Headline overload – Markets take the hit, then rebound

• Headline Overload, not eco data drove early anxiety.
• Bonds down, Oil up, Gold continues to churn.
• Financials get whacked – Trump wants to cap CC rates.
• CPI due at 8:30 – JPM, DAL and BK all beat.
• Try the Spaghetti Arrabiata.

Monday morning, January 12 — U.S. futures were under pressure as investors were once again forced to digest a growing stack of headlines (none of which had to do with the economy) that screamed RISK OFF for investors – at least it did in the morning….

Overnight, geopolitical tensions resurfaced as renewed unrest across parts of Iran crossed the wires, with the Khamenei regime reportedly shutting down internet access — effectively plunging the country into digital darkness as protests continue and citizens push back against the regime.

That uncertainty was compounded by fresh developments involving Cuba. With Venezuela no longer able to provide meaningful oil or financial support, pressure on the Cuban government has intensified — prompting President Trump to demand tougher enforcement and action, telling President Miguel Diaz-Canal to ‘rethink his position as a weakened leader and make a deal’ to cooperate with the US.

At the same time, the Department of Justice launched an investigation into the Federal Reserve raising concerns about central bank independence, placing renewed scrutiny on Chair Jay Powell and the now-controversial multibillion-dollar renovation project. To his credit, JJ came out of the gates strong, issuing a Sunday evening statement – essentially calling the investigation BS, digging his heels in and vowing to take on this fight.

Layered on top of that, Trump opened a new fight – with the credit card companies – issuing a direct challenge for a cap on consumer interest rates to help fight the ‘affordability crisis’. Whether such a move is feasible, legal, or effective is almost beside the point. Its introduction alone injected more uncertainty into the market and more uncertainty into how consumer credit is priced and how financial institutions will manage risk going forward.

As you can imagine – the big banks and the CC companies got slammed as well….JPM -1.4%, C – 3%, BAC – 1.2%, AXP – 4.3%, SYF – 8.4%, COF – 6.4%, V – 1.9%, MC -1.6%. Even Macy’s got hammered – dropping 5.4%. Now, to be clear – rates on these cards vary widely – think 13% - 36% - but remember, no one is forcing you to take on this debt, you do that all on your own.

Taken together — the geopolitical instability, regulatory scrutiny, and policy uncertainty headlines were enough to push futures lower in the early morning hours, as markets worked to reprice a widening and increasingly complex risk stack. Stocks opened weaker…..

As the day wore on, the anxiety faded and stocks rallied – ending the day higher and all is good in the world again. At the closing bell – the Dow added 86 pts, the S& up 11 pts, the Nasdaq gained 62, the Russell added 11, the Transports gave back 13, the Equal Weight S&P rose 4 while the Mag 7 lost 11.

Of the 11 S&P sectors – it was Consumer Staples that won the day – rising 1.2% in a ‘Risk off, Pantry on’ style of investing. Industrials rose 0.8%, Basic Materials up 0.6%, Tech added 0.4%, Real Estate up 0.3%, Utilities + 0.2%, Healthcare ended flat while Financials took it on the chin losing 0.8%, Energy down 0.7% and Communications losing 0.3%.

Down the chain - we saw mixed results….Homebuilders added 0.4%, Retailers lost 0.2%, The Value Trade – SPYV gave up 0.1%, while the Growth Trade added 0.3%, Disruptive Tech – ARKK added 2.8%, Cybersecurity up 0.6%, Semi’s up 0.5%, Aerospace & Defense up 1.5%, Big Pharma up 0.4%, Biotech lost 0.5%, Emerging Markets +1.4%, Quantum Computing names up 3+%.

The VIX – which had shot higher – up 14% overnight ended the day up 4.3% at 15.12 causing the VIXY etf to rise 4%. Interestingly, the VIX traded up to and kissed trendline resistance at 16.94 but failed to pierce it. This morning – the VIX is churning just waiting for the pre-mkt to open.

Bonds sold off yesterday, with TLT down 0.3% and TLH lower by 0.2%, pushing the 10-year yield up to 4.19% and the 30-year to 4.84%. While that may feel counterintuitive it wasn’t a classic risk-off move. Investors were reacting to policy uncertainty: political pressure on the Fed, the possibility of intervention in credit markets, and persistent geopolitical tension. That combination raises concerns about sticky inflation, larger deficits, and the independence of the Fed, all of which force investors to demand higher yields, not safety. In short, not all anxiety is bond-friendly — growth anxiety helps bonds, policy anxiety doesn’t.

Oil continued to grind higher, building on Friday’s breakout above trendline resistance at $58.40, where it closed the week at $59.12. That momentum carried into yesterday, pushing crude up another 40 cents to $59.50, and it is extended again this morning, rising another 40 cents to $59.90 after piercing the intermediate trendline near $59.77.

From a technical perspective, longer-term trendline resistance sits near $60.70, where prices should encounter some pushback — especially given the ongoing global supply glut and ample global production. That said, geopolitics are notoriously difficult to price. The chart suggests resistance should hold, but headlines will dictate the next move. A decisive break above resistance could invite the momo guys to push us towards $64.

