The Fuse
Equity futures are down but well off their worst levels of the overnight session, but no question some damage has been inflicted. It is going to hard to see the markets recover too quickly after these past few days of down movement, but we will be very oversold in a couple of days, and a whopper rally will arrive.
Interest Rates are actually falling a bit this morning after spiking lower following the equity futures opening. Rates had come down sharply in a safety trade situation but now the 10 yr is backing up towards 4% again. Fed futures are screaming at the Fed for rate cuts, now pricing in 5 cuts in 2025. That would almost be at least 1 cut per meeting and with inflation still sticky along with some inflation from tariffs, that is going to be a challenge.
Stocks continue to have a bad reaction to the new tariffs put on last week. Over in Europe the STOXX declined a whopping 6% in heavy turnover, France and Germany were belted 6-7% respectively but are off their lows of the session. The US dollar fell .3%, gold is up just under 1% and crude oil is getting smashed, near $60 per barrel. German 10 yr bunds rallied as the yield fell 12bps, US treasuries also rallied as those yields fell 11bps. Stocks in Asia were down sharply, Nikkei down 7.8%, Hong Kong down a whopping 12.6% as Shanghai dropped 7.3%.
Earnings will be starting for Q1 this week with LEVI, Dave and Buster’s, Delta, and some banks like JP Morgan, Blackrock, Wells Fargo on Friday.
One of the biggest drops in the history of the stock market happened over the last few sessions and there could be more downside to come, but for now the oversold condition may win out. No question the adverse reaction to the tariffs has caused quite a bit concern about the outcome, many are now penciling in a recession to come by the end of 2025. Some stocks have been obliterated and will require a long base-building process.
Breadth was absolutely atrocious Friday, the action was simply abysmal. No relief in sight, new lows continued to expand and the oscillators are nearly full washed out, but not quite there yet. This could continue later in the week unless there is some positive news, but no question there has been damage to the market and the uptrend may now be over.
Volume was explosive on Friday with the heavy selling all session long, there were plenty of sell orders to go around. This heavy volume is troublesome to the bulls here as this could cause the long term uptrend to shift bearish. With so much uncertainty and news escalating things it is difficult to believe we’ll see buyers stepping in to stop the bleeding anytime soon.
Support levels fell like a hot knife through butter. The Nasdaq faired the worst, falling about 6% but so did the SPX 500. As mentioned, good support did not hold as market sentiment continues to be quite bearish. There is little reason to step in and be a hero. Next level we see for the SPX 500 is about 4,680 and 16,500 on the Nasdaq. Dow Industrials are spinning out of control, and small caps are buried deep in a bear market.
The Internals
What’s it mean?
What a rout! The bears had a plan and that was to ruin the bulls, and it was well-executed. The internals were abominable, so bad and full of red it hard to know where to begin. The VOLD clearly showed the story, down hard for a second straight session. ADSPD was a trend down day for certain, the put/call was above 1 again and the VIX ripped higher to close in the 40’s. Ticks were also heavy red, plenty of sell programs. Can this week get even worse?
The Dynamite
Economic Data:
- Monday:Consumer Credit
- Tuesday:NFIB optimism index
- Wednesday:wholesale inventories, Fed meeting minutes
- Thursday:jobless claims, CPI, Chicago Fed Pres speaks
- Friday:PPI, consumer sentiment, NY Fed Pres Williams
Earnings this week:
- Monday:LEVI, PLAY
- Tuesday:TLRY, RPM, WDFC, MAMA, AEHR
- Wednesday:DAL, SMPL, THTX, STZ, PSMT, RELL, TBBB
- Thursday:KMX, BYRN, LOVE, NTIC
- Friday:JPM, BLK, WFC, MS, FAST, BK
Fed Watch:
Stocks to Watch
Volatility – A moonshot of volatility hit last week during the first few days of April. A bit too much? Perhaps, but trying to wade back in is difficult at best, impossible at worst. If the VIX comes down sharply there could be a relief rally.
Tariffs – News of tariffs last week crippled markets here in the US and worldwide. The ramifications are still unknown but most economists believe this is a huge negative for growth. Will there be de-escalation or continued pressure on countries.
Earnings – We’ll have some earnings reports this week, mostly the banks get things underway. With the sharp moves down in this group lately it will take some very soothing words to get investors back in the game.
