U.S. Indices closed notably in the red on Friday on Friday with US equities hit across the board but with the Nasdaq underperforming. The vast majority of sectors were red, with steep losses seen in Communication, Consumer Discretionary and Technology – homes of the mega-cap stocks. The Utility sector was the only sector to close in the green, with Real Estate, Health Care and Consumer Staples also “outperforming” but still red with the haven nature of the sectors limiting the losses. There was likely some influence of month/quarter-end at play but also the market moves come ahead of a key risk week. US President Trump’s “Liberation Day” is on April 2nd where we are expecting the announcement on reciprocal tariffs. Aside from trade/tariff updates, NFP is due Friday with the ISM PMI data also due this week. The major update on trade today was reports from Bloomberg that the EU is planning concessions for Trump after the reciprocal tariffs hit, according to sources. This supported the Euro and weighed on the Dollar. Elsewhere in FX, the Japanese Yen was the clear outperformer due to the risk off trade but also after the hot Tokyo CPI overnight. Elsewhere, focus today was on the February PCE data, which saw the headline in line, but core PCE (Fed’s preferred gauge of inflation) rose above analyst forecasts – albeit in line with Fed Chair Powell’s estimate. Meanwhile, Consumer Spending missed expectations and Personal Income rose above forecasts. Further signs of distress in the consumer came after the Final University of Michigan Consumer Survey for March. Headline sentiment was revised down, while inflation expectations were revised up. This further hit equities with the selling pressure seen extending throughout the session into the closing bell. The risk off tone of trade supported Treasuries with 10yr T-Note futures reclaiming 111-00 with yields trading around 4.26% to end the weak, off the 4.4% peak seen on Thursday. Oil prices settled in the red due to the risk environment but off lows after Reuters sources reported negotiations to resume Kurdish oil exports through Iraq-Turkey pipeline hit a snag. Elsewhere, Lululemon (LULU) shares tumbled after woeful guidance while CoreWeave (CRWV) opened at USD 39/shr, beneath the IPO price of USD 40/shr. Headline PCE was in line with expectations and the prior, rising 0.3% M/M and 2.5% Y/Y. The core metrics, however, rose 0.4% M/M and 2.8% Y/Y, above analyst forecasts of 0.3% and 2.7%, respectively, although in line with Fed Chair Powell’s estimate of 2.8% on the Y/Y print, while the prior was revised up to 2.7% from 2.6%. Although core PCE, the Fed’s Preferred gauge of inflation, it did not change the dial too much. The latest FOMC projections see Core PCE at 2.8% by year-end, suggesting little progress is to be expected this year – likely due to the implementation of new tariff policies from US President Trump, although there is still a lot of uncertainty around the tariffs and their impact. Elsewhere in the report, personal spending rose 0.1% on a real basis and 0.4% on an adjusted basis, beneath the 0.5% forecast with prior revised down to -0.3% from 0.2%, further evidence of some slowdown in the consumer. Personal Income however rose 0.8%, above the 0.4% consensus although the prior was revised down to 0.7% from 0.9%. Although Personal income was hot, the Fed has told us many times that the labour market is not a source of inflationary pressures, so it should not be too concerned regarding the inflation outlook. However, the Fed is concerned about the inflationary impact from tariffs, but if it is a one-time price increase, then Powell has said they would not act to such an increase. The spending cut and tariff uncertainty is also weighing on the economic outlook which is raising fears of stagflation. The latest Atlanta Fed GDPNow model is tracking growth at -2.8%, with the gold adjusted model at -0.5%. Fed Chair Powell reiterated last week that the Fed can cut rates more quickly if the labour market deteriorates or inflation falls too quickly, or they can hold for longer if inflation progress is slow. The University of Michigan final March revisions for Consumer Sentiment were poor, as the headline was revised lower to 57.0, beneath the expected, and prior, 57.9. Forward-looking expectations also dropped to 52.6 from 54.2, while current conditions marginally lifted to 63.8 from 63.5. The report adds that this month’s decline reflects a clear consensus across all demographic and political affiliations, and consumers continue to worry about the potential for pain amid ongoing economic policy developments. Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009. Further adding to the grim report, inflation expectations lifted with 1 year ahead to 5.0% (prev. 4.9%) and 5 year to 4.1% (prev. 3.9%), with the latter hitting a 32-year high. For the record, March’s increase in inflation expectations was seen across all three political affiliations. Fed Member Barkin said that the current “moderately restrictive” policy stance is a good place to be, and if conditions change, the Fed can adjust accordingly. He noted that in the current environment, it is hard to imagine the economy breaking toward significantly more hiring. On inflation and tariffs, the Richmond Fed President warned that the recent period of high inflation could mean tariffs have a greater price impact than in the past, though it’s still unclear where rates will ultimately settle or how businesses and consumers in affected countries will respond. He emphasised that federal government policy is now at the centre of the conversation, with the pace of change creating a sense of instability and uncertainty. Barkin cautioned that this heightened uncertainty could weigh on consumer and business spending, and the Fed is waiting for greater clarity before taking further action. Barkin also commented on the impact of auto tariffs, saying his instinct is that the headline tariff number likely won’t fully translate into higher prices for consumers due to factors like market competition, exchange rates, and other factors. He said that auto companies may struggle to pass on costs, given intense price competition, and that they may have less pricing power than expected. Barkin acknowledged the clear inflationary risks of tariffs but also highlighted possible labor market implications if companies respond by cutting costs. He expects any resulting softness in business demand to show up more in capital spending and hiring decisions. Barkin is not as confident that lowered sentiment will change consumer spending, as he is not yet seeing it in the credit card data. He understands the argument that tariffs would involve a one-time shift in the price level, but he will be watching carefully on how businesses and consumers react. Barkin stressed to not start with the assumption that this will involve a one-time change in prices. Elsewhere, Oil closed 0.8% lower while Gold was firm, closing at a new all-time high with a gain of 0.9%.
To mark my 3150th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 790 points on Friday and is now ahead by 2044 points for March after closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 1.97% lower at a price of 5580.
The Dow Jones Industrial Average closed 715 points lower for a 1.69% loss at a price of 41,583.
The NASDAQ 100 closed 2.61% lower at a price of 19,281.
The Stoxx Europe 600 Index closed 0.77% lower.
Last Friday, the MSCI Asia Pacific closed 1.2% lower.
Last Friday, the Nikkei closed 1.81% lower at a price of 37,120.
Currencies
The Bloomberg Dollar Spot Index closed 0.31% lower.
The Euro closed 0.4% higher at $1.0822.
The British Pound closed 0.4% higher at 1.2935.
The Japanese Yen rose 0.3% closing at $149.80.
Bonds
Germany’s 10-year yield closed 5 basis points lower at 2.73%.
Britain’s 10-year yield closed 2 basis points lower at 4.71%.
U.S.10 Year Treasury closed 10 basis points lower at 4.25%.
Commodities
West Texas Intermediate crude closed 08% lower at $69.36 a barrel.
Gold closed 0.9% higher at $3084.10 an ounce.
This morning on the Economic Front we have German Retail Sales at 7.00 am, followed by U.K. Money Supply and Net Lending to Individuals. Next, we have German CPI at 1.00 pm and U.S. Chicago PMI at 2.45 pm. Finally, we have the Dallas Fed Manufacturing Index at 3.30 pm.
Cash S&P 500
For three reasons it is very difficult for the U.S. Dollar to weaken while the S&P was trading lower:
- After 2008, the Eurodollar System blew up in size and never looked back.
- The U.S. aggressively swallowed global trade surpluses, and in exchange became the epicenter of all global financial flows into Treasuries and U.S. Stock Markets.
- Policy makers applied growth friendly disinflationary policies and politicians postured towards defending Pax America on the geopolitical front.
