Markets kiss 7,000, the Fed shrugs and earnings expose perfection risk

• Markets Churn as it digests the data.
• Fed stays on the sidelines – and Trump keeps quiet (for now).
• Earnings, earnings, earnings. – META, TSLA & MSFT reported.
• AAPL due at 4:05.
• Oil up, Gold up, Yields up.
• Try the Creamy Pesto Orzo.

Stocks churned – the S&P did ‘enter’ the new millennium (7,000) as expected but couldn’t hold it… – the Dow rose 12 pts, the S&P lost less than 1 pt, the Nasdaq gained 40 pts, the Russell lost 13 pts, the Transports gave up 41 pts, the Equal Weight S&P lost 25 pts while the Mag 7 added 14 pts.

JJ and the Fed did exactly what we expected — nothing. No change in rates, and no real signal that a change is imminent. Now, to be fair, JJ did acknowledge what he called “clear improvement” in the economic narrative — and the data backs that up. Inflation is steady, not accelerating. Wage growth remains healthy. Unemployment is still historically low. Service PMIs are strong, Durable Goods and Factory Orders are holding in, and housing is finally showing signs of life as mortgage rates hover near 6%. That’s a pretty constructive backdrop.

But — and this is classic JJ — he immediately hedged it. He described the labor market as “stabilizing,” while in the very next breath pointing to “signs of continued cooling.” Translation: he left himself maximum flexibility. No boxing himself in, no firm commitment, no promises he can’t walk back. That’s deliberate. It keeps the Fed positioned to react if conditions change in either direction — and it reinforces the message that policy will stay data-dependent, not market-dependent.

The vote was 10-2…. As expected - both Chrissy Waller and Stevey Miran voting for a 25-bps cut while the other 10 said – ‘slow down big boy……’ And while lower rates may be coming at some date in the future, they were not coming on Wednesday. FED Funds are now suggesting a July cut is possible with a follow up cut in the fall – now that’s interesting - …. I’d say – unless they have a crystal ball – it’s hard to see how anyone can predict 2 rates cuts 5 and 8 months into the future…. there are just too many variables between now and then — inflation, growth, geopolitics, elections, energy, you name it — any one of which can flip the script in either direction in a heartbeat, so I’m in the camp that you stick to the plan. Nothing you heard yesterday should cause you to re-allocate your portfolio. OK – can we move on now?

The morning brought a list of companies walking the runway…… It was another reality check — broad confirmation that corporate America isn’t in trouble. We saw results from health care, telecom, industrials, defense, and payroll tech — and the message was the same - steady growth and manageable headwinds.

ELV came in with earnings a little softer than last year, reminding us that cost pressures and benefit trends still matter in the managed-care world. T beat the expectation demonstrating that the core telecom business still prints cash even in a slower discretionary spending environment. GLW beat as well – noting there is still plenty of infrastructure demand – think connectivity and fiber.

DHR was respectable, GD beat estimates on both revenue and EPS, backed by ongoing defense demand (think geo-political pressures) and a big backlog that gives visibility through 2026 and beyond. ADP reaffirmed its results and long-term strategy, highlighting again that secular demand for workforce management tech remains intact.

But let’s be honest — that’s not what everyone was waiting for. Those earlier earnings were the warm-up act. Traders were literally counting down the minutes to the closing bell, because that’s when the real party was set to begin. After the bell, META, MSFT & TSLA all reported — and you could almost feel them breathing down you neck - the trader types hovering over their keyboards – prepared to hit the BUY and/or SELL buttons, ready to react to every word, every number, every nuance.

The bottom line? It was a classic “numbers vs. narrative” quarter — and the market made that crystal clear. META did exactly what everyone expected - they beat expectations, guided higher, and showed real operating leverage. Ad demand remains strong, engagement is up, margins are expanding — and yes, Capex is rising — but investors are perfectly willing to fund that spend because META is already monetizing AI inside the core business. And they took it higher…. up 8% or $53 to trade at $718/sh.

Now TSLA and MSFT were a different story. TSLA delivered a profit beat, but revenue growth remains under pressure as EV pricing stays competitive and volumes remain choppy. The market continues to look past the car business and toward the longer-dated AI, autonomy, and robotics narrative — which means patience is required. And they took it up 2.8% or $12/sh to $443.

MSFT — the only one of the three I actually own — beat the numbers too, but expectations were sky-high. The market was pricing in perfection, leaving absolutely no room for disappointment. And disappoint it did (for some) — at least in the short term. Azure growth slowed modestly, while AI Capex continues to explode, raising the near-term question markets hate: when does all this spending turn into incremental margin?

So, what do you think happened? Of course — the trader types hit the SELL button. MSFT fell 6.4%, or about $30, trading down to $450, and now sits roughly 18% below the October highs. That’s what happens when expectations are priced to perfection.

But I’m not selling MSFT on one report. (I don’t’ trade it, I own it) For me — and for other long-term investors — MSFT remains a core portfolio holding and a cornerstone AI platform. Yes, the stock got clipped for execution risk in the short term. But for long-term investors? This is exactly how opportunities are created — buying a dominant franchise when it goes on sale, not chasing it when it’s priced for perfection. And that’s the lesson for today!

Remember what Uncle Warren told you - “Price is what you pay; value is what you get”. Buying quality assets at a markdown is the key to the game.

