Economic Chaos – by Justin Vaughn – Options Trading Report

(Justin Vaughn, Editor, Options Trading Report)

A Roller-Coaster ride last week… Unpredictability, Precariousness, and Changeability roiled the market all week. Finishing Friday, the indexes were static, ending the week just below flatline. A ‘valiant’ burst of buying late Friday couldn’t save a lost week. The S&P 500 fell 3.1% for the week ended March 7. The Nasdaq Composite dropped 3.4% and the ‘bread and butter’ Dow Jones Industrial Average lost 2,4%. The smaller value stock Russell 2000 followed the indexes downward. The flood of President Trump’s administration’s unpredictable tariff policies have unnerved the market and unsettled investors and traders, many of which have pivoted capital placement. As was the case last week with serious high-tech profit capital positioned into dividend paying stocks and Treasuries. “So much is happening from a news headline perspective,” said Alex Coffey, a senior trading and derivatives strategist at Schwab. “There have been several moments in the past two weeks when we’ve had pretty sizable bounces in some megacap tech names but every single time they’ve been getting slammed back down,” As the week finished Treasury yields on the 10-year note ticked up to 4.317%. Comments by Jerome Powell (“wait and see” approach to interest rates) nudged the indexes.

Monday opened to a “bloodbath” as the exchanges tumbled. The Dow Jones Industrial Average ‘sunk’ nearly 900 points, while the Nasdaq Composite lost 4% in an ‘epic ’opening. All ‘darlings’ of tech, starting with the Magnificent 7 and ‘sister likes,’ led the sell off with heavy volume and nearly a trillion dollar devaluation as capital flowed into ‘safer havens’ value and dividend payers and Treasuries. Much of the significant gains since the President’s election win have now been wiped out, as the heavy focus on tariffs has all but turned the indexes downward. Stocks again dropped early Tuesday morning trading, reacting to President Trump’s tariff maneuvering, with investors fearing the worst. As the day wore on, losses were parred, as the exchanges still finished in the red, The’blue-chip’ Dow Jones lost 478 points, negative 1.1% while the S&P 500 and Nasdaq lost 0.8% and 0.2% respectively for the day. All three exchanges suffered their worst 2 day slide in 7 months. Recent fears of tariff enactments,and U.S. government down-sizing ( spending cuts) have instilled fear amongst all investors. “This is more than just a brief pullback that we’re going through,” said Katie Stockton, founder and managing partner at Fairlead Strategies. President Trump’s retaliationTuesday against Ontario’s Premier for imposing a 25% tariff on electricity to Michigan was to immediately increase the steel and aluminum tariff to 50%. Later in the day Ontario’s Premier Doug Ford, retracted saying he agreed not to impose any tariffs on power, rescinded the tariff as did President Trump’s proposed 50% increase. Tit for Tat? Gold continued strong as oil edged up 3% to $66.75 a barrel, still down from the low $70’s. Stocks rebounded Wednesday, stabilized by a better than expected CPI (Consumer Price Index) and an unexpected positive Jobs report earlier in the week. Recession concerns are building on tariff enactments, becoming a major impediment affecting the fragile market.

New home and existing home prices and high mortgage rates(near 7%) continue to befuddle buyers. Existing home sales for January dropped 4.9% according to the NAR (National Association of Realtors). 2024 new home sales dropped to its lowest level since 1995 with 2025 a strong possibility of equalling it. The average existing home sold in January was listed for 41 days, the longest span since 2020, according to NAR stats.

RUMBLINGS ON THE STREET

Ronald Templer, chief market strategist at Larzard, Barron’s – “[U.S.] markets have just begun to digest the potential negative impacts of trade policy uncertainty and are likely to remain vulnerable to additional downside,” he wrote in an e-mail to Barron’s.

Jim Tobin, CEO of National Association of Realtors, Barron’s – “The only way that we are going to solve [high home prices] is to put more supply on the market.”

Shelby McFaddin, investment analyst at Motley Fool Asset Management, WSJ – This is the first time we’ve had an administration pretty much say with a straight face…” The objectives are going to cause pain.”

Adrain Helfert, chief investment officer of Westwood’s alternative and multiasset portfolios, WSJ – “Right now, the concern on growth is impacting the market more than inflation. We could see growth rates drop down to recessionary territory.”