Stocks take a beating, Gold’s the only winner, as Trump bullies JJ and China yells ‘pick a side

• Stocks and everything else got slammed – except GOLD.
• Trump continues to bully JJ – but JJ isn’t going anywhere.
• China warns countries from siding with the US.
• JD Vance tells us that India and the US have reached ‘terms’.
• Futures are higher.
• Try Escarole & Beans.

Stocks got clobbered – The broader market down 2.5%, while the Mag 7 lost 3.25%. Bonds got hammered – 1.75%, the 10 yr now yielding 4.41%, the dollar is under pressure – 0.9% (taking it down 10% off the January high), oil lost 2.1% all while gold continues to trade up and thru century marks like a hot knife thru butta (a nod to the infamous Barbra (Streisand) – Gold was up 3.2% or $107/oz and is now up 26% ytd and this morning gold is up another $40 – ticking at $3467/oz.

The VIX (fear Index) surged by 14% allowing the contra trades (DOG, SH, PSQ, VIXY & SPXS) to ‘win’ – closing up 2.5% to 6.85%. The culprit yesterday – the ongoing ‘rejection of FED chair JJ Powell’ – specifically calling him out as a ‘major loser’, the news that China is now threatening any country that ‘makes a deal with the US that disadvantages Beijing and the lack of any trade deal on top of EVERYTHING else – i.e. – broken trend lines all over the place and rising investor nervousness.

At the end of the day – the Dow lost 970 pts or 2.5%, the S&P’s down 125 pts or 2.4%, the Nasdaq lost 415 pts or 2.6%, the Russell lost 40 pts or 2%, the Transports down 272 pts or 2%, the Equal Weighted S&P lost 135 pts or 2% while the Mag 7 Index gave back 685 pts or 3.25%.

Now what is important to note here is that all of this happened on lighter volume…only 13.8 billion shares traded – and while that sounds like a lot and is a lot compared to my early days on Wall Street when we would trade 30 million shares/day – (1980) – it was down 26.4% vs. the 20-day average of 18.9 billion shares. Remember – European markets were closed for the Easter Monday holiday – so there was no participation from that part of the investing world AND the lighter volumes suggests that there was NO panic selling, NO capitulation – and that is important – here’s why 

Capitulation in the context of financial markets refers to a period of intense selling pressure where investors, driven by fear, panic, or loss of confidence, sell their holdings EN MASSE, often at significant losses, reflecting mass exodus. This typically marks a bottom or near-bottom in a market decline, as it reflects the exhaustion of sellers.

Key characteristics would include:

Extremely high trading volumes – Significantly exceeding the daily average – potentially 50% higher.

Sharp price declines – Think 10+% across all of the indices – suggesting widespread panic. March 2020 (Covid) saw daily declines of 7% – 12%.

Broad based indiscriminate selling with most sectors and asset classes getting whacked.

Extreme sentiment indicators that reflect overwhelming pessimism – social media platforms would be overwhelmed with posts expressing the ‘end of days!’ The latest (April 16th) AAII Investor Sentiment indicators suggest 25.4% bullish vs. 56.9% bearish – a clear contrarian indicator…suggesting a bottom could be nearby.

Market breath metrics would be extreme – stocks trading below their 50 dma would approach 75%- 90%.

Now while the declines have been a bit unsettling amid trade war fears, tariff fears, and FED critiques (I’m being diplomatic) the market is NOT exhibiting the ‘exhaustion or indiscriminate selling’ that would define capitulation - suggesting that investors have not ‘given up’.

So, this is why I keep saying that you need to do a ‘reality check’ and assess your portfolio – making sure that you own fundamentally strong, diversified, stable, high-quality companies that will recover much faster. Talk to your advisor and know your risk tolerance, know what you own and why you own it. And remember – dollar cost averaging and reinvestment of dividends becomes even MORE important during market drawdowns. (You buy more shares for the same amount of money!).

There was no eco data to drive the action yesterday. Today’s data includes the Philly FED Non-Manf Activity (which is Services, and we are a 75% services economy, so this a key metric), Richmond Fed Manufacturing Index, and the Richmond Business conditions……..and while none of these are typically a mkt mover – all bets are off today….Why? Because the markets are reacting to ANY headline as it looks for clarity/sanity….…. something that appears to be absent at the moment.

Later in the week – look for S&P Manufacturing and Services PMI’s – of 49 and 52.8 respectively. Manufacturing is just below the neutral line while services remain in the expansionary zone. New home sales of +1.2%, Building Permits, Durable Goods Orders and Existing Home Sales which are expected to be down 3.1%.

Friday brings us the U of Mich Sentiment Survey and that is expected to come in at 50.8 – which would be unchanged from the prior month – BUT is 40% below the long-term average of 84.5 – and this suggests that consumers are cautious about future spending plans causing analysts to raise the risk of recession. It is important to note that we are not in a recession – defined by 2 consecutive quarters of negative GDP (not happened), accompanied by increased unemployment (not happening – unemployment remains near historic LOWS), declines in Income (not happening) along with other metrics…. Just sayin’.

Overnight stocks in Asia were lower but not a disaster at all…Taiwan down 1.6% while Hong Kong gained 0.8%. Everyone else closed just below the unchanged line.

In Europe – markets are under pressure – recall they were not open yesterday, so they are playing ‘catch up’ – but are not down nearly to the extent that the US was. At 6 am – we see both the UK and Spain up 0.25% while Italy is down 0.6%, Euro Stoxx down 0.3%, Germany down 0.2% and France is down 0.3%. Mkts though, remain in cautious mode.

And US futures? They are UP……Yahoo! JD Vance tells us that the US and India have outlined the ‘terms of a trade deal’. Dow futures up 350 pts, the S&P’s up 52, the Nasdaq up 185 pts, while the Russell is +20. Before the bell – we are due to hear from 20+ companies representing a range of industries – included in that are GE, SYF, CVS, LMT, KMB, PHM, HAL, MMM, VZ – representing Aircraft Parts, Consumer Finance, Health Care Supply Chains, Aerospace & Defense, Personal Care, Homebuilders, Oilfield Services, Diversified Industrials, & Wireless Communications… and AFTER the bell – look for results from a half a dozen companies – but the one that everyone is waiting for is TSLA – so sit tight – and strap in….the clock is ticking.

Just a reminder…..- this is not over yet…. We are now knee deep into earnings season…. and while investors will try to focus on the individual reports and react accordingly….. let’s be honest investors, traders and algo’s will continue to focus on the news out of DC that will continue to dominate the headlines, so expect the turbulence to continue.

The S&P closed at 5158 – down 124 pts… – the action only creating another ‘gap’ in the chart that will need to be filled at some point….My gut says we are not getting any rate cuts, that JJ will not be bullied into doing the wrong thing and it tells me that we still need to retest the lows created on April 7th….at 4835 to see if the bulls defend the position, so for now, we remain in the 4835/5425 trading range.

Escarole and beans

For this you need: Extra virgin olive oil, onion, sliced, 4 cloves garlic, chopped, red pepper flakes, fresh escarole, chopped, washed and dried, chicken broth, cannellini beans, drained and rinsed, s&p to taste.

Add olive oil to a large pot over medium heat.

Once hot, add onions, garlic and red pepper flakes and sauté́ for about 5 minutes until the onions are softened.

Add the escarole and half the broth to the pot. Cover and cook until the escarole is completely wilted, for about 10 minutes.

Remove the cover, add the remaining broth and cannellini beans. Stir to combine and cook uncovered for 10 more minutes. Season to taste.

Serve with fresh grated Parmegiana cheese and toasted Italian garlic bread.