JPMorgan crushes it, markets swing wildly as trade war tensions and Fed patience shape economic outlook

So, on Wednesday – Stocks came ‘roaring back’ in that historic 10% up move, while Thursday was a different story……. the ongoing drama in DC causing more angst for the markets….. this morning’s WSJ runs with this –

TRADE-WAR JITTERS BATTER STOCKS

And so that ‘rip your face off rally’ on Wednesday turned into another meltdown on Thursday….by the closing bell - the Dow gave back 1014 pts or 2.5%, the S&P gave up 188 pts or 3.5%%, the Nasdaq lost 737 pts or 4.3%, the Russell down 81 pts or 4.3%, the Transports lost 587 pts or 4.25%, the Equal Weight S&P gave up 220 pts or 3.3% while the Mag 7 got hammered again – down 1150 pts or 5%!

It is now a tit for tat reaction…..we raise rates on China (currently at 145%) and then China raises rates on us (currently now at 125% beginning tomorrow) – all while 75 countries are lining up at the WH to negotiate new trade deals… The ongoing trade tensions continue to escalate only causing more uncertainty for investors and US companies as both sides try to assess the impact on growth.

Some believe that the trade war will bring ‘long lasting damage’ to the global economy while others are not convinced. And while Trump has paused the tariffs for 90 days – that has not caused companies to feel any better – we have already started to see some companies hit the pause button on orders while others are unable to offer any forward guidance as earning season begins in earnest today.

What is important to note here is that China is becoming more and more isolated – Europe & Australia will not partner up with them to ‘avoid’ US tariffs. Instead, both are pursuing independent strategies to protect their own interests, avoiding full alignment with either side while maintaining economic ties with China where it benefits them. The EU is boosting trade talks with India, ASEAN (Association of South East Asian Nations), and Mercosur (Latin American Trade Bloc – Brazil, Argentina, Paraguay and Uruguay) to reduce reliance on both China and the U.S. Australia is also steering clear of partnering with China in the trade war. While China remains its largest market, Canberra has explicitly rejected calls to “join hands” with Beijing against U.S. tariffs. Instead, Australia is diversifying—restarting free trade talks with the EU for a potential $6 billion boost and eyeing deals with Indonesia and India. This isn’t a rejection of China but a hedge against over-dependence, especially as this ongoing trade war risks disrupting global markets.

Now on the Economic front – yesterday we got the March CPI – Consumer Price Index report showed inflation cooling more than expected, with a y/y increase of 2.4% (down from 2.8% in February) and a m/m decline of 0.1%. Core CPI, excluding volatile food and energy, rose 0.1% monthly, also below forecasts of +0.2%. This was broadly seen as positive news, suggesting inflation was easing despite looming tariff concerns. Market reactions? Investors, traders and algo’s could care less, because many are expecting inflation to rear its ugly head if these tariffs really go into effect. Today it is all about the PPI – Producer Price Index – and that is expected to show a slight increase in prices at the producer level – which I do not think will create any new drama – unless of course that ‘slight increase’ is bigger than expected.

And today – starts the official launch of the ‘Beauty Pageant’…..otherwise known as earnings season, Now, expectations for the S&P are for growth to be up 7.5% y/y which is down from the January estimate of up 12% as analysts have refined their outlooks. And it is the BIG Banks that are the first to walk the runway….

And who better to kick off the pageant - than our friend Jamie Dimon – CEO at JPM (a DOW stock and my favorite bank) …. Consensus estimates peg EPS at around $4.61 and they reported $5.07/sh – CRUSHING the estimates….……, Revenues of $46.01 billion – also CRUSHING the estimates of $44.39 billion. Investment Banking a bit softer due to a slowdown in IPOs and bond deals amid trade war uncertainty, though sales and trading CRUSHED it coming in at $3.81 Bil vs. the estimate of $3.18 billion. And Loan Loss Reserves? Watch for what they say about credit losses, which are expected to rise ‘modestly’ because what that tells you is that they are expecting a rise in defaults. The provision for losses is $3.31 billion vs. the estimate of $2.7 billion…. Hello?

