Earnings Dump, Consumer Confidence, New Home Sales: Daily Contrarian, April 26
Stock futures are wobbling a bit ahead of a major day for earnings, with Microsoft and Google among the headliners…
Good morning contrarians! There is no podcast today as the host just arrived from an overnight flight and was unable to locate a quiet corner to record in time. Apologies for the inconvenience.
Stock futures are down a bit a day after rallying. Stocks yesterday reversed early losses to finish green, with the Nasdaq leading things to finish up 1.3% on the day.
This morning as of 0640, major indexes are down about 0.3%. Among individual stocks, Twitter (TWTR) is unsurprisingly seeing a ton of activity, but shares are up less than 1%. Major winners among S&P names include Cadence Design (CDNS), Garmin (GRMN) and Whirlpool (WHR), all up 3%+ whilst Marathon Oil (MRO) and Warner Bros Discovery (WBD) are the biggest losers, down more than 3% each
Commodities are mixed, with WTI crude oil down about 0.5% to trade around $98/barrel. Wheat (+2%) and industrial metals platinum, palladium, and aluminium are all up more than 1%.
Bonds are continuing to see a few bids, with the yield on the 2-year down about 3 basis points to 2.61% with the 10-year is down 4bps to 2.79%. Cryptos have rebounded, with bitcoin up about 5% to trade around $40,400.
Earnings
It’s a massive day for earnings. The headliners are Alphabet/Google (GOOG), which reports at some point today, and Microsoft (MSFT), which reports after the close at 1600.
We’ve already had a few big reports this morning. UPS (UPS) beat on both top- and bottom-line and announce plans to double its share repurchases. That stock is rising in the pre-market as a result. PepsiCo (PEP) also beat on top- and bottom-line. So did D.R. Horton (DHI), which also raised guidance. This is pretty big coming from a home builder.
General Electric (GE) results were mixed, beating on earnings but falling short on revenues, but management authorized more share repurchases which is helping the stock rally a bit in the pre-market.
We’re waiting to hear from Raytheon (RTX), 3M (MMM), Sherwin Williams (SHW), General Motors (GM), Archer-Daniels-Midland (ADM), Chipotle (CMG), and JetBlue (JBLU), among others. Not all report this morning but they will report at some point today.
Economic Data Releases
The Conference Board reports its Consumer Confidence index at 1000. Economists expect this number to print at 108, a small improvement on the 107.2 seen last month.
At the same time we’ll get new home sales for March, with economists expecting 765,000 sales, only a slight decrease from the 772,000 seen the previous month. This is obviously a big data item for the real estate market in the U.S. New homes are probably the biggest of big ticket items purchased by (mostly affluent) U.S. consumers. These new homes also require more in the way of building materials (and construction labor) than existing homes.
Speaking of real estate, the Case-Shiller Home Price Index is out at 0900. Economists are still expecting an increase for the 20-city index, of 1.5% month-over-month in February. That’s obviously a little dated, but it’s the best gauge we have of home prices. It may be another month or two before we see a drop in home prices — if we get one at all. New construction is holding up fine, so far.
The Bottom Line
It’s a busy day and one suspects earnings to be the main driver of things. Yesterday’s reversal was nice, but it might just be one of these proverbial dead cat bounces, especially for tech.
Maybe more interesting is how the inflation trade has fallen apart: Long energy, short bonds worked great for a few months. Not so much these last couple of trading sessions. It’s not quite significant enough to qualify as a secular trend, but it is noteworthy.
Podcast will return tomorrow, promise.
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