Market Commentary

» Posted by on Apr 16, 2019 in Announcements, Shop Talk, Uncategorized | 0 comments

Stocks are higher this morning as Chinese trade economic data continues to show signs of improvement. We will be digesting the latest Chinese GDP data tomorrow. I don’t think anyone is signaling an “all clear” as there’s still a ton of unknowns moving forward, but the global outlook has somewhat improved.

Brexit headlines have subsided to some degree, but the problem certainly hasn’t gone away, and the Eurozone economies will remain a major question mark in the weeks and months ahead.

Here at home, traders are turning most of their attention to U.S. first-quarter earnings season and possible challenges faced by shrinking margins.

Seasoned traders and investors know that a tight labor market, rising labor costs, tighter margins and slowing revenue growth can be extremely difficult to navigate.

Stock bulls are hoping the old adage that the market generally tends to rally for a couple of weeks following the April 15th Tax Deadline holds true. Last year that wasn’t the case, as the stock market actually tumbled by nearly -3% in the two weeks following.

Most bears are looking a bit further out on the horizon and pointing to the old trade adage of “sell in May and go away.” For years I heard equity traders talking about being aggressive bulls into the new year, then pulling mostly all of their chips off the table between May and October.

Bears inside the trade are still questioning “growth”, especially in U.S. tech companies with large exposure to global revenue. Remember, the average S&P 500 company has just under 40% of their sales coming from non-U.S. sources.

Tech companies have even more exposure with an average of 58% of their sales coming from non-U.S. sources.

Let’s keep in mind there has already been a good number of downward revisions to Q1 earnings. In fact, most Wall Street insiders are looking for a -10% decline in average Q1 tech earnings. I’ve heard many are looking for an even bigger drop in Apple’s sales, perhaps -13% to -14%; Facebook perhaps down -3% to -5%.

On the flip side, and going against the grain, some big names like Microsoft, Amazon and Google are thought to be showing decent size gains in their Q1 earnings reports.

Big names reporting today will include: Bank of America, BlackRock, Morgan Stanley, American Express, Johnson & Johnson, Netflix, IBM, United Continental, PepsiCo, Honeywell, and Alcoa.

Fed comments as of late seem to be mostly mixed to neutral. I tend to side with recent comments from Chicago Fed President Charles Evans, who said he thinks rates could stay “unchanged” until the fall of 2020.

A rate cut is probably only in the cards if the global economies take a massive nosedive and or U.S. deflation starts to become a bigger concern.

 

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