Market Recap Week Ending April 16
Monday – Dow +55 to 33,745, Nasdaq (50) to 13,850 and the S&P (1) to 4,127. The biggest news of the day was Microsoft’s (MSFT) acquisition of speech recognition company Nuance Communications (NUAN) for $56/share…The yield on the 10-year Treasury crept up a tad to 1.68% after a lackluster 3-year and 10-year Treasury auctions earlier in the day…On 60 Minutes, last night, Fed Chair Jerome Powell said the Fed would not be raising rates until the economy was at “full employment” and inflation was running at 2%, a scenario he does not envision coming to pass for some time….
Tuesday – Dow (68) to 33,677, Nasdaq +146 to 13,996 and the S&P +13 to 4,141 (record high). The Labor Department released the March Consumer Price Index, a widely observed measure of inflation today. Prices were up 0.6% month over month but rose 2.6% year over year, the biggest increase since August 2018. The majority of the increase was caused by surging gasoline prices which rose 9.5% in March. Expectations were for +0.5% and +2.5% respectively. Despite the slightly hotter numbers, the yield on the 10-year U.S. Treasury fell 6 bp to 1.61% on news that the FDA is asking states to pause using the JNJ one dose Covid vaccine out of an abundance of caution (6 reported blood clots amid 7 million doses administered). Seven of the eleven S&P sectors traded higher, led by Utilities, Consumer Discretionary and Tech…Earnings season kicks off tomorrow with JPMorgan (JPM), Goldman Sachs (GS), and Wells Fargo (WFC) all reporting…In addition to the focus on the money center banks, all eyes will be set on the direct listing of Coinbase (COIN), the first cryptocurrency trading platform to test the public markets. Nasdaq has issued a reference price of $250/share which can be considered the IPO price. In the meantime, on FTX, a German-based crypto platform, CBSE, a Coinbase futures contract, has changed hands at $594/share, implying a $170 billion valuation for the company. The stock is expected to open between 9am and 11am Pacific….
Wednesday – Dow +53 to 33,730, Nasdaq (138) to 13,857 and the S&P (16) to 4,124. Cyclicals were back in vogue today with energy rallying and strong earnings boosting the financial sector. Consumer Discretionary and Tech were the worst performers in the S&P as only five of the eleven sectors traded higher… Coinbase (COIN), the crypto currency exchange was given a reference price of $250, opened at $381, rallied to $429, and finally closed at $328…The 10-year yield rose slightly to 1.64%…Goldman Sachs (GS) blew out expectations powered by their trading and investment banking units. JPMorgan Chase (JPM) also beat on both top and bottom lines, helped in part by bringing money previously earmarked for loan losses back onto their balance sheet. Wells Fargo (WFC) finished off the banking trifecta, also beating numbers handily while also relying on a $1 billion net benefit from monies previously set aside for loan losses… Tomorrow is Pepsi (PEP), BlackRock (BLK), Citigroup (C) and Bank of America (BAC). In addition, weekly jobless claims will be released with expectations of 710,000 claims filed. March retail sales will also be released….
Thursday – Dow +305 to 34,035 (record close) , Nasdaq +180 to 14,038 and the S&P +45 to 4,170 (record close). Markets rallied strongly today on an exploding March retail sales number (9.8% higher vs expectations of a rise of 6.15%) and a better-than-expected jobless claims print (claims plunged to 576,000 vs last week’s 769,000 print and vs expectations of 710,000 claims). The Philly Fed manufacturing report came in at 50.2, the highest reading since March 1972 and blowing out expectations of 42. The Empire State Manufacturing survey came in at 26.3, its highest level since October 2017 and better than the estimated number of 20. All this positive economic news paved the way for a broad-based rally; ten of the eleven S&P sectors traded higher with only energy trading lower. Counterintuitively, the 10-year U.S. Treasury yield sank to 1.55% today…Citigroup (C) and Bank of America (BAC) both beat analysts’ expectations. However, both stocks traded lower as Citi announced that it would close much of its international retail banking operations and analysts found fault with BAC’s weak interest income and loan growth…BlackRock (BLK) easily beat numbers and traded up 2% as they now manage $9 trillion in assets…Pepsi (PEP) glided past analyst expectations on the strength of their Frito-Lay division….
Friday – Dow +164 to 34,200 (record close), Nasdaq +13 to 14,052 and the S&P +15 to 4,185 (record close). More positive economic data pushed all three indices higher today including record closes for the Dow and the S&P 500. University of Michigan Consumer Sentiment came in at 86.5, the highest it has been in a year…Another Fed Governor, Christopher Waller, said that while the economy is beginning to take off, there was no reason to begin tightening monetary policy…Morgan Stanley (MS) continued the positive earnings parade, easily beating numbers thanks to their trading and investment banking results. The stock traded down 2.76%…The 10-year yield rallied slightly back to 1.58%.
The week in review…Dow +400 or +1.2% Nasdaq +152 or +1.1% or and the S&P +57 or +1.4%. The stories of the week were bullish economic data, the direct listing for cyber exchange Coinbase (COIN), strong earnings for the money center banks and of course, the 10-year yield. From Philly Fed Manufacturing to weekly jobless claims, to Empire Manufacturing, to Consumer Sentiment, every data point came in gangbusters. In addition, earnings were through the roof. The first week of earnings saw companies beating estimates by more than 84% per Refinitiv. Coinbase (COIN) debuted at $381, rallied as high as $429 and finished the week at $342. Cathie Wood’s Ark funds bought over 1.3 million shares for her funds this first week of trading. However, despite all the positive news, the yield on the benchmark U.S. Treasury 10-year note fell 10 bp from Monday’s close of 1.68% to today’s close of 1.58%. The counterintuitive move is being attributed to a range of possibilities; fear that the reflation trade will peter out, the pause in the administration of the JNJ Covid vaccine, or perhaps the most likely reason, that the 10-year yield has rallied from 0.53% July 26th to 1.75% last month and is consolidating. Furthering that theory is the fact that the Fed, Chairman Powell, and all the governors have been on a coordinated press tour the last two weeks assuring markets that raising rates is not in the cards even if inflation continues to rise. Maybe sellers of the 10-year are starting to believe them?
What we are watching next week…
Monday – Earnings: Coca-Cola (KO), IBM (IBM), United Airlines (UAL).
Tuesday – Earnings: Johnson and Johnson (JNJ), Proctor and Gamble (PG), Netflix (NFLX), Lockheed Martin (LMT).
Wednesday – Earnings: Verizon (VZ), Chipotle (CMG), Nasdaq (NDAQ).
Thursday – Earnings: AT&T (T), American Airlines (AAL), Snap (SNAP), Initial Jobless Claims, Existing Home Sales.
Friday – Earnings: American Express (AXP), Manufacturing PMI, Services PMI, New Home Sales.
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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…Bitcoin (physical), Cardano (physical), Chainlink (physical), Ethereum (physical), ETHE, GBTC, TSLA, and WKHS.