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Hot Tips
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The Straits are Still Closed,
with only four ships clearing the waterway on Wednesday. Only Iran’s allies are allowed through, and even they must pay $2 million each in crypto, or $1 a barrel of oil. I’d rather not be buying stocks based on “The straights are going to open.”
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Weekly Jobless Claims Jump to 219,000,
up 16,000. Core PCE price index rises 0.4% for the second straight month; up 3.0% year over year. The Iran War has increased the downside risks to the labor market, and it's too soon to assume that the ceasefire announced earlier this week will last and to say those risks have abated.
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Investors Tried to Pull $20 Billion from Private Credit Funds
in Q1 as panic in the asset class runs rampant. The redemption requests hit huge groups in the sector, including Apollo Global Management, Ares Management, Blackstone, Blue Owl, and KKR, according to FT calculations. The withdrawals reflect intensifying concerns over the private credit industry’s lending to private equity-backed software companies and the uncertainty those businesses face as AI rapidly advances.
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Core PCE price index rises 0.4%
for the second straight month; up 3.0% year over year. And this is a prewar number, not reflecting a hyperinflationary oil price spike. Monthly inflation rose by the most in 12 months in February, and economic growth almost braked in the fourth quarter, other data showed on Thursday. Economists expect that price pressures increased further in March as the war drove up the cost of energy and other products.
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Inventories are Soaring,
another early recession indicator. U.S. wholesale inventories increased by the most in 13 months in February, boosted by sharp rises in the stocks of professional and electrical equipment, government data showed on Thursday. Stocks at wholesalers rebounded 0.8%, the largest increase since January 2025, after falling 0.3% in January, the Commerce Department's Census Bureau said on Thursday.
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Atlanta Fed Revises GDP Growth Down to 1.3%,
from a high of 5.0% last year. The cost of the war keeps growing by the day. Expect negative numbers soon, taking us into recession.
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Apple Delays Foldable Phone,
taking the stock down 4%. The phone is to be the “next big thing” for the company. Apple has suffered setbacks in the engineering test phase for the iPhone that could hurt mass production and product shipments.
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Physical Oil Hits $150 a Barrel.
European and Asian refiners are paying record-high prices for some crude oil grades, far exceeding prices for paper futures, highlighting the worsening supply crisis from the U.S.-Israel war with Iran. The Iran war has forced the shutdown of at least 12 million barrels per day - about 12% of world supply - from the Middle East due to Iran's effective closure of the Strait of Hormuz. As a result, Brent oil futures reached $119.50 a barrel last month, the highest since 2022, although still short of the 2008 record high of $147.50. The nearby Brent contract is for June delivery.
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Delta Raises Baggage Surcharges to $50.
Jet fuel, which had averaged about $85 to $90 a barrel before the U.S. and Israeli strikes on Iran in February, has surged to around $209 per barrel globally, according to the International Air Transport Association (IATA). (DAL) earnings are out tomorrow.
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Tech is starting to Look Cheap,
following a prolonged period of underperformance, creating a potential entry point for investors, Goldman Sachs said on Tuesday. So far this year, we have seen one of the weakest periods of relative returns for technology over the past 50 years.
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Nonfarm payrolls rose by 178,000
in March, a reversal from the 133,000 decline in February. The headline Unemployment Rate edged lower to 4.3%, though that was largely from a sharp reduction in the labor force. Wages also rose less than expected, with average hourly earnings up just 0.2% for the month and 3.5% from a year ago. The annual increase was the lowest since May 2021. As has been the case, health care was responsible for much of the growth, with the sector adding 76,000 jobs.
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Tesla is Getting Trashed,
as JP Morgan cuts its downside target to only $85. The EV Business is in free fall, and profits from robots are years off. Investors are also selling Tesla to buy SpaceX, and it's coming with a $2 trillion valuation. Avoid (TSLA).
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Avoid SpaceX,
as the company is likely to go public at a peak valuation. That’s because investors are unlikely to see robust returns from the aerospace manufacturer stock following its likely massive initial public offering, given that much of its value already appears to be “priced in.” If it is already one of the largest companies in the world on day one, what is the upside? Wait for the post IPO selloff as I did with (TSLA) 16 years ago, which could be as much as 50%.
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Oil Breaks Out to the Upside,
with the (USO) hitting a 20-year high at $139, as there is no sign of a reopening of the Straits. Even if they do eventually reopen, much of the Persian Gulf’s export facilities are now scrap metal requiring five-year rebuilds. Iran is demanding repayment of damage incurred by the US bombing, or more than $1 trillion. I’m not holding my breath on that one. Look for much higher highs in crude (USO).
