The Hidden Danger That Could Derail the Stock Market Recovery

Commercial real estate (CRE) is a $20 trillion industry that plays a vital role in the US economy. It provides space for businesses to operate, jobs for millions of workers, and income for investors and lenders. However, the industry is facing a wave of defaults that could have serious repercussions for the stock market and the broader economy.

A default occurs when a borrower fails to repay a loan or meet other contractual obligations. In CRE, defaults are usually triggered by a decline in property income, a drop in property value, or a rise in borrowing costs. Any of these factors can make it difficult for property owners to service their debt or refinance their loans when they mature.

Why

The Covid-19 pandemic has exacerbated these risks for many CRE sectors, especially office and retail. The shift to remote work and online shopping has reduced the demand for physical space, leading to lower occupancy rates and rents. According to Green Street, office and retail property values have fallen by 25% since last year, while hotel values have plunged by 40%.

Meanwhile, the Federal Reserve’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry. Higher interest rates increase the cost of borrowing and refinancing, as well as reduce the attractiveness of CRE as an investment relative to other assets. According to Morgan Stanley, about $1.5 trillion of CRE debt is set to mature over the next two years, posing a significant refinancing challenge for many borrowers.

Possible Impacts

The impact of CRE defaults could spill over to the stock market in several ways. First, defaults could erode the earnings and capital of banks and other lenders that hold CRE loans on their balance sheets. According to Goldman Sachs, about 80% of all bank loans for commercial properties come from regional banks, which are more exposed and vulnerable to liquidity shocks.

Second, defaults could trigger fire sales of distressed properties, putting further downward pressure on property values and impairing the collateral of other loans. This could create a negative feedback loop that amplifies losses and contagion across the financial system.

Third, defaults could undermine the confidence and sentiment of investors and consumers, leading to a pullback in spending and investment. This could weigh on the growth and profitability of various sectors that depend on CRE activity, such as construction, hospitality, retail, and business services.

Conclusion

In short, CRE defaults could pose a significant threat to the stability and performance of the stock market and the economy. While the Fed and other regulators have taken steps to monitor and mitigate these risks, such as providing relief measures and conducting stress tests, the situation remains uncertain and volatile. Investors should be prepared for more turbulence ahead.

Doug

After learning that April inflation was 4.9% down one-tenth of one percent the indexes finished mixed in a choppy whipsawing session.  Bonds yields slightly pulled back even as the regional banking sector experienced some renewed selling pressure and debit ceiling rhetoric swirled keeping investors on edge.  Today it’s all about the Jobless claim numbers and the April PPI with the number of earnings events starting to decline.  Although with select tech giant’s names rising the QQQ continued its bullish trend as the DIA, SPY, and IWM remained rangebound where they have traded for more than a month. 

Asian markets finished the day mixed but mostly lower with modest gains and losses.  European markets show modest gains this morning with the BOE raising rates by 25 basis points.  Ahead of market-moving economic data U.S. futures suggest a flat open however that is likely to quickly change as the data is reviled.  Plan for another challenging day of price action.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include AQN, CRSP, CYBR, DDS, ENTG, FVRR, HIMX, JD, DNUT, MLCO, NWSA, NIO, PKI, TPR, USFD, UTZ, & YETI.

News & Technicals’

According to Jeffrey Kleintop, chief global investment strategist at Charles Schwab, the labor market may experience a reversal later in 2023, similar to how supply chain shortages turned into gluts of goods and materials in mid-2022.  However, some analysts argue that monetary policy may take longer to influence the labor market, especially in the services sector, where labor demand is high and labor supply is constrained by factors such as pandemic-related disruptions, demographic changes, and skill mismatches. Moreover, a contraction in labor supply may reduce labor productivity and variety, which could put upward pressure on wage growth and inflation. Therefore, meaningful policy action to grow the size and productivity of the labor force is needed to address the underlying causes of inflation and ensure a balanced and sustainable economic recovery.

