MARKET WRAP

Equities erased Friday’s bounce and the SPX is now down on the year. An early morning rally attempt failed and the selling accelerated on news that tomorrow’s tariffs are indeed proceeding as well as some disappointing manufacturing data as well as the Atlanta Fed’s (volatile) GDP Now tracker expecting a negative Q1 GDP growth rate. For the day, the SPX was -1.8%, QQQ -2.2% and IWM -2.8%. Treasury yields continued lower, with the 10y yield now 4.16%. The VIX closed near 23. (More vol at the bottom of this email). It should be noted that we once again saw a scramble of buyers into the close (potentially shorts covering overnight risk like Friday)

On today’s shows, RiskReversal Pod with Liz and a potential debt crisis? And on MRKT Call, semiconductors and the lack of market leadership. Enjoy!

MRKT MATRIX: March 3, 2025

Today’s Top Stories:

• Dow tumbles 650 points as sell-off intensifies following Trump’s confirmation of tariffs on Mexico and Canada (CNBC)

• The economy’s at risk of plunging into an air pocket, says JPMorgan. What that would mean for stocks now and in the future. (MarketWatch)

• Dalio Warns of US Debt Crisis ‘Heart Attack’ Within Three Years (Bloomberg)

• Car Prices Are Poised for $12,000 Surge on Trump’s New Tariffs (Bloomberg)

• TSMC to invest additional $100B in U.S. chips manufacturing (Axios)

• Chinese Buyers Are Ordering Nvidia’s Newest AI Chips, Defying U.S. Curbs (WSJ)

• The Countries Driving America’s $1.2 Trillion Trade Deficit in Goods (WSJ)

• Trump Crypto Rally Proves Fleeting as Reserves Plan Questioned (Bloomberg)

• Morgan Stanley’s Jonas names struggling Tesla a top pick, sees nearly 50% comeback (CNBC)

• Apple’s Artificial Intelligence Efforts Reach a Make-or-Break Point (Bloomberg)

• MLB Plots a New TV Model After Striking Out With ESPN (WSJ)

Today’s MRKT Call is Presented by MoneyLion

Make or Break Moment for Semis

Guy and Dan kick off the show by analyzing today's SPX action, highlighting a failed morning rally and declining Treasury yields. They discuss recent GDP changes and the broader economic hesitancy toward spending. A sector comparison follows, focusing on tech's underperformance in 2025, leading into the Chart of the Day: NVDA. Next, they preview AVGO ahead of earnings, followed by an analysis of SOXX and MSFT charts, noting that much of the former tech leadership has been flat or declining over the past six months. They then check in on MRVL and TSM before diving into PLTR and SMCI, followed by DELL and MU. The discussion shifts to this week’s earnings, including TGT and COST. In the Call of the Day segment, they examine Morgan Stanley’s take on TSLA and mixed calls on DE from Baird and Goldman. The show then turns to gold miners, energy, and XLE before wrapping up with quick insights on AAPL, BAC, ELF, EL, and a final look at SPX’s volatile moves.

Click here to access all of the charts mentioned in today’s MRKT Call.

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Today’s RiskReversal Podcast is Presented by CME Group and SoFi

Jobs Report Preview & Ray Dalio's Debt Crisis Warning

Guy Adami, Liz Thomas, and Dan Nathan discuss recent market trends and geopolitical events. The conversation covers Friday's significant market movements, the impact of Zelenskyy's Oval Office meeting on market sell-offs, and volatility driven by geopolitical tensions, particularly between Russia and Ukraine. The discussion also addresses the role of tech stocks like Nvidia in market fluctuations, the outlook for semiconductor companies including Broadcom and Taiwan Semiconductor, and potential implications of trade and tariffs. The hosts analyze the likelihood of a U.S. debt crisis, inflation trends, and the Federal Reserve's stance. The upcoming jobs report and its potential market impact are also highlighted, along with the performance of major retailers like Costco and Target. The episode underscores the importance of staying informed in a volatile market landscape.

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What’s Next?

As we noted in yesterday’s email, Friday’s rally had the characteristics of an oversold short-covering bounce within a short gamma backdrop. Today’s sell-off not only erased those gains but also broke Friday’s lows.

One key driver of today’s acceleration was the confirmation that tariffs on Mexico and Canada will take effect tomorrow. If this remains the case, equities may stay under pressure until either the news cycle shifts or equities reach levels where buyers feel safer stepping in for more than just a 24 hour bounce.

From a broader market perspective, as we’ve been highlighting, there aren’t many strong support levels near current prices. We’re in a bit of a no man’s land with little liquidity or options market support. Key levels to watch:

• SPX 5775 – The intraday low of 2025 (which is very near.)

• SPX 5650-5700 – A possible near-term capitulation point, particularly if accompanied by a VIX spike toward 30.

For traders looking to position for a bounce, Friday may have proven that we’ll need more than a 20 VIX for that happen. If we did see a vol spike closer to 30 however, tat could coincide with a buyable technical. A credit put spread is one way to take advantage of an oversold market and elevated implied volatility. It’s a strategy to begin to price up before implementing and then being patient. For example:

• CURRENTLY: With SPY around 583, the March 21st -565p / +560p credit put spread risks 4 to make 1.

• HOWEVER - If SPY moves to ~570 or so in the next few days: The spread would be priced around 2.20 (risking 2.80 to make 2.20). That’s a more ideal entry point.

The idea is to be patient, look for capitulation type action and then sell an implied volatility spike while gaining risk defined long delta exposure. Defining risk is VERY important here because the negative headlines weighing down equities don’t look like they’ll be going away soon. We’ll update this potential trade (or other strikes and ETFs) should we see that next level down.

For now: here’s an update on expected moves for the rest of the week. All have expanded greatly following today’s market action:

Expected Moves into Friday’s close:

• SPX/SPY: 2.1%

• QQQ: 2.7%

• IWM: 2.8%
  
  

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