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Inflation is Heating Up,
because of the war-driven, explosive rise in energy prices. SM services sector growth slows, PMI falls more than expected to 54.0. Input prices index surges to 70.7, the highest since Oct 2022, amid Middle East conflict and tariffs. Services employment contracts diverged from strong private payrolls in March.
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Peace Rumors Abound,
sending the Dow up 1,000 points and crashing oil 5%. Confusion is running rampant as investors attempt to nail down who said what. Keep your cash, as nothing could be more opaque.
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US Gasoline Tops $4 a Gallon,
a new four-year high for the national average. It’s over $6 in California. You can almost hear the American economy grinding to a halt. Inflation numbers in April will rocket.
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There’s a Tanker Burning Outside My Hotel Window in Dubai.
The Kuwait Petroleum Corporation says an Iranian attack on the giant 500,000-barrel Al-Salmi oil tanker at the Dubai Port has caused a fire, warning that it could lead to an oil spill. No injuries were reported among the tanker’s 24 crew members, whose safety had been secured, the media office said. Maritime firefighting teams had been working to bring the fire under control and later said it had been extinguished. It sure puts on a heck of a show.
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Aluminum Soars 10%,
after Iran’s missiles destroyed smelters in Bahrain and the UAE. The light-weight metal advanced toward $3,500 a ton in London, on course for a monthly gain of 10%. That’s the most since April 2024 and bucks a broader downtrend for metals in March. The war on Gulf infrastructure continues. The conflict has tightened the global market, with around a tenth of aluminum's global production concentrated in the Persian Gulf and exports choked off by the closure of the Strait of Hormuz.
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McCormick Buys Unilever Food Business
for $45 Billion. To purchase most of Unilever Foods' portfolio, including Hellmann's mayo and U.K. favorite Marmite, McCormick will pay $15.7 billion in cash. Unilever shareholders will own 55.1% of the combined company, while Unilever will hold a 9.9% stake. For Unilever, divesting much of its food business allows the company to focus on its personal-care segment, which is growing faster.
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Will Semiconductors Get Hit Next?
Semiconductor stocks have been a pocket of strength within the technology sector in Q1, with the VanEck Semiconductor ETF (SMH) outperforming the S&P 500 Index by around 7 percentage points year to date. However, semiconductor stocks are now vulnerable to a period of downside leadership in the short term and potentially the long term. Long-term upside momentum waned in March, as shown by a downtick in the monthly MACD histogram. This is the first downtick since the April 2025 low and serves as an indication that the cyclical uptrend in SMH is losing steam.
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Is the Fed About to Raise Interest Rates?
Traders in the futures market shifted the probability that the Federal Reserve will raise interest rates by the end of 2026 to 52%. It’s the first time the reading has crossed the 50% threshold, according to the CME Group. The move comes with global benchmark crude prices topping $110, which, combined with other developments this week, signals inflation is a growing problem.
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The Recession is Here.
Economists have pulled up their risk assessments of a U.S. contraction amid heightened uncertainty over geopolitical risk and a labor market that for the past year has shown strains. Twin concerns about growth and unemployment have triggered talk of stagflation, a characterization that Fed Chair Jerome Powell has rejected. But the threat of a prolonged war, pressure on consumers, and a labor market that, outside of health care, lost hundreds of thousands of jobs last year, has kept concerns elevated.
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Alaska Air Reports Record Loss,
due to rocketing jet fuel prices. Benchmark Brent has soared by about 58% this month, the steepest monthly jump in LSEG data going back to 1988, exceeding gains made during the 1990 Gulf War. The latest oil price spike could become the first real financial stress test for U.S. airlines since the pandemic, with weaker carriers more likely to shrink, borrow, or absorb deeper losses while stronger rivals keep investing and gaining market share. Alaska Air now expects an adjusted first-quarter loss of between $1.5 and $2 per share, compared with its previous estimate of 50 cents to $1.5.
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NVIDIA PE Hits Seven-Year Low,
with the shares plumbing $165. As global stock markets tumble over deepening worries about war in the Middle East, Nvidia, the world's most valuable company, finds itself trading at its cheapest price-to-earnings multiple since before ChatGPT kicked off the AI boom. The steep drop in Nvidia's PE suggests the dominant AI chipmaker's shares may be a bargain, but one tied to risks and uncertainty that have shaken investors' confidence in the so-called AI trade that has driven Wall Street higher in recent years.
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