The media and entertainment industry is facing a dilemma as it tries to balance raising prices and cutting costs amid a slowdown in subscriber growth and a shift in consumer preferences. Disney, for example, lost 4 million Disney+ subscribers in the quarter, most of which came from India. To find a new growth narrative, the industry may need to look at gaming, which is on track to be the primary source of entertainment across the world. Gaming not only reaches three billion people on the planet and drives multi-billion-dollar revenue streams, but also creates a sense of community and social interaction among its users. Gaming also offers opportunities for innovation and diversification, such as cloud gaming, virtual reality, augmented reality, and interactive storytelling. Therefore, media and entertainment companies may need to develop strong visions that span video, social media, and gaming sectors to create a richer and more engaging ecosystem for consumers.

On Wednesday, the indexes finished mixed with regional bank and debit ceiling issues worrying investors. This happened as April’s U.S. inflation rate was 4.9% higher than a year ago, a bit lower than the expected 5.0%, but still much higher than the Fed’s goal of 2.0%. Unfortunately, the DIA, SPY, and IWM remain stuck in the same wide trading range they have been stuck in for more than a month.  However, the QQQ managed a marginal break of overhead resistance with the tech giants doing all of the work. With the number of earnings events declining for 2^nd quarter earnings the focus this morning will be the Jobless Claims and the April PPI report with a little fed speak tossed in for good measure.  Plan for the challenging price action to continue!

Trade Wisely,

Doug

Indexes churned in a frustrating flat trading rage on Tuesday with the pending CPI report center stage.  However, the debt ceiling negotiations and the regional banking stress added to the uncertainty.  I would not rule out the possibility of a big point move in the indexes before the market open either up or down reacting to the inflation data.  That said, anything is possible with additional volatility created by another big day of earnings data. 

Asian market traded lower overnight with an eye on the pending inflation data. European markets are also red this morning waiting in a light volume session ready to react to the pending U.S. report.  Ahead of the April consumer price index report U.S. futures trade marginally lower as banking and debit ceiling stresses continue in the background.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ALRM, AAP, BYND, BILI, CAKE, COHR, CRSR, CR, DIS, EBIX, FLEX, GDRX, GRPN, HL, JAZZ, LI, MFC, NYT, NTNX, NTR, OSUR, PAAS, PFGC, REYN, RBA, HOOD, RBLX, SONO, TEVA, TTD, COOK, TUP, U, VVV, VERX, WEN, WWW.

News & Technicals’

Despite the pandemic’s impact on travel, Airbnb achieved its first profitable quarter in Q1 2021, earning $117 million in net income. This was a significant improvement from the net loss of $19 million it posted in Q1 2020. The company also grew its revenue by 5% year-over-year to $1.82 billion, surpassing the expectations of analysts. The revenue growth was fueled by higher demand and prices in North America. However, the company warned that its second-quarter performance might be weaker than expected due to the uncertainty around travel restrictions and the high demand it faced last year.

A White House meeting on Tuesday failed to break the deadlock over the debt ceiling, as President Joe Biden and House Speaker Kevin McCarthy stuck to their opposing positions on how to raise the nation’s borrowing limit before it runs out on June 1st. The meeting, which also included other congressional leaders, did not result in any new progress or agreement on the issue. President Biden called on Congress to pass a clean debt limit increase without any strings attached, while House Speaker McCarthy demanded spending cuts as a condition for any votes to support more borrowing.

Another day of sideways chop as investors monitored banking turmoil, and debit ceiling wrangling while pensive about the pending CPI data.  Opinion Survey released yesterday indicated that banks continued to tighten lending standards, but the tightening was not as severe as feared given the recent stress in the banking sector. Nevertheless, with banks less willing to lend and demand for loans weakening, economic growth and inflation will likely slow further in the quarters ahead. We will also get Mortgage data, Petroleum numbers along with another big day of earnings reports to keep traders guessing and price action challenging.

Trade Wisely,

Doug

The market caught its breath on Monday trading in a very narrow range seeming waiting on the Wednesday CPI report.  Regional banks continue to be a concern for investors experiencing some selling with gold and defensive sector stock remaining strong as investors look for some safety.  Today we face a big day of earnings, some speak, and a 3-year bond auction.  Expect more chop waiting on the inflation data unless the selling picks up to worry the market.

