The Fuse
Sellers continue to tear the markets down as futures are off nearly 70 handles before the open, the Industrials off another 600 after losing more than 1,700 points yesterday. It is going to be another long day for the bulls.
Interest Rates are falling sharply as fixed income is now the place for investor safety. Yields on the 10 yr may break 4% soon, the 2 yr is now reflecting 3 rate cuts in 2025. Fed funds futures are seeing 4 cuts by the end of the year, but with sticky inflation that may be nearly impossible to deliver.
Stocks are continuing the calamitous fall this morning as Europe showed declines, down .9% on the STOXX index. This was led lower by France and Germany. The dollar index rose a small amount, .2% a slight recovery after Thursday’s drubbing. Crude oil is really getting hammered, down another 5-6% on heavy volume. We now see WTIC at about $63.90 per barrel, gold is down modestly. In Asia stocks in Japan were off 2.8% but markets in China were closed.
No earnings of significance last night.
The bears unleashed the fury of selling yesterday as word of a trade war with tariffs was made official. Stocks were punished badly over the day as there was no place to hide in this rout. Without question stocks have entered the danger zone and could really be in a world of hurt if the selling continues.
Awful breadth as one would expect on an historical day like yesterday. A nearly 5-1 rout of the bears puts this indicator back in the doghouse. Oscillators are oversold but not extremely done yet, that could be a few more days of hard selling to get there. New lows expanded largely as that indicator remains on a sell signal. Just ugly all around.
Monster volume and it was huge on the downside yesterday. There are no words to describe what we witnessed, perhaps we just call it carnage. Usually there is some sort of relief rally during the day but we did not experience that for a moment, just heavy downpour of selling that accelerated to the end of the trading session. More selling into the weekend is very possible.
Well, so much for holding support. Stocks plunged through any major support levels and got drilled from the opening bell, but we knew this would happen last evening. Failing to hold levels brings more vulnerability. For the SPX 500, 5,400 may feel safe but there is a laser down to 5,186 that is begging to be touched. The Nasdaq is right near September levels at 18400 and could be there today.
The Internals
What’s it mean?
All red, all the time. That was how we can view Thursday’s action. Nothing positive whatsoever, the VOLD finished deep in the red as did the ADD, ticks were mostly red all session as a flurry of sell programs hit one after another. VIX peaked and closed just below 30%, up about 37% on the day while put/calls rallied and finished above 1. Extreme readings? You bet, but not yet enough to call it over.
The Dynamite
Economic Data:
- Friday:non farm payroll, Chair Powell, Govs Barr and Waller
Earnings this week:
- Friday:N/A
Fed Watch:
After last week’s rather hot inflation number we have quite a few fed speakers coming out with speeches this week, including Chair Powell on Friday. That will be following the jobs report, which is going to be another pivotal data piece. Jobs have been strong for a few years but if they start to show cracks there may be action needed by the Fed down the road, but not right away. Inflation in the interim remains a problem and may only get worse with tariffs.
Stocks to Watch
Volatility – We again watch the VIX as it is now above all of the futures contracts. That condition does not often last for too long before easing up, but the uncertainty abound is making investors quite worried and nervous.
End of Quarter – Monday is the last trading day of the first quarter and it has been awful. The worst performance for the SPX 500 in about three years, stocks are reeling just before the start of earnings season. It is foolish to be bearish before earnings begin but hard at this time to be bullish, too.
Gold – Hitting a new all-time high this week was impressive, what is the message from the metal? Certainly there is something there, other commodities have shown good strength as well including copper, which hit all-time highs last week before the tariffs start to hit.
