Apr 28

GDP, More Earnings: Daily Contrarian, April 28

Stocks are again trying to mount a rally in the pre-market after Facebook results beat estimates…

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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.
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Good morning contrarians!

Stock futures are looking to rebound a day after another reversal saw major U.S. indexes finish roughly flat.

As of 0550 this morning, tech stocks are leading the resurgence with the Nasdaq up over 2%. Meta Platforms né Facebook (FB) surged overnight after the company reported earnings that beat analyst estimates. Qualcomm (QCOM) is also gaining after its earnings.

Bonds are flat with the 2-year yield sitting at 2.58% with the 10-year at 2.82%, both unchanged.

Commodities are mixed with natural gas selling off a bit, down 1%. Palladium is up over 2%. Cotton is up 2% for some reason. Cryptos are gaining with bitcoin up 2% to trade around $39,800.

GDP

First-quarter GDP is due at 0830. Economists expect growth of 1.1% quarter-over-quarter, a significant drop from the 6.9% recorded in Q4. This is obviously a trailing indicator, but it would be a big psychological blow if U.S. GDP went negative in Q1. That could set us up for a recession if we get another negative print in Q2. Economist forecasts don’t usually miss by that much for this figure, but with Russia’s invasion of Ukraine coming in the middle of the quarter, who knows?

Seeing how it’s Thursday we also get initial jobless claims at 0830. The expectation there is for 180,000 new claims, in line with last week’s 184,000. This figure is near historical lows, which would contradict any possibility of a recession.

Later tonight at 2145, we’ll get Caixin’s China Manufacturing PMI for April. Economists expect this to come in at an even 50, right on the line separating expansion from contraction. This one is coming off a recessionary print last month (48.1 if you must know).

Earnings

Tons of earnings on tap again today. Apple (AAPL), Amazon (AMZN), and Twitter (TWTR) are the biggest ones, but then with Twitter who cares since it’s about to become a private company again. Apple and Amazon report after the close at 1600.

Before the open this morning we’re due to hear from industrial companies Caterpillar (CAT), Linde (LIN), and Northrop Grumman (NOC), consumer staples Altria (MO), Church & Dwight (CHD), Domino’s Pizza (DPZ), Hershey (HSY), Keurig Dr Pepper (KDP), and McDonald’s (MCD), pharma majors Merck (MRK) and Eli Lilly (LLY)

We’ll also get Baidu (BIDU), Intel (INTC), Mastercard (MA), Southwest Airlines (LUV) today as well. Probably several others I missed.

The Bottom Line

Can anything save this market? Earnings don’t seem to be helping much. Positive results boost shares of the company in question but fail to take the rest of the market along for the ride. At least that’s been the story so far.

Perhaps more disconcertingly, the last couple of days have seen activity that is typical of bear markets: buying before the open, signs of a rally in the early trading session, then selling into the close — often to new lows.

Overused cliche time:

“So much uncertainty facing markets right now.”

(Thanks for that. Kindly show me a time when people are convinced there is ample certainty in markets?)

Nobody can see into the future. But markets, forward-looking indicator that they are, certainly seem apprehensive. They’re either right, and risk assets are in trouble, or they’re wrong and this is a buying opportunity.

No matter which side of this divide you happen to find yourself on, don’t forget to do your own research and makes our own decisions.