 Asian markets mostly retreated overnight led by Hong Kong down 2.12% in reaction to China’s trade data.  European markets are also experiencing some selling this morning with red across the board. Ahead of a big day of earnings data, U.S. futures suggest a bearish open with some premarket pressure in the regional banking sector even as bond yields pull back slightly. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ABNB, AFRM, APD, AKAM, BIRD, ARMK, BLNK, BE, BOOT, CARG, CE, CHH, CLNE, COTY, CPNG, DAR, DOCN, DUK, DUOL, BROS, ELAN, EA, EXAS, FSR, FOXA, GFS, GPRO, GO, GXO, HRB, HAIN, HSIC, HNST, TWNK, IGT, IRBT, J, KGC, LZ, LNC, LITE, MNKD, MTTR, NKTR, NKLA, NVAX, OTLY, OXY, PAYO, PETO, PETQ, PTRA, PUBM, RTX, RNG, RIVN, SEAS, SQSP, SHOO, TPX, TOST, MODG, TWLO, UAA, UPST, WRBY, WMG, WB, WE, WYNN.

News & Technicals’

Nintendo, the Japanese gaming giant, reported a decline in both profit and revenue in its fiscal year that ended in March 2023. The main reason for this drop was the lower sales of its flagship product, the Nintendo Switch console series. The Nintendo Switch is a hybrid device that can be used as a home gaming system or a handheld million units of the Switch in the fiscal year, which was slightly below its forecast of 18 million. For the next fiscal year, Nintendo expects to sell 15 million units of the Switch, indicating a further slowdown in demand for its popular console.

Google will show some new AI things at a big event this week. One of them is PaLM 2. PaLM 2 is a computer program that can understand and write in many languages. It can also do creative writing, math, and coding. Google will also show some new things it made with Bard and Search. Bard is another computer program that can write like humans. Search is what you use when you want to find something on the internet. Google says these new things will help people do more with computers.

Aramco, the world’s largest oil company, made $31.8 billion in net profit in the first quarter of 2023. This was lower than the $32.2 billion it made in the same quarter last year. The company faced challenges from inflation and rising interest rates, which reduced global oil demand and raised worries about a recession. However, Aramco’s net profit was higher than what analysts expected. The company also said it will pay a dividend of $19.5 billion in the second quarter.

Monday the market caught its breath after the sharp rally as we wait for the CPI. The indexes did not change much chopping in a narrow range. Stocks in Europe and Asia mostly went up, and so did the prices of gold and oil. Some sectors that depend on the economy, such as communication services, consumer discretionary, and financials, did better than others, but this did not mean that the big issues facing the market were solved. These issues include the Fed’s possible change in policy, the problems of some banks, and the slowing down of the economy. Interest rates went up a bit on Monday, but they are still around 3.5% for the 10-year Treasury bond, which is where they have been for the last two months.

Trade Wisely,

Doug

All economic worries fell into the background on Friday with a huge reversal that I think can correctly be called the Apple effect after the companies better than expected report.  Now that the indexes are back in the choppy range they have traded for the past month can the bulls follow through with CPI and PPI reports pending?  There will be plenty of earnings events to keep traders guessing with regional banking woes and debit ceiling wrangling in Congress keeping the uncertainty of the path forward challenging.

Overnight Asian markets mostly rallied with the tech-heavy HSI leading the buying, up 1.24%.  European markets also trade bullishly this morning as the relief rally continues.  U.S. futures also suggest a mostly bullish open ahead of earnings with nothing of consequence on the economic calendar as traders monitor debt ceiling talks and the pressures in regional banking.

Economic Calendar

Earnings Calendar

Notable reports for Monday include ADTN, BNF, CBT, DDD, DBA, DVN, ENR, FN, FRPT, HI, HPP, IIPR, IFF, KKR, LCID, LL, MCK, PLTR, PLUG, PYPL, PGNY, ROVR, SIX, SWKS, TSN, VECO, & WDC.

