S&P hits another record as markets shrug off fear – Defensive sectors lead the charge

The S&P closed at an all-time for the 3rd time in 2025…. moving further into ‘unchartered’ territory as investors look past any tariff threats – you know the ones that the legacy ‘media’ was creating all the hysteria around? The ones that were going to cause the economy (and the stock market) to crash? The ones that were going to lead to trade wars on every continent escalating all forms of economic instability. I could go on, but you get the picture, don’t you? Apparently, investors are NOT concerned at all about any of it as they take stocks higher and higher, because the economy remains resilient and robust. And then toss in the fact that latest FOMC mins did nothing but confirm what I have been saying all along….the FED mins officially put any rate CUT on hold until the (stubborn) inflation picture improves – every member voted for a pause…….Period, FULL STOP!

Now recall one thing….inflation was moving lower, we were getting closer to that elusive 2% target…..but then recall how they cut rates by 10% or 50 bps in September (weeks ahead of the Presidential election) – in a move that many of us thought was a mistake (and political) – Why? Because there were still hints of underlying inflation – I said, and many others did as well….Images of a repeat of the late 70’s came to mind for all of us baby boomers – when the FED prematurely cut rates because they thought they had slayed the monster, only to realize all they did was ‘feed the beast’ – those premature cuts caused inflation to not only rear its ugly head, but caused it to come back with a vengeance, surging higher than it had been…….We discussed this, go back and look at my comments….I was like a broken record……and so – here we are.

And you know why? Because inflation is not in decline…..PPI for the last 3 months have been ticking up, CPI last month ticked UP – 3 month readings on both PPI and CPI are now running at 4.5%.....that is UP not DOWN ..so for all of those people that keep telling us that we are going to see multiple rate cuts this year – I would say – WAKE (the….) UP……. Now, while the markets are still pricing in a single rate cut in September (pushed back from July) with the possibility of a second at some point later in the year…. I would say – Don’t go betting the ranch on that just yet…….!

Now – to be fair – stocks were a bit weaker in the morning – after creating the second new high of 2025 on Tuesday – It just felt like we needed to digest the recent push…….which btw would be good for stocks…but like Tuesday, stocks backed off and then gained traction late in the day only to close mostly positive territory…. By the closing bell – the Dow added 72 pts, the S&P up 15 pts, the Nasdaq added 15 pts, the Russell lost 8 pts, the Transports gave up 257 pts, the Equal Weight S&P up 15 pts while the Mag 7 Index added 65 pts.

Now what is of note is that the most ‘Defensive Sectors’ were the beneficiaries of the action (and that tells you something)…..Consumer Staples gained 0.8%, Utilities + 0.5%, Healthcare + 1.3%, Energy + 0.8%...Note – there is nothing ‘sexy’ (like the Mag 7) about any of those sectors, but they do play an important role in portfolio construction – especially if it appears to be cloudy. Ytd – Staples are up 3.8%, Utes + 6%, Healthcare + 6.5% and Energy +7.5%.... vs. the S&P up 4.5% - capisce?

Now Industrials were up 0.1%, Financials & Technology were flat, Communications were up by 0.1%, Real Estate gained 0.2% while Consumer Discretionary and Basic Materials ended in the negative column…down 0.1 and 1.2% respectively.

Homebuilders got banged – down 1.3% after Toll Brothers (TOL -5.8%) reported a drop in revenues, offered a soft forecast while saying that ‘rates are CRUSHING demand’….Ok – let’s not set our hair on fire….4.25% fed funds are not usurious and 7% mortgages are not ‘unheard of’…..the issue is prices of these homes….not rates and the prices are outrageous because the FED left rates at zero for way too long… The FED created asset inflation by keeping rates at zero for 15 yrs….so now what has to happen is that prices have to come down to adjust to rates, not the other way around…. – it’s not rocket science…..….cut the prices and watch what happens to demand….because there is plenty of wiggle room – look I built a Toll Brothers home in NY – I am well aware of the ‘fat’ that goes on in that process….but that’s another story.

Defense and Aerospace got banged – XAR – 0.8%, after Trump suggested that he would like to cut 8% out of the Defense budget for the next 3 yrs – causing one of the favorites – PLTR (big Defense contracts) to get crushed…..losing 10% or $12.50 – which btw – may not be a bad thing….PLTR has been on fire….was up 500% since June 2024….that’s 8 months….2 weeks ago it gapped UP $19 …leaving a gaping hole in the chart that I would love to see filled…..meaning it would need to trade back down to $83.50 to fill it….That might be a big ask – but we can always hope can’t we? (LOL).

Bonds ended the day slightly higher…the TLT +0.1% while the TLH gained 0.15%. The 2-yr treasury is now yielding 4.25% while the 10 yr is at 4.52%.

Gold continues to churn at the highs……this morning it is up $33 at $2969…. same story.

Oil –continues to hug the trendlines…. the short and intermediate term trendlines converging around $72…. - WTI trading at $72.20. Yesterday the API reported that crude stockpiles rose by 3.3 mil bpd while OPEC + reconsiders their next move – suggesting that they will in fact increase production come April (last week – the word was that they would NOT increase production….) …. even in what might be a saturated market – increased production will send oil prices lower, but not because of waning demand….in fact – the rumor this morning is that demand in China is UP! Can you believe that????

This morning US futures are down…... Dow down 85, the S&P’s down 12, the Nasdaq down 50, while the Russell is down 6.

There isn’t any eco data that is going to drive the action today…. but tomorrow we will get manufacturing and services PMI’s…both expected to remain in the ‘expansion zone’. We will also get Existing Home Sales – and they are expected to be weaker…but let’s see if the TOLL Brothers commentary rings true…Remember – it is easier for existing homeowners to cut their price – especially IF they have to sell it….

Next week – will bring us New Home Sales – and they are also expected to be down 2.7% but again, is that because prices are too high or because rates are too high? It’s like the chicken and the egg…. Which came first? I’m in the ‘prices are too high camp’……but let’s see…..And btw – don’t forget – TOLL Brothers can ‘throw in’ some ‘freebies’ to make it look like you are getting more value for the money…..who are they kidding? Stop whining.

European markets are up……as investors there assess the latest datapoints – and the possibility that the FED does nothing. Earnings season is coming to an end and there are no eco reports today.

The S&P closed at 6144 up 15 pts…. Again, this morning – futures are pointing lower…. I still think it feels a bit tired here….so I expect the churning to continue in the 6000/6150 trading range.

WMT reports and beat on all metrics….…..but they are warning about the future (tariffs)……blah, blah, blah…..the stock is trading down 7% in the pre-mkt…WMT is up 82% in the last 12 months…so let’s not get crazy.

Grilled pork chops with sweet vinegar peppers

This is an easy dish and not one that you might think of readily...but make it easy for yourself.... for this you will need only 4 things really. You need center cut bone-in thick pork chops, olive oil, sweet vinegar peppers (you can use hot if you prefer), s&p and chopped scallions.

Preheat the grill.

Rub the chops with olive oil, salt and pepper - Place chops on grill and sear for about 3 mins then turn over and continue cooking for another 4 or so mins on reduced heat. Do not burn them.

While the chops are cooking - open the jar of sweet vinegar peppers, slice in half and sauté quickly with some of the juice in a sauté pan - really just to warm them up - you are not "cooking them".

Now remove the chops from the grill - place on a warmed plate. Top with the sweet vinegar peppers. Serve a lg salad - maybe mixed - romaine, some spinach, Boston bib, sliced red onions, and tomatoes. Dress with a simple lemon/olive oil mix.