/ April 02
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Wednesday:
ADP Employment Change (105K exp.)
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Thursday:
Initial Jobless Claims (225K exp.)
ISM Services PMI (53 exp.)
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Friday:
Non Farm Payrolls (128K exp.)Unemployment Rate (4.2% exp.)
Fed Chair Powell Speech
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Wednesday:
RH
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Thursday:
N/A
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Friday:
N/A
Daily Briefing
*The stock market had a choppy start to April and Q2; the major equity indices traded above and below prior closing levels as investors wait on today’s tariff announcements and digest the day’s economic data;
*The market moved lower right out of the gate and selling increased in response to release of the ISM Manufacturing PMI (49.0% actual vs consensus of 49.8%); the report showed that manufacturing activity contracted in March while prices grew sharply for the second month in a row, signaling growing fears of stagflation;
*SPY did manage a turnaround in the afternoon trade and ended the day up +0.28%; the major technical achievement of the day focuses on what did not happen - namely new lows were not realized; for now, we can label support as holding, though the reaction after today’s tariff news will be truly pivotal; the level to watch for upside is a close above $565, while any downside move would potentially confirm a further deterioration to $505;
*The deterioration at the MACD signal level has been stopped for now, with technically bullish positioning still ongoing;
*The uncertainty on the tariff front has officially hit maximum levels, as we’ve already discussed; investors are understandably anxious that the tariffs due to be anounced later today could severely impact the economy and negatively affect corporate earnings;
*Recent statements from Donald Trump support this view; however, it's worth considering whether Trump might be leveraging this situation emotionally to present Liberation Day as a sort of victory; if that turns out to be the case, he could be frontloading expectations for high tariffs and then ultimately deliver less than anticipated;
*In such a scenario, the tariffs might not be as substantial or extensive as feared; Should this happen, the markets could respond with a relief rally; consequently, Trump could claim success, arguing that the tariffs are advantageous, as demonstrated by the market's 1-day response;
*The scenario we’ve presented above is the polar opposite of “buy the rumor, sell the news”; in this case, the rumor has taken the market down, while the news might be a relief rally event;
*Extreme CTA positioning computed by Goldman Sachs may result in a “buy or buy more” situation, regardless of the tariff announcement; the yellow line is if stock market goes down 2 sigma; this should be compared to the red line, which is the buying if stocks trade up 2 sigma;
*Dark pools data among the top market cap companies reflected positive sentiment among institutional investors, as virtually all major companies saw a volume of buying at least equal to the volume of selling (no dark pool index was below 50%);
*Notable accumulation occurred in Google (GOOG), Broadcom (AVGO), Bank of America (BAC) and Wall Mart (WMT); some of these trades reflect a buy-the-dip mentality, while others reveal a preference for safety and stability;
New Home Sales MoM %
*Ultimately, sector breadth turned out to be positive; nine of the 12 S&P 500 sectors registered gains led by consumer discretionary (+1.1%), communication services (+1.0%), and technology (+1.0%) — all risky plays; the health care (-1.8%) and financial (-0.2%) sectors were alone in the red at the close;
*March ISM Manufacturing Index was reported at 49.0%, below forecasts of 49.5%; the reading pointed to the first contraction in factory activity in three months, after expanding only marginally in February;
*A bad mix of decelerating activity, rising prices, and weakening employment for the manufacturing sector is the kind of mix that will stir more talk of stagflation;
*Looking ahead, while it’s easy to be bearish given the uncertainty, we must be open to all possibilities as investors; we have a sneaky suspicion that the worst tariff related news has been priced in by this point; furthermore, the market continues to be set up for a sellable rally;
*Credit spreads are currently stable by historical standards, indicating that the ongoing selloff is likely a "correction event" instead of the onset of a more substantial decline; should these spreads widen to more critical thresholds, it would probably signal a more serious risk-off scenario, likely due to a real bearish catalyst;
*Treasuries settled with gains across the curve; the 10-yr yield dropped nine basis points to 4.16% and the 2-yr yield settled five basis points lower at 3.86%;
*TLT closed +0.87% higher, taking a step closer to the challenging of resistance at $92 (R1 level);