News & Technicals’

The U.S. is facing a looming crisis as the debt ceiling deadline approaches. The debt ceiling is the legal limit on how much the federal government can borrow to fund its operations and pay its bills. If Congress does not raise the debt ceiling by June, the Treasury Department will run out of ways to avoid paying its obligations. This would have disastrous consequences for the economy, according to Treasury Secretary Janet Yellen. She warned that a default would trigger a “steep economic downturn”. She urged lawmakers to act swiftly and responsibly to avoid this scenario.

Jerome Powell thinks the US economy can skirt recession. But the odds are stacked against him considering the banking stress, debit, and debt ceiling politics.  The Fed boss thinks the US economy is doing well because many people have jobs. He saw this in the latest report that showed more jobs were added last month. He thinks this will help the US economy avoid a big slowdown, even though the Fed has raised interest rates.  But the Fed might have to keep interest rates high for a long time because there are too many jobs and not enough workers. This makes it more likely that the US economy will slow down a lot making for a not-so-soft landing after all.

I think we could correctly call the huge Friday reversal the Apple effect as the better-than-expected report had investors shake off the debt ceiling, regional banking, hot jobs figures, and higher rates. However, despite the surge higher, the indexes finished the week within the wide-ranging chop zone that has trapped prices for a month.  The QQQ has the best chance of breaking overhead resistance but we face the uncertainty of the CPI report on Wednesday and the PPI on Thursday. Toss in banking woes, the debt ceiling battle, and a slew of earnings events and we can plan for another wild week of price action!

Trade Wisely,

Doug

The FOMC disappointed the market as indexes turned negative after raising rates with a unanimous vote from the committee.  Unfortunately, the news adds more pressure to the regional banking sector with PACW now looking for a solution for the rapid selloff. We have a jampacked day of earnings and economic data to keep traders guessing and investors on edge culminating with a highly anticipated AAPL report after the bell. Don’t be surprised to see a substantial gap up or gap down, as a result, Friday morning.

Asian markets traded mixed with Hong Kong’s tech-heavy index gaining 1.27% by the close.  However, with an ECB rate decision pending European markets see only red this morning as they wait.  U.S. futures suggest a mixed open ahead of a massive day of earnings data with worrisome jobs, trade, and productivity data pending.  Keep an eye on the regional banking sector with several names under attack.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ACCO, ACIW, AES, AAPL, ATI, AEP, AMH, AIG, BUD, MT, TEAM, BALL, BHC, BDX, SQ, BKNG, BWA, BMBL, CAH, CG, CARS, CVNA, CRUS, COHU, COIN, COP, CEG, DDOG, DISH, DKNG, DBX, LOCO, EOG, EXPE, RACE, FND, FTNT, FNKO, GDDY, GPRE, HII, H, ICE, IDCC, IRM, ITT, K, LAMR, LYFT, MMP, MLM, MTZ, MLCO, MCHP, MRNA, MNST, MSI, NIO, NOG, OGN, PZZA, PARA, PH, PTON, PENN, PCG, DOC, PLNT, PTLO, PWR, REGN, RKT, RCL, RYAN, SBH, SHAK, SWK, STWD, SHOP, TXRH, VMC, W, WCC, WLK, WRK, WPM, WOW, WW, XPO, YELP, ZTS.

News & Technicals’

Microsoft is rolling out a new version of its Bing search engine that will let anyone with a Microsoft account chat with a bot that uses an OpenAI artificial intelligence model. The bot can answer questions, provide suggestions and generate content based on the user’s queries. The new Bing also offers chat history, export options, and visual enhancements to improve the user experience. Microsoft plans to add third-party integrations to Bing in the future. The company hopes that the new Bing will help it gain more share in the search advertising market, where it still lags behind its competitors, according to Bernstein analysts.

PacWest, a California-based bank, is looking for ways to survive after the collapse of First Republic, another regional bank. PacWest’s stock has plunged since First Republic’s failure, which raised concerns about the health of smaller banks. PacWest said it is negotiating with several potential partners and investors who could help it weather the storm. The bank also said it had not seen any unusual deposit withdrawals after First Republic’s demise.

