(Justin Vaughn, Editor, Options Trading Report)
Nearly all sectors and all stocks finished Friday lower wiping out the week’s gain and setting the stage for the upcoming week. The Dow Jones Industrial Average dropped 438 points or 1.7% while the S&P 500 was off 1.7%. The heavy technology Nasdaq Composite was the big loser, falling 2.8% as the Magnoficient 7, chips and artificial intelligence stocks led the cascade downward–the biggest drop this year. Contributing to negative news, existing home sales dropped 4.8%, while retail sales fell 1% in January. “The data is just piling up day after day,” said Jay Hatfield, chief executive at Infrastructure Capital Advisors. As the markets closed lower, the 10-year Treasury note weakened, dropping 0.840 to settle at 4.419%. Many investors and traders claimed profits in the technology arena, moving ‘heavy capital’ into bonds in late Friday trading. The two-year Treasury bill finished at 4.192%. Oil prices slid lower, finishing the week near $74.00 a barrel, as worldwide reserves continued to build higher. Many oil specialists are looking for barrel prices to float below $70.00. OPEC+ members, with Saudi Arabia at the helm are discussing production slow-downs to ease surplus build-ups.
All indexes floundered Monday, unable to retrench after last week’s ending selloff. President Trump’s continuing comments on imposing tariffs have clouded many investors’ thinking, as ‘safe haven’ investing is forcing the bond market. Focus on settling the Russian/Ukraine war has also come to the fore, as President Trump leads negotiations through third parties with his many stipulations, and mineral demands. As the recent market and indexes have demonstrated, investors and traders alike are cautious about market direction and allotment of funds. Market instability continued Tuesday, as the Nasdaq Composite lost another 1.2% or 237 points as the heavy-tech index lost for the fourth day in a row. The Dow Jones bucked the trend as capital flowed into value stocks and the Russell 2000 with its smaller value companies. UBS chief investment officer, Solita Marcelli noted, “While volatility may persist, we expect more to go into stocks and view equity pullbacks as a buying opportunity.” Oil continued to weaken, falling to a new recent low of $68.93 a barrel. Bitcoin and cryptocurrencies in general were weaker, with Bitcoin trading below $85,000 early Thursday morning. The 10-year Treasury note was lower, dropping to 4.29%, down the past 7 of 8 days, lowest since last December. President Trump announced Wednesday that he would enact tariffs on the European Union automobile manufacturers of 25%, giving no time table. Stocks broke a four day slide with the Nasdaq and S&P 500 finishing higher, however the value Dow Jones index fell 188 points. “I think folks woke up feeling a little better about AI and a little bit better about risk. Then I think the broader macro [environment] and the threat of tariffs tempered that,” said Michael Brenner, senior research analyst and asset allocation strategist at FBB Capital Partners.
Is The Bear Hibernating?….Did President Trump wake-up the sleeping bear? Ruffled investors and traders are becoming pessimistic, with over 47.3% expecting stock prices to fall over the course of 6 months according to the latest survey from the American Association of Individual Investors, that being “the highest level since 2023.” Waiting for President Trump to “pull the trigger” on enacting tariffs has unsettled the market. Will the Bear wake up….?
RUMBLINGS ON THE STREET
Ed Yardeni of Yardeni Research, WSJ – “The mood is confused. They don’t know which policies are going to stick and which ones aren’t. Isn’t necessarily bearish, it is just not bullish.”
Adam Turnquist, chief technical strategist of LPC Financial, WSJ – “These sentiment gauges are a factor of how spoiled we have been over the last two years. There is a lot of optimism baked into this year, and I think some of that will need to reset as we move ahead.”
Tomasz Tunguz, a venture capitalist and founder of Theory Ventures, WSL – “Every keystroke in your keyboard, or every phoneme you utter into a microphone, will be transcribed or manipulated by at least one AI.” (Artificial Intelligence)
Lawrence Yun, NAV’s chief economist, WSJ – “In the month of January, this loosening of inventory did not bring additional buyers because of high mortgage rates. Customers are essentially tapped out.”