Enter the Bear

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, April 22.

State of Play

Stocks got beaten up yesterday the Nasdaq officially entered a bear market. As we eye our board of indicators for signs of direction at 0700, risk appetite appears to be returning:

• Stock index futures are pointing to gains, led by small caps (usually a good sign). The Russell 2000 is up 1.1%. Nasdaq and S&P 500 are up 1%;

• Commodities are gaining ground across the board, with WTI crude oil up 1.5% to trade around $63.50/barrel. Copper is up 0.8%. Precious metals continue their ascent, with gold and silver up 1% each;

• Cryptos are relatively quiet by comparison. Bitcoin is up 1% to trade around $88,500;

• Bonds are unchanged with the 10-year yielding 4.43%.

Cover art by author via Flux Dev AI

Today’s Known Events

It’s a big day for earnings. A few of these are in already:

• Staples company 3M (MMM 0.00%↑) beat on top- and bottom-line and appears to have left guidance unchanged as the stock is rising in the pre-market, up 3% at the time of this writing;

• Fellow staples company Kimberly-Clark (KMB 0.00%↑) reported mixed results but importantly lowered guidance (tariffs again) and that stock is sinking in the pre-market, down 3% in the pre-market;

• Home builder PulteGroup (PHM 0.00%↑) beat estimates and is moving higher in the pre-market, to the tune of 2% at the time of this writing;

• Verizon (VZ 0.00%↑) beat estimates but its guidance appears to have disappointed investors as the stock is down 3.5% in the pre-market;

• GE Aerospace (GE 0.00%↑) reported mixed results and updated guidance and investors appear to have liked what they saw as the stock is up 1.5% at the time of this writing;

Also reporting before the open: Defense contractors Lockheed Martin (LMT 0.00%↑), RTX (RTX 0.00%↑), Northrup Grumman (NOC 0.00%↑), and Halliburton (HAL 0.00%↑)

After the close at 1600 the main event: Tesla (TSLA 0.00%↑)

The Bottom Line

At least earnings will supply a detraction from all this Trump stuff. If not tariffs, then undermining the independence of the Federal Reserve — all of this is creates uncertainty, which is bad for risk appetite. The sell-off we saw yesterday is the logical consequence of this.

Figure the market needs one of two things to happen for investors to regain confidence:

1. Companies in their earnings indicate that tariffs are not that big of a deal;

2. Deals between the US and its major trade partners EU, UK, Japan, and China.

We got a hint of item 1 in the bank earnings last week. Not overtly, but the loan loss provisions were not raised significantly to account for a wave of consumer defaults. GE and PulteGroup earnings today may have done the same, though Kimberly-Clark certainly did not.

Where item 2 is concerned, the situation remains quite fluid and it’s not entirely clear who to believe on everything. We do know that Vice President Vance is in India discussing a trade deal. Trump for his part has talked up a deal with Europe. Japan talks now appear stalled. China would appear to be even further afield.

Where the Fed is concerned, Trump is probably just going to keep raising pressure on Powell to cut rates. He had a rant to this effect on Truth Social yesterday. That would perhaps be an indication he is not that serious about removing Powell. But markets still seem scared by the whole thing.

That could leave us set up for the type of head fake typical of bear markets: higher moves in futures and at the open before sustained selling sets in, leading to a loss for the day. This generally holds true if futures are up less than 1% — if more than that, then the momentum usually carries through to a winning day, unless acted upon by an outside force of course.

Today’s futures are up exactly 1% so figure it could go either way — but watch for the bear trap.

Housekeeping

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