Nasdaq surges on cooler-than-expected CPI, though tariff tensions and Fed uncertainty cloud the rally

• Dow down, Nasdaq up Transports down, S&P up.

• CPI comes in softer – that’s good but does not change the FED narrative (yet).

• PPI out at 8:30.

• Trade tensions remain high/Vlad has a decision to make.

• Oil down, gold up, bond down, yields up, Eggs down, Mortgages down.

• Try the Lemon Ricotta Rigatoni.

Nasdaq surges by 1.25% after the February CPI report showed that inflation cooled even more then the estimates….headline CPI m/m came in at +0.2% down from +0.5% and below the estimate of +0.3%, and the y/y number ….that came in weaker as well….2.8% down from 3%. Core CPI – ex food and energy m/m came in at +0.2% down from +0.4%....y/y figures came in at +3.1% down from +3.3% - these reading the lowest they have been since 2021…and this was welcomed news for sure….Add to this the recent declines in the prices of eggs (down 15% in 2 weeks), gasoline (oil down 13% since Trump took office), and mortgage rates (currently at 6.25% down from 7%) and you can see why Americans are ‘almost’ giddy.

But on the other side – we continue to get the hit by conflicting headlines that will continue to cause angst – while the CPI was a positive – it does not change FED policy just yet……And then Chucky Schumer – making it clear that he and the Democrats will vote NO on a CR (continuing resolution) to keep the gov’t open past tomorrow…………..Retaliatory tariff headlines coming out of Canada and the European Union against the US only caused Trump to remind everyone that he has every intention of hitting anyone that charges the US with tariffs by hitting them with ‘reciprocal tariffs’.

News that Marco Rubio was in Moscow trying to ‘seal the deal’ and bring an end to the war in Ukraine also added to the excitement…..but let’s be clear – Vlad has NOT agreed to anything just yet…..although Marco has made it clear that he could face severe economic consequences if he continues to stall. Trump echoing this stance threatening ‘significant financial measures if Vlad drags his feet.

Now while stocks did rally across the board out of the gate it ended up being a ‘head fake’ with a split right down the middle. – the Dow lost 83 pts, the Transports lost 108 pts and the Equal Weighted S&P gave up 32 pts….while the S&P gained 28 pts, the Nasdaq gained 212 pts, the Russell added 3 pts and the Mag 7 index added 522 pts – leading the group advancing by 2.25%.

Of the 11 sectors – it was a mixed picture…..Tech, Financials, Consumer Discretionary, Communications and Energy all ended the day higher while Industrials, Utilities, Consumer Staples, Healthcare, Basic Materials, and Real Estate ended up being a drag on the group.

The value trade was down 0.5% while the growth trade was up 1.5% (growth = tech). The divy aristocrats (think NOBL ETF) fell by 1.5% as investors and traders went for ‘sexy’ not boring….think the Mag 7 – all higher, but remember – they have also been the ones to get hit over the head over the past 2 weeks – so that does make sense (think bargains) even if Cramer thinks that TSLA and NVDA are now meme stocks! How ridiculous is that? Meme stocks? Really? So now he is putting NVDA, TSLA in the same category as GME, AMC and BBBY? Whatever!

Bonds gave back some of their gains sending yields up – the TLT down 0.6% and the TLH down 0.5%......….2 yr is yielding 3.988%, 10 yr is yielding 4.32% and for ‘savers’ that do not want the risk of equities that too is welcomed news….

The VIX – fear index fell by 10% as stocks moved higher…. this morning it is down another 0.5% - trading at 24.35…. which is still elevated, reflecting ongoing fear, but it is down from the highs earlier this week…. The VIX remains well above the trendlines – and that suggests ongoing nervousness….and like I said yesterday on Varney & Co on Fox Business – this is NOT over just yet…. the headlines remain conflicted and so the markets will remain anxious.

Oil continues to trade in a tight range….$66/$70….this morning we learned that the IEA is predicting a surplus of 600k barrels/day and this is BEFORE OPEC+ announced that they are going to increase production, and if that happens – we could see oil break below $66 leaving the next real level of support closer to $55…..think about that? Think about what $55 oil would do to the global economy…..And to be clear – this decline in oil is not because I think we are going into a deep recession – on the contrary – I think it is just a simple Econ 101 Supply/Demand discussion.

Gold BROKE OUT of the triangle we have been discussing ($2915/$2930) – yesterday it advanced by $22 to end the day at $2,947 and it’s up another $6 this morning at $2,953…..…..I continue to believe that it is the lack of clarity on tariffs, trade tensions and global conflicts that are ultimately driving this move….….but do not discount ongoing central bank buying and the sudden re-emergence of the big banks forecasts of $3000+ gold by year end…..in fact yesterday - McQuarie came out pushing $3500 by the 3rd qtr.….that’s another 16% from here and it is already up 12% this year…..and that is on top of the 20% move in 2024! In the end – it’s a ‘safety trade’…..Not so bad, huh?

Eco data today is all about the February PPI – prices at the Producer Level…and the expectations is for it to show a decline as well….now, I do not expect any of the tariffs to be reflected in today’s report….so let’s see…If the PPI comes in weaker than expected then I guess we will see the celebrations kick off again.

Now US futures are not celebrating just yet….Dow futures up 40, S&P’s up 3, the Nasdaq is down 4 and the Russell is flat…..but to be fair – they are off their lows from overnight….so maybe they are ‘getting ready’ to advance……in addition to the PPI we are also waiting on Initial Jobless Claims and Cont. Claims….both expected to be in line…..no real surprises – no jump in claims that might signal concerns………tomorrow is all about the U of Mich sentiment surveys…and inflation expectations….(which have come down…and that’s good).

European markets are up across the board…..Spain in the lead up 0.6% while Italy is carrying up the rear – only ahead by 0.1%. There are no eco data reports to point to…. it’s just the ongoing thrashing back and forth.

The S&P closed at 5599 – up 28 pts….and if today’s PPI’s is a positive then expect stocks to move higher…….but do not expect that the anxiety is over just yet…..I think we continue to thrash around because there was a fair amount of damage done to the markets over the past couple of weeks….that needs to be repaired and that only happens with time. I think we trade here for a while to repair the damage as the ‘issues’ get resolved (or not) and that will determine where we go next. If the issues do not appear to be resolving…. then the thrashing continues, if they do resolve – then off we go….in the end – patience is a virtue.

While I do think we are closer to the bottom than not – I do not think we will have that V type recovery…..… I continue to believe that the future is bright, so stick to the plan, keep allocating monies to your portfolio and take advantage of the sale. The goal is not to panic.

Get comfortable with being a bit uncomfortable, stay defensive while being cautiously optimistic…. Know what you own and why you own it…. remain diversified…..

Lemon ricotta rigatoni with arugula

This takes you all of 18 mins to make and boy is it good.

For this you need – 1/2 lb. of Rigatoni, Fresh Ricotta, Fresh Grated Parmegiana, lemon zest, fresh squeezed lemon juice, and fresh arugula (adds a bit of punch).

Bring a pot of salt water to a rolling boil.

Add the pasta – cook until aldente – 8 mins or so.

Now – add the cooked pasta to a warmed-up sauté pan. Add a ladle of the pasta water (tears of the Gods), fresh ricotta, handful (or two) of the parmegiana, zest of 1 lemon and maybe 2 tbls of lemon juice. Mix well… Once the ricotta melts into the warmed pasta – add in a handful of fresh arugula. Mix well and serve immediately in warm bowls.

*If it appears to dry – just add a bit more of the pasta water – you want it moist NOT soupy. Capisce?