JPM is trading up $3 at $231/sh…. We have also heard from BLK (beat), WFC (beat), BK (beat) and it’s a big bank bonanza! US futures shot higher…. Dow futures are up 253 pts, the S&P up 40 pts, the Nasdaq up 142 pts and the Russell is ahead by 10.

And in the end – all this does is confirm what I have been saying for 2 weeks now…….the markets are very anxious and the reaction to every headline is dramatic – In the end – this is not over yet….Earnings will cause some distractions - investors will try to focus on the broader economic conditions, the earnings data and more importantly – the earnings guidance. The news out of DC will continue to dominate the headlines, so expect the turbulence to continue.

Bonds lost ground yesterday…the TLT and TLH both down a lot…. TLT lost 2.75% while TLH gave back 1.9%, leaving 2 yr yields at 3.85% and the 10 yr at 4.42%.

Oil remains in the $60 range….as it too tries to settle down – remaining in the $55 - $68 trading range.

The US dollar has also been collapsing…..it is down 10% off the January high and is down 4% since April 2nd …trading at 99.92 - .taking it below the lows of March, August, December of 2023 and September of 2024….leaving it without any support until we get to the 96 level. Now a weaker dollar is good for America. It boosts exports as US goods become more competitive, it supports corporate earnings – weaker dollar boosts the value of foreign profits, and it eases debt for exporters….

Gold is once again surging…up $56 – now trading at $3,235/oz…..up 10% THIS WEEK. The primary driver? The renewed safe-haven demand sparked by escalating U.S.-China trade tensions. Today’s surge, only reigniting fears of economic fallout, inflation, and a broader trade conflict with China. We can only estimate where it goes now, and the chart line drawn from the highs of July 2024 – suggest that $3255 should be the top – which btw – we already tested earlier this morning.

The S&P closed at 5268 – down 188 pts. Look – stocks are all over the place as the algo’s continue to create chaos…My sense is that we are closer to a bottom than not – which only means we will retest the lows of 4835 at some point….to see if the buyers defend the position…We remain in the 4835/5775 trading range…Yes that is wide…and yes you can drive a Mack truck thru it…but there is still a fair amount of instability in the trade talks, never mind all of the internal damage done to the markets over the past 2 weeks, so expect the volatility to continue until such time we get clarity on trade, clarity on economics, clarity on earnings and clarity on FED policy…. While the markets are still pricing in 3 or 4 cuts – others (me included) are not sure they should do anything, unless of course the macro data starts to really fail….at the moment it is NOT… Boston Fed President Suzy Collins agrees with me! (LOL) Suggesting that while renewed price pressures from tariffs could delay cuts, she is not ruling out easing later this year if conditions align. Collins has also highlighted upside inflation risks and downside growth risks, reflecting a balanced concern about stagflation. Overall, she sees the economy in a good place but stresses patience, with no urgency to cut rates immediately.

Spaghetti all’ Assassina with Burrata… Classic Bari Style…

This is burnt pasta…..it is so dam good.

For this you need – water, tomato puree tomato paste, s&p, Spaghetti, garlic, red pepper, crushed tomatoes, and Olive oil.

First you need to make a tomato broth… Bring a pot of water to a boil – add in 1small can of tomato paste and 1 can of tomato puree. Season with s&p. Keep in on Med so that it is hot.

In a large sauté pan – add in a generous amount of olive oil, sliced garlic and the crushed red pepper. Now add in the crushed tomatoes, season with s&p.

Now – lay the spaghetti in the sauté pan and turn the heat up to med hi. Now – don’t touch it – let it burn a bit and then turn and burn a bit more.

Now start to add in the broth – 2 ladles at a time until the pasta is cooked.

Now – when it is cooked – plate in and then place a creamy burrata cheese right on top.