)

08:30 - Construction Spending (Feb): Expecting 0.2% m/m, Last -0.2% m/m.

08:55 - Redbook (Weekly): Last 5.6% y/y.

09:45 - S&P Global Manufacturing PMI (Mar-F): Flashed 49.8.

10:00 - ISM Manufacturing Index (Mar): Expecting 50.1, Last 50.0.

10:00 - JOLTs Job Openings (Feb): Last 7.74M.

10:00 - JOLTs Job Quits (Feb): Last 3.266M.

4:30 p.m. - API Oil Inventories (Weekly): Last -4.6M.

The Fed (All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights (Consensus EPS Expectations)

No significant quarterly earnings scheduled.

At the time of publication, Guilfoyle was long MSFT, NVDA equity.