With a unanimous vote, the Federal Reserve increased rates by 0.25%, making its overnight policy rate 5% – 5.25%. The statement did not include a line that said, “some additional policy firming may be appropriate,” which may mean a pause at this level is possible The 2-year Treasury yield and the U.S. dollar declined but stocks also fell, as the decision disappointed investors, and the struggling regional banks. Today is a massive day of earnings data with the highly anticipated Apple report coming after the bell.  Traders will also have to deal with Challenger Job-Cut, International Trade, Jobless Claims, Productivity, and Natural Gas numbers while keeping an eye on regional bank pressures.

Trade Wisely,

Doug

The bears feasted on Tuesday as the renewed banking weakness sparked a sharp selloff hoping to send a message to the FOMC on the pending rate decision this afternoon.  Big tech held its ground while IWM suffered the most technical damage with many regional banking names included in the average.  Today we face a big round of earnings events so plan whipsaws and uncertain chop as we wait for the Fed decision at 2 PM Eastern with Powell’s presser thirty minutes later that may well create some wild price swings.

Asian market traded mix overnight as worries about the huge banking outflows and the next Fed decision. However, European markets seem much more upbeat with gains across the board.  The U.S. is also trying to shake off the pending Fed decision and banking worries with futures suggesting modest gains at the time of writing this report.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ALB, ALGT, ALL, ATUS, APA, ATO, GOLD, TECH, EAT, BLDR, BG, CDW, CIVI, CTSH, CXW, CTVA, DIN, EMR, EL, ETSY, EXC, FSLY, FTS, FDP, GRMN, GNRC, GOGO, HBI, HST, HUBS, INFN, IR, JNG, KHG, KTOS, KLIC, LMND, LPX, MRO, VAC, MELI, MET, MTG, MOS, MYGN, NE, NUS, OPK, PGRE, PDCE, PSX, PSA, QRVO, RDN, RYN, O, SMG, SBGI, SPWR, SYNA, TRMB, TRIP, TTEC, OLED, UTHR, UPWK, WMB, WING, WWE, YUM, & ZG.

News & Technicals’

The global economy is facing a dilemma as inflation continues to soar despite the efforts of central banks to tame it. By raising interest rates, central banks hope to cool down the demand for goods and services and reduce the cost of living. However, higher interest rates also make borrowing more expensive and can hurt economic growth and financial stability. According to a survey by the World Economic Forum, most economists believe that central banks have to choose between fighting inflation and supporting the financial sector. This could pose a serious challenge for policymakers as they try to balance the needs of the economy and society.

The clock is ticking for the U.S. government on its debt ceiling, which could trigger financial complications for the economy as worries of stagflation grow. While Democrats have publicly blamed Republicans for refusing to cooperate on raising the debt ceiling, they have also quietly taken some steps to open the door for a possible compromise. President Joe Biden has signaled his willingness to negotiate with Republicans on his spending plans, while Democratic leaders in Congress have explored ways to use their slim majority to raise the debt limit without GOP support. These moves suggest that both parties are aware of the high stakes of the debt ceiling standoff and may be willing to make concessions to avert economic consequences.

Renewed banking weakness brought out the bears on Tuesday adding pressure to the pending FOMC rate decision.  As investors worry about possible recession or stagflation the earnings season excitement is struggling to overcome.  Some people are buying bonds instead of stocks because they think bonds are safer or moving cash into money market funds to protect capital from massive uncertainty. Plan for a choppy session as we wait on the FOMC decision with a big round of earnings data and economic reports to keep the whipsaw and the price action volatile.

Trade Wisely,

Doug

The wait on the Fed began Monday producing a choppy session with little to no concern from investors about the ongoing regional banking declines.  We also learned that due to declining tax receipts, the Federal default deadline may be sooner than originally projected.  Today we investors will have a lot of earnings data to digest as well as Factory Orders and the JOLTS report.  However, don’t be surprised if we see another light volume choppy day as we wait to hear from Jerome Powell on Wednesday afternoon.

