Yesterday, the market was hit with two realities that added to one wake-up call. What’s interesting is that these are new:

• The tariffs will hit corporate bottom lines because the best-case scenario is passing on a quarter of the price impacts.  

• And the Fed will not be coming to the rescue anytime soon.

Speaking in Chicago, Fed Jay Powell made that clear yesterday with a homage to Ferris Bueller.

The focus on ”significantly larger than anticipated” tariffs emphasize the obligation to control inflation, which could soon be in tension with the obligation to full employment. 

Make Him Stop Talking 

The market ticked down on each word, and I was so relieved when he finished speaking that there was a nice rally into the closing bell. Powell wanted to release the notion of a ‘Powell Put’ with a ‘Powell Punt.’

It seems odd that bond yields moved lower, and rate cut probabilities increased.

Tough Sledding

Growth sectors weighed on the market, but even Financials (XLF) and Industrials (XLI) couldn’t withstand a tsunami of selling.

Patches of Green

There were only patches of green, mainly in the oil patch, but some Health Care (XLV) and Real Estate (XLRE) as well.

Tantrums Beget Tantrums

I think the market has suffered a tariff tantrum and now a Fed tantrum. The big question is whether the S&P 500 (SPX) will finally retest the lows to wash out the remaining weak hands.

More earnings today, although the most important release comes after the close and ahead of a three-day weekend. Seeing the appetite to hold stocks over such a long weekend will be interesting. 

Today’s Session

President Trump came out swinging this morning.  Upset with Jay “Too Late” Powell as the European Central Bank (ECB) did cut rates again.  This battle is probably going to end up at the Supreme Court, as there are those that think Trump can and should terminate Powell.

Initial jobless claims came in at 215,000 against the consensus of 225,000.  I know this appears to give Powell cover, but I have been writing for over a year the labor crisis is not from layoffs, it’s from a lack of hiring.

Retail Investors got a little less bearish, but also a little less bullish.

• Bear sentiment: 56.9 from 58.9
• Bull sentiment: 25.4 from 28.5

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