The Fuse
Equity futures are rising up this morning on the back of strong tech earnings. Microsoft and Google are pushing higher after solid earnings reports. However, the market is waiting on the all-important PCE report due out today, a favorite tool of the FOMC and just before their next meeting begins on April 30th.
Interest Rates are a bit lower this morning as bond traders are adding to some recent gains. Yesterday’s auctions were taken well, short term rates have been fluctuating and with the next fed meeting coming up soon, there could be some volatility. We do not expect a rate move for some time to come if at all in 2024.
Strong earnings last night were a relief to investors/traders alike. Volatility remains in front of us but as news is disbursed (today’s PCE, next week’s Fed meeting) we might see volatility start to retreat, which would be a positive for markets. The yen slumped to a record low against the dollar after recent policy decision there to keep monetary policy unchanged. Stoxx in Europe climbed, crude and gold are up nicely this morning.
Earnings from Google and Microsoft were spectacular last night, both stocks up strong this morning. Cloud, AI, software and advertising all beat their respective metrics. Google announced a dividend and big share buyback. Intel beat, SNAP was strong with guidance while Roku missed on its forecast. Today XOM and CVX reported solid numbers but are backing away a bit on profit taking.
Following poor guidance from Meta and a weak GDP report for Q1 stocks were sent reeling all day yesterday. The price action was terrible but stocks did finish well off their lows of the session. In after hours trading the SPX futures are up sharply following strong earnings from Alphabet and Microsoft among others. It’s been a positive week for stocks, we’ll see if it ends that way.
After two days of strong breadth the bears took control of this indicator. Thanks to the IWM being lower the decliners outdid the advancers. That is not a surprise, though we did see a buy signal arrive on Tuesday, that is now in question. Oscillators turned up Tuesday but have retreated and are near the flat line. Breadth shows the market is no longer oversold.
Volume was mixed, the DIA actually printed a distribution day while the Nasdaq was close, but make no mistake the big volume was to the downside all session long. If we see more distribution this week then those recent lows are in jeopardy for being clipped. Recent action has caused some publications like IBD to go ‘market in correction’. For good reason!
It sure seemed as if the support from last Friday was going to fail. In fact, the 5K level was tested once more, the Nasdaq also flirting with 17K but managed to hold above that level. Next week brings the last couple of trading days in April and we could see a bit of window dressing activity before the end of the month.
The Internals
What’s it mean?
If this is what a short term bottom looks like, then the internals are ready to move higher. VOLD and ADD were not all that excited about the late day rally. Put/calls remain a bit elevated while the VIX continues a steady decline. Ticks were strong late in the day, lots of green arrows. This bodes well for markets in the near term.
The Dynamite
Economic Data:
- Friday:PCE for March, Michigan sentiment
Earnings this week:
- Friday:XOM, CVX, ABBV, HCA, CL, CHTR, BALL
Fed Watch:
We have reached the point of ‘blackout’ period for the Fed speakers as they have become unified with their hawkish stance. Nothing on the schedule for this week. It seems almost unanimous the committee is less likely to cut rates in 2024, last week Chair Powell stated in no uncertain terms that inflation was not moving down as quickly as they wanted.
Stocks to Watch
Tesla – This stock has been a miserable performer this year and has been falling hard. Earnings are due out Tuesday after the close so we’ll be watching this carefully to see if traders respond with bearish behavior.
Semiconductor Stocks – This group was just hammered the past week, down some 10%. After some decent earnings from TSM and others it appears this has been a ‘sell the news’. NVIDIA’s poor performance contributed as did SMCI, but others’ charts are in a precarious position. Watching closely with Intel reporting Thursday.
Defense – Most names report this week and have started to improve. No doubt this was caused by the potential orders coming from the government, now spending has been approved and perhaps these companies will receive some contract benefits.
