Good morning contrarians!
Stocks are selling off a bit after a big rally yesterday. Tech led the rebound with the Nasdaq gaining 3%, with other U.S. indexes up a little less in a hectic Thursday session that only intensified after the close.
State of Play
Today as of 0500 the Nasdaq is seeing the worst of the selling, down 0.9%. It was down more earlier in the overnight session. The catalyst was disappointing earnings from Apple (AAPL) and Amazon (AMZN) after yesterday’s close. Apple’s earnings were actually good, and the stock rallied initially, but then its CEO cautioned of supply chain constraints cutting into future earnings.
Amazon’s stock is now down more than 8%, making it the biggest loser in the pre-market (among S&P 500 companies). Winners include Tesla (TSLA), up 3%.
Bonds are pretty quiet again. The 2-year is effectively unchanged, sitting at 2.64% with the 10-year down 2 basis points to 2.85%.
Commodities are seeing a few bids. Palladium is the major winner again, up almost 4%. Platinum, gold, and silver are up more than 1% each. WTI crude oil is flat at $106/barrel. Cryptos aren’t doing much with bitcoin down 0.4% to $39,400.
Economic Data
Today we have the Personal Consumption Expenditures, or PCE, index out at 0830. This is the Fed’s preferred inflation gauge and would normally be a really big deal. It isn’t because the Fed has effectively dialed in that it will raise rates by 0.5% or 0.75% at its next meeting. This reading is unlikely to change that calculus. For more on this, make sure you listen to the latest weekly podcast that posted last night where our guest Mike Singleton of Invictus Research gets into it at much greater depth. (This episode is only available to you premium subscribers. Everybody else has to wait until next week).
For what it’s worth economists expect a 5.3% year-over-year print for the core PCE deflator, which is a tiny bit below the 5.4% seen last month. If it exceeds that maybe the market will start to price in a 75bps hike (if it hasn’t already).
We also have Chicago PMIs out at 0945. A reading of 62 is expected versus 62.9 last month. Michigan Consumer Sentiment for April is out at 1000 but this is the ‘confirmed’ report that makes much less of a splash than the preliminary one that posted a fortnight ago. That came in at 65.7.
Earnings
A bunch of these to tell you about too, all due before the open at 0930. Oil majors Exxon Mobil (XOM), Chevron (CVX), and Phillips 66 (PSX). Pharma companies AbbVie (ABBV), AstraZenica (AZN), and Bristol-Myers Squibb (BMY). Consumer staples Colgate-Palmolive (CL) and Newell Brands (NWL). Industrial concerns Honeywell (HON), LyondellBasell (LYB), and Weyerhaeuser (WY). This caps off a crazy busy week in earnings.
The Bottom Line
It’s the final trading day of the month and a lot still going on. Maybe the PCE report will come in soft, leading to a relief rally. Other than that, earnings — and more importantly, comments from earnings — should continue to drive things.
Some of the issues reported in earnings, like supply chains, should prove temporary. Others, like higher wages, should not. Interesting that investors are punishing Amazon for paying more to their workers. Not sure where a living wage ranks in the whole ESG scam dogma, but investors don’t seem to like it very much.
Yesterday’s rally still leaves stocks facing a losing April. You weirdly aren’t hearing much about April being the winningest month for stocks anymore. None of the rallies we’ve seen these past couple of weeks have proven to have any kind of staying power. That appears to be the case for the most recent one seen yesterday as well.
Personal Consumption Expenditures, Yet More Earnings: Daily Contrarian, April 29