The Fuse
Equity futures are ripping higher this morning following some strong earnings out of Meta and Microsoft. Those two names are stoking a rally in Nasdaq that puts that index right near 20K again. More from big earnings later tonight.
Interest Rates are mostly flat after moving up a bit in Wednesday’s trade. With the recent drop in the 10 yr yield there is some relief to go around, but yesterday’s weak GDP figure tells us the economy has slowed down quite a bit from a good pace in 2024. The data however in the GDP report was not enough to push the Fed towards rate cuts on the near term horizon, but maybe late in 2025 or early next year.
Markets had a strong rally late in the day but that did not pace the European markets which were flat. The dollar had a strong move up, higher by .4% while gold remains volatile, down more than 2%. Crude oil is also getting slammed, Nat gas down .6%. German 10 yr bund yields were off 5bps while 10 yr US treasuries held steady. Japan was the big winner, up 1.1% as China and Hong Kong were closed.
Earnings from Microsoft and Meta beat downtrodden estimates handily and those two stocks are being rewarded nicely this morning. We’ll see if that carries over. We also had very strong report from RobinHood but not so good from Qualcomm. Tonight we’ll hear from Apple and Amazon, this morning Lilly, Mastercard, CVS, McDonalds, Roblox and Sirius.
More volatility yesterday with stocks getting buried early in the day, falling more than 2% by the first 20 minutes of the trading day but managing to turn the boat around and catch a nice tailwind into the close. In fact, the markets simply wiped out all of those losses and then some, managing to post a decent win across the board (save for the Russell 2k). If the overnight gains hold and a run to 5,600 happens there could be some fireworks.
Breadth was negative but that really does not tell the entire story. I would almost declare the small breadth loss as a win for the bulls. Early in the day the down issues were dominating, trouncing the advancers by 5-1. It was a steep climb just to get back to an even level and that was nearly accomplished. Oscillators went down a bit but remain in overbought territory. New highs slowed down some but are still ahead of new lows.
More volume, now that’s more like it! Nothing like some volatility to really shake the trees. Heavier turnover on the Nasdaq and SPX 500 is just what the doctor ordered, and with a new month starting today perhaps some new money flows will come along. Remember, beginning of the month is often a time when we see new money put to work right away, and with big earnings today and a labor report coming up tomorrow we could see more turnover this week.
A nice pullback to a round number today. That 5,400 level was screaming to be tagged and the SPX 400 nearly obliged. That pullback was bought up ferociously and with vigor. No question the bulls should not be giddy yet, the 200 and 50 day moving averages are still well out of range but today’s big reversal candle is a good start.
The Internals
What’s it mean?
We have seen better days with the internals than yesterday but being this was an up day, we’ll take what we can get. Ticks were strongly red and green, this last day of the month with many buy/sell programs hitting the tape. VIX hit highs at the start and plunged the rest of the day, VOLD tried to climb as did ADD but just could not get to positive. If the action holds here we could get a move above 5,600, internals might cooperate.
The Dynamite
Economic Data:
- Thursday:Jobless claims, PMI, ISM, construction spending, auto sales
- Friday:April non-farm payrolls, hourly wages, factory orders
Earnings this week:
- Thursday:LLY, RBLX, MA, CVS, MCD, SIRI, BAX, PWR, AMZN, AAPL, IOT, ABNB, RDDT, TEAM, FIVN, AIG
- Friday:FUBO, XOM, AES, CVX, BEP, APO, CI, WEN, MGA
Fed Watch:
Plenty of fedspeak last week but nothing this coming week as the committee is teeing up their next meeting on May 7th. This one is not likely to have a rate move but it’s possible June is in play. I still don’t believe the fed will move rates this year but the if the data weakens that forecast will be wrong.
Stocks to Watch
Volatility – VIX made a bold move down this week and if it continues we’ll have a buy signal from this indicator.
MAG 7 names – A big week of earnings as 4 of the 7 declare their results. How will they do? Beat lowered guidance, offer up some incentives like boosted dividends and buybacks? Anything is certainly on the table.
Jobs Report – A big labor report is due this week, will the strength in this part of the data continue to roll? Last month was a huge miss to the upside.
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