Good Earnings, PCE Declining, Fed Looms, First Republic Hangs in the Balance (April 28 Market Recap).
Indices
Dow 34,098, +290 or +0.85%.
Nasdaq 12,226, +154 or +1.28%.
S&P 4,169, +36 or +0.87%.
USD10Y 3.452%, -7.0bp or –1.99%.
WTI Crude $76.63 bbl, -$1.32 or –1.69%.
Good Earnings
Surprisingly good technology, communication, and growth company earnings pushed the Nasdaq composite to lead all the indices this week. Microsoft, Alphabet, Amazon, Meta, and Ebay all reported excellent quarters. However, it wasn’t just the growth companies that showed strength in earnings; Consumer names like McDonalds, Coca-Cola, Chipotle Mexican Grill, Pepsi, General Motors, Visa and Mastercard also reported great quarters. Not to be outdone, the Energy giant Exxon Mobile and Chevron also reported stellar results.
PCE Declining
As discussed in the space last week, we anticipated a fairly large drop in the March year-over-year Personal Consumption Expenditure report, and we were not disappointed. Month-over-month PCE was up a mere +0.1% vs +0.3% in February, which led the YoY number to fall to +4.2% from +5.0% last month. Does this data along with falling inflation numbers as measured by CPI and PPI and the impending failure/merger of First Republic finally lead the Fed to ease off their rate hike cycle (after this Wednesday’s 25bp hike)?
| Last Reading | Recent High | |
| Personal Consumption Expenditure | March +4.16% | June 2022 +6.98% |
| Consumer Price Index | March +4.98% | June 2022 +9.06 |
| Producer Price Index | March +2.75% | March 2022 +11.66% |
Fed Looms
On Wednesday the FOMC is widely expected to raise rates (perhaps for the last time in this cycle?) by 25 basis points. The CME Fed Watch Tool is now expecting the Fed to pause after Wednesday’s rate hike until the September meeting at which time the odds indicate a rate cut.
First Republic Hangs in the Balance
As of the time of this writing (7pm PDT Sunday), First Republic has not yet been taken into receivership by the Federal Deposit Insurance Corporation. However, final takeover bids for the embattled bank were due earlier this afternoon. Bank of America has backed out of the bidding. It is believed that JP Morgan Chase and PNC Bank are the sole bidders. Also unknown is whether FDIC will insure all deposits regardless of the $250,000 limit.
Economic Calendar
- Monday – April S&P and ISM U.S. Manufacturing PMI. Earnings: MGM Resorts (MGM), Norwegian Cruise Lines (NCLH).
- Tuesday – March Job Openings and Labor Turnover Survey (JOLTS). Earnings: Advanced Micro Devices (AMD), Clorox (CLX), Ford Motor (F), Starbucks (SBUX), Uber (UBER).
- Wednesday – FOMC Interest Rate Decision. April ADP Employment Report. April S&P and ISM U.S. Services PMI. Earnings: CVS Health (CVS), Qualcomm (QCOM), Trip Advisor (TRIP), Yum Brands (YUM).
- Thursday – Initial Jobless Claims. Earnings: Apple (APPL), Coinbase (COIN), Door Dash (DASH), Expedia (EXPE), Lyft (LYFT).
- Friday – April Non-Farm Payrolls. April Average Hourly Wages. Earnings: AMC Entertainment (AMC).
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April 28 Daily Trading Recap…
Monday – Dow +66 to 33,875, Nasdaq -35 to 12,037, S&P +3 to 4,137, USD10Y –0.07bp to 3.515%.
- Six of eleven S&P sectors traded higher, led by Energy, Materials and Healthcare.
- Meme stock, Bed Bath and Beyond (BBBY), finally bowed to the inevitable and declared bankruptcy over the weekend. As recently as last August, this was a $30 stock.
- Earnings: Coca-Cola (KO) beat top and bottom-line estimates fueled by price hikes. Despite losing 40% of their deposits during the banking crises, First Republic (FRC), beat both top and bottom-lines and noted that deposits have stabilized.
Tuesday – Dow –344 to 33,530, Nasdaq –238 to 11,799, S&P –65 to 4,071, USD10Y -11.9bp to 3.396%.
- All eleven S&P sectors traded down, led lower by Materials, Technology, and Consumer Discretionary.
- April Consumer Confidence disappointed at 101.3 vs 104 expected.
- Earnings: Microsoft (MSFT) beat their numbers and raised their forward guidance. Alphabet (GOOGL) beat their numbers for the first time in five quarters and announced a $70 billion stock buyback. Chipotle Mexican Grill (CMG) blew out their numbers on higher prices and higher customer traffic. General Motors (GM) beat their numbers and raised forward guidance. McDonalds (MCD) beat analyst expectations but warned of a possible recession in both North American and Europe later this year. Pepsi (PEP) topped analysts’ expectations and its shares hit a 52-week high. UPS (UPS) results missed on both the top and bottom lines on slower U.S. retail sales. Visa (V) beat both top and bottom lines on a rebound in international travel.
Wednesday – Dow –79 to 33,897, Nasdaq +4 to 12,157, S&P -0 to 4,154, USD10Y -1.3bp to 3.602%
- Ten of eleven S&P sectors traded down, led lower by Utilities, Industrials, and Healthcare.
- March Durable Goods Orders were much better than expected, +3.2% vs +0.5% expected and vs last month’s -1.2% print.
- The First Republic Bank (FRC) saga continues: after reporting earnings Monday night and disclosing the amount of deposits lost during the March bank run, investors have not been waiting to sell and the stock has plummeted. Today it lost another 29.75%.
- Earnings: Meta (META) blew out their earnings, beat their revenues, and raised their Q2 forecast; META traded up +11.65% post close. Ebay (EBAY) also beat their number and raised their current quarter projections; EBAY traded up +2.63% in the extended period.
Thursday – Dow -71 to 33,826, Nasdaq -15 to 12,142, S&P -19 to 4,135, USD10Y –7.4bp to 3.528%.
- Jobless claims rose again to 230,00 vs the 248,000 forecast and last week’s slightly revised higher print of 246,000 (originally 245,000).
- Q1 GDP disappointed at +1.1% vs expectations of +2.0% and last quarter’s +2.6% print.
- Earnings: Amazon (AMZN) beat their revenue numbers but warned that growth at their Amazon Web Services division is slowing. American Airlines (AAL) reported roughly in line numbers and guided their Q2 to the high end of the range. Caterpillar (CAT) blew out their numbers, but analysts were concerned with growing inventory at their dealerships. Mastercard (MA) beat their consensus estimates. Southwest Air (SWA) reported a $159 million loss in the quarter which was expected after it cancelled some 16,000 flights during its holiday meltdown. SWA does expect to be profitable in calendar Q2.
Friday – Dow +272 to 34,098, Nasdaq +84 to 12,226, S&P +34 to 4,169, USD10Y –7.6bp to 3.452%.
- Nine of eleven S&P sectors traded up today, led by Energy, Financials, and Real Estate.
- March Personal Consumption Expenditure number was +0.1% leading to a Year over Year (YoY) number of +4.2% down from +5.0% last month. Core PCE continues to be stickier at +0.3% Month over Month (MoM) leading to a YoY number of +4.6% down a tenth of a percent from last month.
- Earnings: Chevron (CVX) beat their numbers handily on higher refining margins. Exxon Mobil (XOM) easily beat their numbers.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.