With such a combination of factors the Dollar tends to appreciate during risk-off events. A portion of the $12 trillion of U.S. Debt issued by foreign entities has to be refinanced in any given year, and a risk off environment which threatens to slow down global trade means all foreign entities rush to buy Dollars to service their debt. This means that net-net the Dollar goes up in risk-off events. The only periods when the Dollar weakens alongside the S&P 500 were 1998, 2002 and the first half of 2008. Today, U.S. policymakers seem to be doing all they can to generate another one. On the macro front the U.S. Administration is injecting a large amount of uncertainty. The ‘’no-visibility’’ approach from President Trump on tariffs brings unpredictability, meaning it is also nearly impossible for American companies to plan capital expenditures and hiring given there is no visibility on tariffs. To that business uncertainty, you need to sum up the leaked White House memo to the Washington Post recently which aligns with the recent Musk interview highlighting a 25/35% cut to the Federal Workforce by the end of May. We are now witnessing a very rare experience to a month when the German DAX is higher and the S&P down and we have just experienced it. If you take a step back, you realise that foreign investors have accumulated a gigantic amount of U.S. Securities since 2010. Trade surpluses for countries like Germany and Norway which then recycled these excess Dollars back into U.S. Treasuries and stock markets. If some of these ‘’ Foreign Whales’’ decide to reduce their exposure to U.S. Assets? It would make sense given the new American geopolitical stance, the non-supportive policy mix, business uncertainty from tariffs and still elevated valuations. All of the above risks achieving a weaker Dollar and lower Treasury Yields but at the expense of the economy and stock market. This is a scary prospect and one I will not take lightly. I am still happy to be long the S&P given how oversold the technical are short-term, but I will reassess on any upcoming relief rally. The past two trading sessions have not been positive for my Platinum Service. On Thursday, the S&P traded the whole of my buy range for a 5734 average long position before stopping me out of this trade at 5699. Subsequently, I emailed my Platinum Members to buy the S&P again and I am now long at 5643 with no stop or T/P level for now. If this view changes, I will be back with a new update for my Platinum Members.
EUR/USD
My latest 1.0740 long Euro position worked well as the market rallied to my 1.0800 T/P level on Thursday and I am still flat. Today, I will again be a buyer from 1.0690/1.0760 with a higher 1.0615 ‘Closing Stop’. If I am taken long, I will have a T/P level at 1.0820. I still do not want to be short the Euro at this time.
Dollar Index
On Friday morning the Dollar sold off to my initial 103.90 buy level. I am long with a now lower 104.20 T/P level. I will continue to look to add to this position at 103.10 while leaving my 102.60 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Russell 2000
Overnight, the Russell finally sold off to my second buy level at 2005 for a now 2035 average long position. I will leave my 1945 ‘Closing Stop’ unchanged. I will now lower my T/P level to 2070. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash FTSE
No Change: The boring sideways trading in the FTSE shows no sign of ending anytime soon despite the worsening economic and political situation in the U.K. I am still flat the FTSE market as I continue to look to buy the market on any dip lower 8530/8600 with the same 8465 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 8655. Despite the higher Gilt Yields I still do not want to be short the FTSE at this time.
Dow Rolling Contract
Wrong. On Friday, the Dow traded the whole of Thursday’s buy range for a 41980 average long position before stopping out of this position at 41695 and I am still flat. As I go to press the Dow is trading lower at a price of 41400. We have support below from 40900/41150 where I will be a small buyer with a 40695 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 41620.
Cash NASDAQ 100
Wrong! On Thursday the NDX hit my stop at 19815. Unfortunately, I bought the NDX again on Friday at an average price of 19620 as emailed to my Platinum Members. I am still long with no stop. I will have a T/P level at 19750 on this position. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
The Bund never came to close to Thursday’s buy range and I am still flat. Much weaker than expected economic data on both sides of the Atlantic saw yields fall as the markets ignored the impact of the higher PCE data. The Bund has support from 127.80/128.60. I will now raise my buy level to this area with a higher 127.95 ‘Closing Stop’. If I am taken long, I will have a T/P level at 129.20.
Gold Rolling Contract
Gold closed at yet another all-time high on Friday. This move higher saw the whole of my sell range triggered for a now 3082 average short position. I will leave my wider 3111 ‘Closing Stop’ unchanged while raising my T/P level to 3067. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Silver Rolling Contract
Silver followed Gold higher on Friday and I am still flat. As I am now short Gold, I will raise my Silver buy level to 32.80/33.60 with a higher 31.85 ‘Closing Stop’. If I am taken long, I will have a T/P level at 34.30.
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