Good morning contrarians! It is Thursday, April 20. Happy 4/20 day to those who celebrate.
Want a short recap of yesterday’s trading session? We’ve got one of those with an AI-generated host we’ve named Connie (short for contrarian, natch). Or, skip right to The Bottom Line and Set-Up.
State of Play
One individual who surely celebrates 4/20 is Elon Musk, whose Tesla (TSLA 0.00%↑) reported earnings yesterday that didn’t give investors what they were looking for. That stock is down in the pre-market, apparently taking risk appetite with it. As of 0635:
Stock futures are down, led by tech. The Nasdaq is pointing to a drop of 1% at the open;
Commodities are selling off, with WTI crude oil down another 2% to drop below $78/barrel while copper is down 1%;
Bonds are seeing some bids, with the yield on the 2-year down 6 basis points to 4.20% and the 10-year yield down 4bps to 3.56% (yields move inversely to prices).
Earnings
Taiwan Semiconductor (TSM 0.00%↑) just lowered its revenue guidance. That stock is moving lower along with other chipmakers, which is surely also affecting risk appetite this morning.
On the topic of semiconductors, be sure to listen to the ‘actionable highlights’ reel clipped from the latest podcast that was just recorded Tuesday:
The full podcast episode will be out for premium subscribers by this afternoon.
AT&T (T 0.00%↑), American Express (AXP 0.00%↑), Union Pacific (UNP 0.00%↑), D.R. Horton (DHI 0.00%↑), Rite Aid (RAD 0.00%↑), and Philip Morris (PM 0.00%↑) are among other names reporting before the open at 0930.
After the close at 1600 we’re due to hear from PPG Industries (PPG 0.00%↑), Knight-Swift Transportation (KNX 0.00%↑), and CSX (CSX 0.00%↑), among others.
Several regional banks report after the close as well.
Economy
It’s Thursday so we will get initial jobless claims at 0830. Economists expect 240,000 new claims, effectively in line with the 239,000 seen last week.
Existing home sales are out at 1000. The expectation here is for 4.5 million sales, more than 4.4 million seen last month.
Also at 1000 is the Conference Board’s Leading Index, which is expected to drop by 0.6% month-over-month versus a decline of 0.3% last month.
Fed Governor Chris Waller is apparently speaking at some crypto conference. Not sure what’s most surprising here: that there are still crypto conferences, that they book Fed speakers, or that the Fed finds it necessary to speak to these people.
Atlanta Fed President Raphael Bostic and Cleveland Fed President Loretta Mester are also due to speak today.
The Bottom Line
This earnings season has seen disappointing results from stalwarts like Goldman Sachs (GS 0.00%↑), Netflix (NFLX 0.00%↑), Morgan Stanley (MS 0.00%↑), and now Tesla and TSMC. That is enough to weigh on risk appetite for stocks, especially tech.
The move in bonds this morning is interesting. It’s a relatively small one but indicates there could be hope of a Fed pivot re-entering the hearts and minds of investors.
Meanwhile regional banks have quietly risen from the ashes. The SPDR Regional Bank ETF (KRE 0.00%↑) gained almost 3% yesterday and one of the biggest winners in yesterday’s session was First Republic Bank (FRC 0.00%↑), with a gain of 12%.
The Set-Up
If you think the economy still has room to grow and that this latest move to risk-off is temporary, then it may make sense to consider buying the dip in the chipmakers. Other cyclicals as well. Energy has dropped the last couple of days;
If you’re more bearish about the economy then bonds still present an opportunity, even after the bounce this morning. The premise here is that the economy will soon deteriorate, bringing down inflation and leaving the Fed with no choice but to cut rates;
There’s probably still plenty of juice left in the regional bank trade as well. Some of these are moving lower this morning after yesterday’s rally, potentially allowing for another entry point — though obviously not as lucrative as the one we had last month.
There may be (and most likely are) other factors to take into consideration when making investments. Nothing here is investment advice. Do your own research, make your own decisions.
Tesla, TSM Earnings Weigh on Risk Appetite