/ April 08
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Tuesday:
N/A
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Wednesday:
FOMC Minutes
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Thursday:
Core Inflation Rate YoY (3% exp.)
Inflation Rate YoY (2.6% exp.)
Initial Jobless Claims (225K exp.)
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Friday:
Michigan Consumer Sentiment Prel (54.5 exp.)PPI MoM (0.2% exp.)
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Tuesday:
WD-40
Cal-Maine Foods
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Wednesday:
Delta Air Lines
Constellation Brands
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Thursday:
CarMax
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Friday:
JPMorgan Chase
BlackRock
Morgan Stanley
BNY Mellon
Wells Fargo
Daily Briefing
*The stock market exhibited extreme turbulence on the first session of the week on above-average volume; the S&P 500 (-0.2%), which traded in bear market territory (i.e., 20% below its recent peak) near its worst level of the session, swung more than 400 points between its intraday high and low; the index was down -4.7% shortly after the open and surged +3.4% at its high;
*The Nasdaq Composite, down more than 800 points at its low, closed +0.1% higher thanks to rebound action in mega caps and chipmakers;
*SPY managed not to lose as much as in the previous sessions, and finished spectacularly near the unchanged mark, down just -0.18%, despite the roller-coaster session; we would say that support near $506 held firm, especially since the early drop to $482 was recovered; technically, this could be a turning point for a reflexive rally to $550 - $570, if only fueled by short covering activity and some FOMO;
*The MACD signal is now more extended to the downside than it has ever been since the Covid crash;
*Yet among institutional traders, there was no buying detected, at least at the top 20 S&P 500 companies level; the average buying in dark pools for these stocks averaged just 37.8% of the total volume;
*With Gamma Exposure (GEX) still negative for 19 out of these 20 stocks, the outlook is for volatility to continue (including to the upside);
*This can be seen in yesterday’s price action with the initial bounce, related to an erroneous report regarding a “tariff pause”; the White House called the report fake news, and President Trump later indicated that the U.S. will impose an additional 50% tariff on imports from China, starting Wednesday, if China does not withdraw its 34% tariff on U.S. imports;
*Selling increased in response, but major indices remained well above their worst levels of the session; one factor keeping equity indices elevated relative to session lows was the reversal in the Treasury market;
*Comments from President Trump and his advisers sounded more like they are not planning to course correct in the near term;
*One change we did notice was that more Republicans were speaking out against the tariffs including both business leaders, like Jamie Dimon and Bill Ackman, and members of Congress like Senator Rand Paul and Congressman Don Bacon of Nebraska to name a few; there are also efforts to introduce legislation to return tariff decisions to Congress; however, getting a 2/3 majority to survive a likely Trump veto seems difficult;
*Despite this, some stocks have been holding up fairly well; TJX traded to new all-time highs this week, even as other retailers fall sharply; on its last call, TJX said it has seen tariffs before and it's confident it can navigate through them; also, direct imports from China are an extremely small percentage of its business; other off-price retailers have not performed as well in recent weeks, including BURL and especially ROST;
*Dollar store stocks are doing fairly well, with Dollar Tree (DLTR) and Dollar General (DG) both trading higher on Citigroup upgrades; in fact, Dollar General has been ramping nicely since early March; on its last call, it said that it was well positioned to mitigate the impact of tariffs in 2025 after successfully doing so in 2018-2019; also, Five Below (FIVE) was upgraded by JPMorgan;
*Clearly, analysts are starting to see some value down here in these beaten up names with the idea being that consumers will continue to trade down for value; if Trump were to suddenly change course on tariffs, especially with China/Vietnam, these stocks would likely see a big move; however, if SNAP benefits are cut, that would reduce general buying power for their core lower income customers;
*Market rates have been sinking on safe-haven interest of late, but the 10-yr yield jumped 17 basis points today to 4.16% and the 2-yr yield rose six basis points to 3.73%;
*TLT fell -3.02% in a violent rejection from resistance ($92 - R1); it remains trapped in its recent trading range, with a noticeable build up in bullish price action;