Bonds held steady yesterday…the TLT and TLH both down about 0.2% - nothing dramatic. 10 yr yields are now 4.25% and the 30 yr is at 4.88% and while there is nothing to get worked up about right now – keep your eyes on the red lines….4.5% for the 10 yr and 5% for the 30 yr….because those are levels that will prove to be a headwind for stocks.

Oil has been pushing higher — and it’s not hard to see why. Three drivers are doing the heavy lifting: a weaker dollar, a continued drawdown in inventories (which tells you demand is still very real), and renewed geopolitical tension between the U.S. and Iran.

Yesterday added fuel to the fire when Trump told the Ayatollah to come to the table on nuclear weapons or risk getting blown to smithereens. Yeah… not exactly very diplomatic – but it is too the point – and I’m not the President so who am I to judge? Regardless, that kind of rhetoric injects instant angst into the energy markets, and angst is bullish for oil — at least until it isn’t.

Technically, Crude took out the September high at $64.75, traded up to $65.09 overnight, and is currently up $1.25 at $64.50. That puts oil firmly back in a $60.60 support / $66.50 resistance range. So, here’s my takeaway: as long as the dollar stays soft, inventories keep shrinking, and geopolitics remain elevated oil remains bid — and volatility is just part of the deal.

And speaking of volatility — the VIX remains below all three of its trendlines, which continues to signal complacency. That said, it’s now pushing right up against resistance, and that’s important. All it takes is one anxiety-driven headline — geopolitics, rates, policy, you name it — and up it goes. And when the VIX surges, stocks typically back off. Not a prediction — just a reminder of how this movie usually plays out.

Now, gold… it just keeps going. This morning it’s up another $67 at $5,485. Think about that for a second reason: it just broke $5,000 on Monday, and now it’s up another $485 in three days, nearly 1% in a blink. And remember — this is gold, not NVDA or PLTR. It’s exciting, no doubt, but one look at the chart screams “parabolic.” And whenever something goes parabolic, a little caution is warranted. That’s all.

It’s another busy earnings day, and before the bell we’re hearing from a dozen companies representing the economy…..PHM (homebuilding / housing demand), IP (packaging and global trade), TMO (life sciences and diagnostics), LHX (defense and aerospace), HON (industrial automation), CLO (credit markets), XRX (office tech and services), CAT (global construction and mining), NDAQ (market infrastructure), and MO (consumer staples).

But let’s be honest — that’s not what everyone’s waiting for. The real excitement comes after the bell, when at 4:05 pm, Tim Cook steps up and delivers earnings for Apple. Bottom line on AAPL? This quarter isn’t about a blowout — it’s about stability and execution. Investors want to see services continue to carry the margin load, iPhone demand hold in despite a cautious consumer, and — most importantly — clarity on the AI strategy. Investors want reassurance that Timmy is not falling behind in the AI arms race.

Look, they are expected to show revenues of $138.5 billion in 3 months…say it again – 3 months…. Am I selling AAPL if they only report revenues of $138 billion? Yeah, I’m not selling my AAPL. As of this morning – AAPL is down 11% off the December high – so, I’ll say it again - “Price is what you pay; value is what you get”. Buying quality assets at a markdown is the key to the game. Are you a buyer or a seller?

It’s Super Thursday in Europe — think earnings — and European markets are mostly higher… with one glaring exception. Germany is getting smacked, down 1.1%, and you can point to one name as the culprit: SAP.

SAP actually beat expectations and even announced a €10 billion share buyback, which should have been bullish. But then came the gut punch — cloud revenues missed expectations. Ouch. In this market, that’s a non-starter. The stock is getting punished, down 8.6% today, now 38% off the February 2025 high, and trading back to levels last seen in May 2024, around €167.

U.S. futures are UP…. — Dow +23, S&P up 10, Nasdaq up 40, Russell up 7.

Eco data today includes Initial Jobless Claims of 205k, and Cont. Claims of 1.85 million – both in line. Factory Orders & Durable Goods Orders at 10 am.

The S&P closed at 6,978 — essentially unchanged on the day, but that doesn’t tell the whole story. We actually traded up to 7,002 early in the morning, tagging the big psychological level before backing off. That pullback suggests the market may need a little more time to build the energy required to get up and through 7,000 with any real consistency.

That said, my gut says it’s only a matter of time — any day now. From a technical standpoint, the S&P would have to pull back to around 6,874 to even kiss trendline support, and I just don’t see that happening anytime soon. Remember consolidation near the highs is healthy — it’s not a rejection, it’s digestion.

Creamy pesto orzo

For this you need ½ lb. of orzo, homemade pesto (basil, pine nuts, garlic, salt, Olive oil and parmegiana cheese), heavy cream, chicken stock plus more garlic.

Start by chopping the garlic and sautéing in a large sauté pan with some olive oil. After 4 or 5 mins…add the orzo directly to the pan and coat with the oil and garlic.

Now add in the chicken stock – enough to cover the orzo – Add in ¾ c of heavy cream – keep heat on medium hi…. Once it starts to boil, turn heat to med. And allow the orzo to cook – it will suck up most of the stock – if it sucks it all up, then feel free to add just enough to keep it moist – not soupy.

When it’s cooked – add in a tablespoon of the pesto and mix well.

Serve immediately in warmed bowls.

Side tip – you can top with tiny mozzarella balls if you like. But always have more parmegiana on the table for your guests.