Equites were bifurcated yesterday as the NASDAQ fell about 3.1% on a combination of disappointing revenue outlooks and the trade war as well from remarks from FRB Chair Powell which broke no new ground, confirming that a “Fed Put” is not likely. The Dow fell about 1.6%. The selling sent 10 of the 11 S & P 500 sectors lower with only energy producers advancing.
As noted many times, the NASDAQ—specifically the Magnificent Seven was/is priced to perfection, coupled with disproportionate ownership. Any mis step would be severely punished, amplified by the lack of liquidity and massive ownership.
A basic premise for a stock to move higher is more buyers than sellers. If everyone ones the stock, especially in a challenged liquidity market, who is left to buy if/when selling commences?
Treasuries rallied across the curve, causing however a nominally steepening of the curve. Retail sales rose the most in two years, meeting estimates. The surge is perhaps the result of buying before tariffs take effect. Swap traders are still pricing in at least three rate cuts for this year.
Commenting about FRB Chair Powell’s speech, Powell reiterated the central bank must ensure tariffs don’t trigger a more persistent rise in inflation.
Specifically, he stated “Our obligation is to keep longer term inflation expectations well anchored and to make certain that one-time increase in the price level does not become an ongoing inflation problem.”
Powell also commented “for the time being, we are well positioned to wait for greater clarity before considering any adjustment to our policy stance.”
Moreover the Fed Chief remarked that the level of tariff increases announced so far is significantly higher than anticipated, adding “the inflationary effects could also be more persistent.”
There was nothing new to his comments, stating “there is not a modern experience for how to think about this” when asked to remark about the massive uncertainty linked to the emerging trade policy.
What will happen today? Tomorrow most markets are closed for Good Friday.
Last night the foreign markets were mixed. London was down 0.66%, Paris down 0.78% and Frankfurt down 0.60%. China was up 0.14%, Japan up 1.35% and Hang Seng up 1.61%.
Futures are bifurcated as Dow and NASADQ futures are down 1.2% and up 0.65%, respectively. Dow futures are negatively affected by a 20% plunge in United Healthcare. The 10-year is off 9/32 to yield 4.29%.
