CWS Market Review – March 11, 2025

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The stock market was hit hard yesterday. The Dow lost nearly 900 points. For the day, the S&P 500 lost 2.70%. That was the index’s largest loss for this year. It was also the third-largest daily loss in the last 2-1/2 years.

Going by intra-day levels, the S&P 500 got down to 9.7% below its intra-day high from last month. Since its peak, the S&P 500 has shed $4 trillion.

As we’ve seen in recent weeks, the selling was again mostly focused on riskier areas of the market. Value and low-volatility stocks fared much better; even so, many closed lower on the day.

The Nasdaq Composite, for example, closed down 4% yesterday. Elon Musk’s Tesla (TSLA) was also the focus of many sellers. The EV stock is now down about half in the last several weeks. The S&P 500 High Beta Index is down 17% from its peak.

The message is clear. Folks are selling risk and buying safety. For example, Bitcoin is down 30% from its January peak. I’m pleased to say that our ETF is holding up much better than the rest of the market. The last three weeks have been some of our best weeks in terms of relative performance in years.

I know it sounds odd to say that we’re doing a lot less badly than everyone else. Still, from my experience, it’s the “less badly” part that separates good investors from the rest of the pack. In a bull market, everyone looks like a genius.

It seems like all the stocks that were working so well in December are now lagging and the stocks that had been trailing in December are now the hottest places to be. As we know well, the market has a mind of its own.

The stock market was down again today. At one point, the S&P 500 was down over 1.5% but it eventually closed down 0.76%. The S&P 500 reached its lowest closing level in six months. The index is also trading below its 200-day moving average (the blue line in the chart above). That’s often been a signal of more trouble ahead. Most of the high volatility days have come when the index is below its 200-DMA.

Here’s a look at the High Beta Index:

What’s the cause for the sudden jitters in the market? The top suspect appears to be President Trump’s trade policies, or perhaps it would be more accurate to say the uncertainty surrounding President’s Trump’s trade policies. Last month, the National Federation of Independent Business’ “Uncertainty Index” rose to its second-highest level since 1973. The percentage of small businesses who say now is a good time to expand posted its largest one-month drop since Covid.

More than once, the president has reversed himself or called for delays. I suspect that investors are growing frustrated with the ad hoc nature of these tariff polices. This morning, the president said he would double that tariff on Canadian steel and aluminum.

In addition to the uncertain policy risk, there’s also been some sluggish economic news. I want to be clear that it’s hardly bad news, but the economy may not be as strong as we believed.

The February Jobs Report Was OK But Not Great

On Friday, for example, we got the employment report from February, and it was decent but below expectations.

The government said that the U.S. economy created 151,000 net new jobs last month. Wall Street had been expecting an increase of 170,000 so that’s not a huge miss. The job gains figure for January was revised down to 125,000.

Average hourly earnings rose by 0.4%. That’s not bad, but it’s not much above inflation. The unemployment rate ticked up to 4.1%.

I was curious to see if the efforts of DOGE are present yet in the data. Last month, federal government employment fell by 10,000 while overall government employment increased by 11,000. We’ll probably have a better idea next month when the March jobs report comes out.

Here are some more details:

Health care led the way in job creation, adding 52,000 jobs, about in line with its 12-month average. Other sectors posting gains included financial activities (21,000), transportation and warehousing (18,000), and social assistance (11,000). Retail posted a decline of 6,000 workers.

On wages, average hourly earnings climbed 0.3%, as expected, though the annual increase of 4% was a bit softer than the 4.2% forecast.

Some of the details don’t look so hot. For example, the labor force participation rate fell 0.2% to 62.4%. That’s the lowest level in more than two years. The broader U-6 rate rose to its highest level since October 2021.

The household survey showed a loss of 588,000 jobs. The number of folks who have part-time work but are looking for full-time jobs rose by 460,000 to 4.9 million.

The Atlanta Fed’s GDPNow model currently expects Q1 GDP to shrink at a 2.4% rate. Polymarket, which lets investors buy futures on real world events, now sees a 41% chance of a recession this year.

One effect of this jobs report may be a more active Federal Reserve. Futures traders now expect three rate cuts this year whereas it was only two a few weeks ago.

The next test for the market will come tomorrow with the February CPI report. Wall Street expects an increase of 0.3% for both the core and headline rates. The 12-month rate is expected to be 3.2% for the core rate and 2.9% for the headline rate. Tomorrow’s report will be too soon to show any impact from the trade policies.

Time for SAIC to Shine?

Next week, one of our Buy List stocks, Science Applications International (SAIC), is due to report its earnings. I highlight SAIC because it’s put up good results in recent quarters, but their stock has not done well.

In September, SAIC reported Q2 earnings of $2.05 per share. That was a 20-cent beat. Then in December, it reported Q3 earnings of $2.61 per share. That was a 44-cent beat.

Yet the stock started to fall since election day. In November, SAIC was as high as $156 per share. It recently dropped to $95 per share.

I assume that investors are nervous that its contracts will come under the DOGE knife. I’m not so sure of that. SAIC does a lot of private sector business, and it works with many foreign governments. Also, most of the company’s defense contracts are on high-tech systems which often help the Pentagon save money.

In December, SAIC’s board of directors authorized a buyback of $1.2 billion. That’s a strong show of confidence. At the end of last quarter, SAIC’s estimated backlog was approximately $22.4 billion.

SAIC also raised its guidance. The company sees its full-year earnings ranging between $8.50 and $8.65 per share. That’s a big increase over the previous guidance range of $8.10 to $8.30 per share. SAIC also narrowed its revenue range to between $7.425 and $7.475 billion.

For the year so far, SAIC has made $6.56 per share. That means the guidance implies Q4 earnings of $1.94 to $2.09 per share. Last Friday, the stock rose nearly 9% in trading. I think there’s a good chance we’ll see an upside surprise.

That’s all for now. There will be no newsletter next week. I’m going to be at the Future Proof Citywide investment conference in Miami Beach. If you’re around, please come by to say hello. It should be a lot of fun. We’ll be at booth #116.

– Eddy

Posted by on March 11th, 2025 at 7:12 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.