DXY reached our 105 target overnight…and is still dropping.While this reflects the sharp drop in interest rates (thank you equity correction), the US is still a net importer. So a drop in the value of the dollar means higher inflation. Not exactly a good look when folks are justifiably worried about stagflation.

Speaking of which, the ADP jobs report was plenty ugly this morning: +77K versus 145K consensus and 186K prior.There aren’t many companies that enjoy the kind of chaos that characterize the early days of Trump’s second term (the first was chaotic enough.)  It’s no surprise that economic uncertainty is being reflected in the market. Are we winning yet?

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They’re certainly working so far, driving major indices below their 200-day moving averages.

ES reached our 200-day target with ease, followed by an obligatory bounce which failed overnight.

If the tariffs result in a reduction in duties charged by our trading partners, that’s all well and good. The markets wouldn’t bat an eye. Unfortunately, the economic arguments the White House is putting forward are rubbish.

There is no chance of tariffs lowering prices, increasing US jobs or increasing profits. Consider Apple’s recent announcement of a $500 billion investment in the US. Estimates suggest that manufacturing jobs in China pay $5-6 per hour on average.

In the US, similar manufacturing jobs pay about $27 per hour.  And, consider that US employees get healthcare, retirement, overtime and other benefits which are practically nonexistent in China. Other Asian countries pay less – often much less.

Obviously, if those jobs were to come back to the US, prices would definitely rise.

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Futures are moderately higher ahead of tomorrow’s implementation tariffs on Mexico, Canada and China.

There is no question that tariffs are inflationary, regardless of the ludicrous White House narrative.

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PCE came in on target at 0.3% MoM and 2.5% YoY.  Core PCE was up 2.6% YoY.  Although personal income shot up 0.9% (versus 0.3% expected), personal spending declined to -0.2% (-0.5% real) versus 0.3% expected.

In other words, consumers’ spending is in line with declining consumer confidence, home sales and employment and slowing GDP. Combined with elevated inflation, the data continues to hint at stagflation. It leaves the Fed in a box which doesn’t allow for any rate cuts in the next few months.

Meanwhile, stocks continue melting down. COMP has been especially walloped. approaching our 200-day MA target from December 26 [see: Update on COMP – Dec 26, 2024.]continued for members… (more…)

Judging from its price action overnight, NVDA’s earnings and outlook were good enough. As we approach the open, however, it’s obvious that it hasn’t made new highs just yet – not a good sign.

Meanwhile, oil and gas bounced at critical support, allowing the 10Y to do the same as mixed economic data and Fed speakers hit the tape and Trump reiterates the Mar 4 tariff rollout.

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Futures were moderately higher overnight, but have pared some of their gains as we approach the open.

While most traders will focus on NVDA’s earnings due out after the close, it is also important to keep an eye on CL and RB as both are testing important support.

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Futures are slightly negative this morning, with all eyes on both the economic data and NVDA earnings due out this week.

Note that two chart developments – including a Head & Shoulders pattern – have embraced the market’s bearish tilt.

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We can argue about what it means, but Warren Buffett clearly pulled back in the past year. The percentage of cash to equities in Berkshire’s holdings is greater than ever, recently reaching $334 billion.  Read his latest annual letter here.

Meanwhile, SPX tested its 50-day moving average yet again. Futures are up moderately ahead of the open with a great many important economic data points due out this week.continued for members… (more…)

S&P500 futures are flat this morning despite a hiccup in the DJIA related to UNH, down 12% in the premarket following a WSJ article reporting a DOJ investigation into billing practices.

Incidentally, the investigation follows on last year’s report from HHS’s inspector general that UNH was overcharging for medicare advantage patients. That inspector general was one of many whom Trump fired immediately after being reelected.

We saw the same market dynamic yesterday morning following WMT’s disappointing guidance. Bottom line, the market has gone nowhere since the end of January.

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Futures are off moderately following initial claims that slightly exceeded forecasts and Fed minutes which reinforced the expectation that any further rate cuts will remain on hold.

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