Gold surged yesterday, racing to an early-morning high of $4,630 before settling back to $4,597. This morning, it’s modestly lower — down $13 at $4,584 — still holding above what had been upside resistance near $4,550, which could now act as initial support on any pullback. More meaningful support, however, sits much lower around $4,250. For now, gold remains locked in a $4,250 to $4,630 trading range, with direction likely dictated by the next wave of macro or geopolitical headlines.

Eco data today includes the December CPI report, and it is expected to show that topline & Core inflation rose by 0.3% m/m and 2.7% y/y. – Not rising nor falling – just remaining ‘sticky’. We are also going to get New Home Sales, and they are expected to plummet by 10.6% - again – we already know this. The surprise will be what the actual number is! Building Permits are on the docket as well – last month they were down 0.2%.....Let’s see what they are now.

And it is the EARNINGS season! JPM out of the gate BEATS the estimate $5.23 vs. $5.00 and exceeded trading revenues by 40% y/y! 2026 Net Interest Income expected to top $103 billion – prior estimate was $100 billion. Loans grew by 11% to $1.49 trillion and the one data point that gives you a sense of where they think we are going….... They RAISED their provision for credit losses by 77% from a year ago to 4.66 billion. That means JPMorgan set aside additional reserves today to cover potential future loan losses, not losses that have already occurred. It reflects management’s more cautious outlook on consumer and commercial credit and reduces current earnings as a precaution, not because credit has already broken.

Now there were a couple of negatives – Investment Banking Revs were a bit lower, Advisory revs a bit lower, Equity and Debt Underwriting revs a bit lower. Jamie did say though, that ‘While the labor markets have softened, conditions do NOT appear to be worsening. Consumers continue to spend, and businesses generally remain healthy.” JPM is up 2.4% in pre-mkt trading.

BK and DAL also reported and beat their estimates….so far we are batting 100%...3 for 3!

European markets are all lower this morning. There is no eco data to report. Markets churning, digesting the geo-political data.

U.S. futures are a bit lower though…. Dow -40, S&P -5, Nasdaq -40, Russell -6.

After the bell yesterday, Trump announced on Truth Social that the U.S. would impose an immediate 25% tariff on any country that does business with Iran while also doing business with the United States, in an effort to increase pressure on the Iranian government. At the same time, the US Department of Defense outlined that all military options remain on the table, a combination that all but guarantees continued geopolitical volatility — and the potential for near-term disruption/chaos in financial markets.

And don’t forget about the supreme court decision on tariffs that is due out any day now. Why this matters is straightforward: if the Court strikes the tariffs down, it could open the door to refund claims north of $150 billion and spark near-term volatility in trade-exposed sectors. If the Court upholds them, it cements expansive executive authority in trade policy. Either way, this isn’t about tariffs disappearing — it’s about how they’re imposed going forward and whether future trade actions require more congressional involvement.

Importantly, this is not a “sell the whole market” moment. It’s a sector rotation, not a systemic shock. Industrials and materials would likely feel pressure as tariff protection fades and pricing power erodes. On the flip side, consumer discretionary and technology quietly benefit from lower input costs, less supply-chain friction, and reduced inflation pressure. Financials, healthcare, and utilities largely shrug. Bottom line: this doesn’t derail the bull market — it simply reshuffles leadership.

The S&P 500 closed yesterday at 6,977 up 10 pts – a new closing high. Trendline support sits near 6,820 and resistance is now anyone’s guess…. If earnings continue to BEAT and the eco data remains strong – then I would expect the markets to continue to advance, then back fill, then advance again.

In the end – Stay disciplined. Stay focused, stick to your plan and don’t get drawn in the fray.

Spaghetti arrabiata

Angry, oh boy…..…..this sauce is simple to make and gets it anger from the red chili pepper… You can serve this with any type of pasta you want - but spaghetti or linguine is best.

You will need: olive oil, onion, garlic, red wine, sugar, crushed red pepper (or chili peppers if you want hot, hot, hot), lemon juice, oregano, s&p, crushed tomatoes, tomato paste and chopped parsley.

Bring a pot of salted water to a rolling boil.

In a large pot (or deep sauté pan) on med-hi - heat up olive oil and garlic… sauté a bit - but do not burn - 3 mins or so... now add sliced onion and sauté until soft - like 5 mins more. Next - add 1/2 cup of red wine, 1/2 tbsp. of sugar, fresh squeezed lemon juice (about 1 tbsp.), oregano, bit of tomato paste and a 28 oz can of kitchen ready crushed tomatoes (not in puree - just crushed tomatoes), crushed red pepper (or crushed chili pepper if you prefer) - bring to a boil and then reduce to simmer and cook for 15/20 mins...

Add the spaghetti to the boiling water and cook for 8 mins or until aldente - strain - reserving a mugful of the pasta water. Return pasta to pot and add back about 1/4 cup of the pasta water to re-moisten. Stir… Now add pasta directly into the sauté pan with the sauce - toss well - add a handful or two of grated parmegiana cheese and serve immediately in warmed bowls. Enjoy with a nice bottle of Brunello di Montalcino. Always have extra cheese on the table for your guests.