VIDEO: Major Revenue Boost Hints at Good Things for These 5 Holdings

In today’s Daily Rundown video, Chris Versace shares why the Portfolio is sticking to its plan for this week and not leaning into Tuesday night’s comments from Commerce Secretary Howard Lutnick. 

Part of that stems from comments delivered during President Trump’s Congressional address on Tuesday night but also our concerns about Wednesday's wave of economic data, including the weaker-than-expected February ADP Employment Report. 

On a positive note, February revenue reported by Hon Hai rose more than 56% year over year, bringing some positive data for five Portfolio holdings. 

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here, Wednesday, March 5. As you probably saw, the stock market is no surprise-- trying to rebound following the latest drubbing that we've seen over the last couple of days. But as we shared with you in last week's roundup, when it comes to today, Wednesday, March 5, we simply have a big day of data that could be rather revealing. And our concern is that it could further spook the market, drive uncertainty higher, all of those things that have been plaguing the market.

Now, before we break it down and what we have coming at us, well, already out this morning and coming yet later, let's review what led the market to kind of perk up in the after-hours session last night. And it's really pretty simple. Commerce Secretary Howard Lutnick hinted that the 25% tariffs on Canada and Mexico could be reduced today.

What he said was this, quote, "I think Trump is going to work something out with them. It's not going to be a pause, but I think he's going to figure it out. You do more, and I'll meet you in the middle some way," is what he said. Now, let's keep in mind for a second. When we parse that language, that's not saying that those tariffs on Canada and Mexico are going to be eliminated but reduced. And that suggests that, well, tariffs in some form are likely to remain.

But let's think about two other things. First, last night during Trump's State of the Union address, there was no real indication that he is going to back down from tariffs anytime soon. And again, he is a dealmaker, negotiator, so we have to keep some flexibility in our thinking. But certainly last night, he was leaning in to the use of tariffs.

And second, also last night, he did confirm that new reciprocal tariffs on goods imported from a wide range of countries will be introduced on April 2. And as he did that, Trump also acknowledged that, odds are, these tariffs are going to create, quote, "a little disturbance within the US economy." And at the same time, in between what's going on right now with Mexico, Canada, and China and the expected April reciprocal tariffs, there are other tariffs that are likely to come into play-- aluminum and copper, for example.

So I understand the market's reaction to Lutnick's comment. But I think we've got to step back and really assess the situation in full. And in doing so, I think, at best, we continue to have an uncertain picture, but one that seems to appear a little more towards tariffs being implemented.

And we're only starting to see that impact. Remember the comments yesterday from Target, from Best Buy. And today, we had the ADP Employment Report for February that missed expectations. Only 77,000 jobs were created. The market was expecting almost double that at 140,000. And for context, about 186,000 were created in January.

Now, the ADP employment report also showed that wages remain elevated-- 4.7% year over year for job stayers, 6.7% for job changers. So this is not exactly a real upbeat economic report. And I suspect that when we dig into it a little bit further, it's going to tie back to some of the comments that we saw from earlier in February, both with ISM's Manufacturing Report, but also the Flash February Services PMI that really crystallized, if you will, the concern about the potential impact of tariffs.

Now, when we look at ADP's Employment Report, I also think that it is going to clearly raise questions about Friday's February Employment Report, especially since that report also includes public sector job creation. And of course, we just have to think about what's been happening and being announced from DOGE and out of the White House when it comes to the public sector and jobs. So I think we're going to see some concern about that report build coming out of today.

But we also have the February Service PMI reports coming out are at 9:45 from S&P and 10:00 from ISM. Remember, the one from ISM is the one that gets filtered into GDP expectations. Now, if those reports reaffirm the February Flash findings on the service sector, higher inflation, slower employment, and the service sector slowing considerably, it's going to be another set of data that spooks the market even further. And then, of course, this afternoon, we have the latest-- excuse me-- Fed Beige Book.

So recognizing all of this to come, please remember that our plan coming into the week was to let the market digest the data while we watch and identify for you key support levels and other technicals that we're watching as it relates to the existing portfolio positions. And we also want to, where we can, do a little extra work for potential bullpen candidates.

So remember, yesterday, with that in mind, we shared a list of RSI levels for the portfolio's holdings, showing which positions-- and, as of yesterday-- were oversold and ones that were approaching that. Now, a note of caution-- these relative strength index levels, they move around just as stock prices do. So we will want to continue to monitor them to see if certain positions are still oversold, if ones that were approaching it have become, ones that were oversold have moved out. So we're going to have to navigate this extremely carefully looking at the numbers day to day.

Remember, we do want to tread carefully, let the market absorb all of this. So that means most likely sitting on our hands, sitting on the sidelines today until we let today's data wash over. But remember, too, we do have Friday's Employment Report, and we'll get comments from Fed Chair Powell.

And what's going to be interesting about this is certain tariffs will have been implemented, and we'll have a lot of data showing that inflation is either sticky or moving in the wrong direction. So I do think the market is going to really hang on what Powell's comments are. So that's what we're paying very close attention to over the next couple of days.

But in terms of our roadmap for today, we have, as I said, the upcoming Services PMI. So we'll have some comments on that this afternoon, the Fed Beige Book. After the close, we have earnings from Marvell. And setting the stage for that this morning, known Apple and NVIDIA supplier Hon Hai reported that their February revenue rose just over 56% year over year, very strong.

And when we dig into that, where was the year over strength? Well, cloud and networking was extremely strong, with the comment saying it was really led by AI. That is, of course going to be good for Marvell and NVIDIA. Hon Hai also said that its consumer electronics and computing was strong on a year-over-year basis. That's PCs and, of course, smartphones. So going to be good for our positions in Apple, Universal Display, and Qualcomm. And Hon Hai closed it out saying that the current quarter should be a very strong one on a year-over-year basis.

Now, we'll have some comments on all of that as we get ready for Marvell's earnings after today's close, as I mentioned. But also today we will have Mastercard, Meta, and NVIDIA appearing at the Morgan Stanley TMT conference-- all that and office hours in the forum after the close. So you can imagine we have a pretty busy day ahead of us.

I would ask that you please check your emails, your alerts. We want to make sure you get our latest thoughts. And if we happen to make any moves with the portfolio, we want to make sure that you are right there with us. Thanks for watching, and remember, busy day. Keep an eye on those alerts.