Asian markets mostly rallied while we slept with the ASX the only decliner after raising rates by 25 basis points.  European markets trade mixed with the FOMC rate decision in focus.  U.S. futures point to a slightly lower open ahead of a slew of earnings and economic data with worries about the debt ceiling, regional banks and the pending Fed action swirling.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ADT, AER, AGCO, ABC, ARNC, AMD, ASH, AXTA, BP, CZR, CHW, LNG, CQP, CHK, CLX, CMI, DENN, DD, ETN, ET, AQUA, EXR, F, FNV, IT, GPK, HLF, HWM, ITW, INCY, JRVR, KAR, TREE, MPC, MAR, MTCH, TAP, NNN, OSH, OKE, OSK, PFE, PACB, PRU, QSR, SEE, SPG, SBUX, SUN, SMCI, SYY, TROW, TRI, UBER, WTI, WU, ZBRA, & YUMC.

News & Technicals’

The US government is facing a looming deadline to raise its debt ceiling or the maximum amount of money it can borrow to pay its bills. The debt ceiling, which is set by Congress, currently stands at $31.4 If the debt ceiling is not raised or suspended by June 1, Treasury Secretary Janet Yellen warned that the US could default on its debt obligations for the first time in history. This could have disastrous consequences for the US economy and global financial stability, as investors would lose confidence in the US dollar and the government would have to cut spending on essential services. President Joe Biden has invited the top four congressional leaders to a meeting at the White House on May 9 to discuss the debt limit issue. However, Republicans and Democrats have different views on how to address the debt problem, and a compromise may be hard to reach.

Shein is a company that sells cheap clothes online. It started in China. Some people in the US government are worried that Shein uses workers who are not paid or treated well. These workers are from a group of people called Uyghurs who live in China. The US government does not like how China treats Uyghurs. The US government wants to stop Shein from selling its shares to the public in the US. They want Shein to prove that it does not use bad workers. Shein says it does not use bad workers and it follows the rules.

Stocks did not change much on Monday chopping in a range as wait on the FOMC began. Talking heads seem to make light of 3^rd bank’s failure as the pressures on regional banks continue and the market appears willing to ignore the situation. The federal default deadline is back in the news today due to declining tax revenues further complicating the Fed rate decision Wednesday afternoon. Today we investors have big wave earnings data to react to as well as Factory orders and the JOLTS report.  Don’t be surprised if we see another choppy day with Jerome Powell’s comments pending.

Trade Wisely,

Doug

Friday was another big tech-buying party as the sharp rally pushed the SP-500 up 0.9% in just two trading days. With the FRC takeover by JPM as regional bank worries continue, an FOMC rate decision Wednesday, and Apple’s earnings slated for Thursday afternoon expect another week of emotionally charged price swings.  Goldman is warning that the CTA’s could be ready to sell off as much as 200 billion of stock holdings.  If that occurs expect some big point moves as fear can trigger a rush for the door to protect gains.  Buckle up it could be a wild week ahead!

With some Asian markets closed for Labor Day the Nikkei lead the buying by 0.92% with Australia also in a bullish mood.  European markets trade mixed but mostly higher this morning with modest gains and losses as banking worries continue.  With manufacturing data pending and a slew of earnings U.S. futures trade mixed and flat this morning perhaps suffering from buying hangover after the buying party last week as we wait on the FOMC decision.

Economic Calendar

Earnings Calendar

Notable reports for Monday include AL, ANET, CAR, CF, CHKP, CHGG, CYH, FANG, RE, FMC, FRWD, BEN, GPN, HOLX, INVH, JJSF, KBR, LEG, LOGI, MSM, MSTR, NCLH, NXPI, ON, OTTR, PK, SOFI, SBAC, SFM, SYK, RIG, VRTX, VICI, VNO, & ZI.

News & Technicals’

JPMorgan Chase, the largest bank in the US, has acquired First Republic Bank, the fourth bank to fail this year, in a deal brokered by the Federal Deposit Insurance Corporation (FDIC). The deal will allow JPMorgan to assume all the deposits and most of the assets of First Republic, which had about $229 billion in total assets and $104 billion in total deposits as of April 13, 2023. First Republic’s 84 offices in eight states will reopen as branches of JPMorgan today. The FDIC said the deal avoids the agency having to use its emergency powers and minimizes disruptions for customers and loan borrowers. The takeover follows the collapse of Silicon Valley Bank and Signature Bank in March, which sparked fears of a wider banking crisis.

