The bulls and bears battled for control all day on Monday, becoming a frustrating day of multiple whipsaws.  Volume remains notable anemic, but with another surge in the last minutes of the day, the DIA held its 50-average while the other indexes chopped below theirs.  As earnings ramp up, there is a lot of hope that consumers will keep spending habits high despite the impacts of inflation.  As a result, expect challenging price action in the weeks ahead with big moves, depending on the outcome.  Remember, the war in Ukraine and rising interest rates could still poison the well of enthusiasm at a moment’s notice, so plan your risk carefully.

Asian market closed mixed overnight as currency fluctuations inspired the HSI to sell off 2.28%.  European markets trade in the red across the board this morning as the war in Ukraine enters the next phase.  With a busy day of earnings and housing data on the way, U.S. futures reversed early bullishness, pointing to a modestly lower open as Russian aggression worries investors.

Economic Calendar

Earnings Calendar

We have just short of 60 companies listed on the Tuesday earnings calendar.  Notable reports include JNJ, NFLX, CFG, FITB, FHN, FULT, HAL, HAS, IBKR, IBM, LMT, MAN, PACW, PLD, SBNY, TRV, TFC, WTFC.

News & Technicals’

On Monday, a federal judge in Florida ruled that the CDC had overstepped its authority when it issued a mask mandate for planes and other forms of public transportation.  As a result, the CDC mandate is no longer in effect, and the TSA will not enforce it, a Biden administration official said.  According to press secretary Jen Psaki, the White House is reviewing the court’s ruling, and the Justice Department will decide whether it will appeal.  The court’s ruling comes less than a week after the CDC extended the mandate for 15 days, amid a rise in Covid infections nationwide due to the more contagious omicron BA.2 subvariant.  Private equity firm Apollo Global Management would consider providing financing for a Twitter buyout in preferred equity, sources say.  But Apollo isn’t interested in joining a private equity consortium to acquire the social media company.  Elon Musk, the CEO of Tesla and SpaceX and the world’s wealthiest person, offered to buy Twitter for $43 billion last week.  As inflation soars to record highs, pensions feel the pinch, making it even more important to make sure yours is working for you.  U.S. inflation hit a fresh 40-year high in March, rising 8.5% year-on-year, while U.K. consumer prices shot up 7% over the same period, as the war in Ukraine pushed up energy prices.  “The blistering inflation rate we have been seeing for a year now will ravage those living on a pension, and the pension fund itself,” Dan North, senior economist at Allianz Trade North America, told CNBC.  While the first quarter ended with more than $20 billion in net inflows to mainland Chinese stocks, the bulk occurred in January, and the pace of buying dropped sharply as the quarter progressed, data from EPFR Global showed.  Anything that relates to China we can find in causality and reasoning from either Russia or [the] U.S. right now,” said Steven Shen, manager of quantitative strategies at EPFR.  There’s been “sizeable outflows from China equities since last year, reflecting a notable de-risking on China,” according to Max Luo, director of China asset allocation at UBS Asset Management.  Treasury yields moved higher in early Tuesday trading, with the 10-year briefly reaching 2.91% and the 30-year slipping slightly to 2.9512%.

Monday proved to be a frustrating day of multiple whipsaws ending with another end-of-day dark pool surge holding the DIA at its 50-day average.  With the Fed’s James Bullard suggesting a 75 basis point interest rate increase and Russia advancing in Ukraine, futures have pulled back from overnight highs.  We have a busy day of earnings to focus on with our first big tech report from NFLX after the bell to get a glimpse of consumer spending habits.  This morning we will also get a reading on the Housing Starts and Permits, where the consensus suggests only a modest decline.  With so many forces pushing and pulling on the market, expect the price volatility to remain challenging.  There is so much hope that consumers came through with spending despite the high inflation that good reports could move stocks with enthusiasm.  However, if they miss, I suspect they could also get severely punished, with many suggesting that a recession is on the way.   As a result, it would be wise to plan for a bumpy ride in the weeks ahead.

Trade Wisely,

Doug