Charlie Munger, the vice chairman of Berkshire Hathaway and a legendary investor, has sounded a warning on the U.S. commercial property market, which he said is facing trouble due to bad loans and falling prices. Munger told the Financial Times that U.S. banks have made many risky loans to commercial property owners, such as office buildings and shopping centers, that may not be able to repay them as the demand for such properties declines amid the pandemic and changing consumer habits. Munger said that while the situation is not as bad as the 2008 financial crisis, it still poses a threat to the stability of the banking system and the economy. He also said that Berkshire Hathaway has been cautious about investing in banks because of these uncertainties.

The indexes continued their sharp rally on Friday, with the SP-500 adding 0.8% to its 2.0% surge on Thursday and ending the week with a 0.9% gain. Amazon’s warning of slowing growth in its cloud-computing segment was no match for hungry bulls willing to buy up the tech giants seemly at any cost. First Republic Bank, which plunged 49% on Friday and 95% for the week was taken over by JPM in a deal late Sunday yet more regional banks suffering massive outflows are still in question. Today trades face a possible hangover from Friday’s buying party as well as PMI, ISM, Construction Spending, and a slew of earnings reports.  The FED’s May rate decision comes Wednesday afternoon and next tech giant Apple will report Thursday afternoon this week so plan on price volatility as we wait.

Trade Wisely,

Doug

With earnings as the focal point indexes surged on Thursday as investors averted their eyes from the regional banking crisis.  Unfortunately, the situation seems to have worsened for FRC over the last 24 hours and some suggest an action by the Fed may be required as soon as this weekend.  The very bullish reaction to the initial AMZN and INTC earnings seems to have tempered after the conference calls.  Today we have fewer earnings events but have several potential market-moving economic reports highlighting the Feds favored core PCE number before the bell.  Buckle up it could be a wild Friday session.

Asian market surged higher in overnight trading as Japan keeps monetary policy unchanged weakening the Yen.  However, European indexes see only red this morning after a 0.1% GPD number with sinking bank prices raising concerns.  With bank worries back in focus this morning and tempered excitement from after-the-bell earnings reports U.S. futures point to bearish open.

Economic Calendar

Earnings Calendar

Notable reports for Friday AON, ARES, BLMN, CCJ, GTLS, CHTR, CVX, CL, XOM, LYB, NWL, NIO, SAIA, SLCA, WPC, & WT.

News & Technicals’

Amazon, the e-commerce giant and cloud leader, reported its first quarter earnings for 2023 on Thursday, April 28. The company beat analyst expectations on both revenue and profit, posting $127.4 billion in revenue and $3.2 billion in profit, or 31 cents per share. However, the company also warned of a slowdown in its cloud segment AWS, which grew 16% year-over-year, compared to 37% in the same period last year. Amazon’s online retail business also saw no growth in the first quarter, as shoppers became more cautious and less reliant on e-commerce amid the pandemic. Amazon’s stock rose 9% in after-hours trading following the earnings release.

Intel, the semiconductor giant, and PC chip leader, reported its first-quarter earnings for 2023 on Wednesday, April 27. The company reported the largest quarterly loss in its history, losing $2.8 billion, or 66 cents per share, compared to a profit of $8.1 billion, or $1.98 per share, a year ago. Revenue fell nearly 36% year over year to $11.7 billion, as the company faced fierce competition from rivals like AMD and Nvidia, as well as supply chain challenges and a global chip shortage. Intel also lowered its full-year guidance, expecting to lose $2.30 per share on revenue of $65 billion to $68 billion. Intel’s stock dropped 5% in after-hours trading following the earnings release.

The U.S. stock market earnings as the focal point, and tech companies have been delivering strong results that have boosted investor confidence and key indexes. Microsoft and Alphabet surprised the market with their earnings yesterday, and META followed suit today with a beat that sent its shares up 14%. The earnings season is not over yet, and Amazon could be the next big mover when it reports later today. The U.S. economy, however, is slowing down, according to the GDP report released this morning. This suggests that the Fed will not raise rates much more, but also that it will not cut them soon either, as inflation remains high.

Trade Wisely,

Doug