Despite the rising rates and the U.S. officially entering a recession, earnings results continued to fuel a hurry up and buy something bullish exuberance.  With the indexes showing a very extended short-term condition, can they keep it going into the weekend, or will we see some profit taking?  As the indexes approach a substantial overhead resistance level, be careful with the urge to rush into already extended stocks.  Though there is a lot of bullish energy, remember the Fed is actively working to slow the economy.

Asian markets had a rough session, with the Hang Seng falling 2.26% as tech came under selling pressure.  However, European indexes see green across the board ahead of economic data fueled by earnings excitement.  With the breakneck pace of earnings slowing a bit with pending economic data, U.S. futures continue the buying spree after AMZN and AAPL earnings results.  As we head toward the weekend, it should be another wild day of price action.

Economic Calendar

Earnings Calendar

We have a little lighter day on the earnings calendar with under 100 companies listed.  Notable reports include ABBV, AON, B, BLMN, BAH, CBOE, GTLS, CHTR, CVX, CHD, CL, XOM, IMGN, MTD, NWL, PSX, PG, GWW, & WY.

News & Technicals’

European officials have become increasingly concerned about the possibility of a shutdown of gas supplies.  Gazprom, Russia’s majority state-owned energy giant, reduced gas supplies to Europe via the Nord Stream 1 pipeline to 20% of full capacity this week.  A growing number of economists expect the eurozone to slide into a recession next year.  Apple’s services business posted the lowest growth rate since the fourth quarter of 2015.  A continuing slowdown could prompt investors to take a closer look at Apple’s valuation.  The unit had a gross margin of 71.5% in the latest quarter, compared to Apple’s overall margin of 43.3%.  Apple’s services business posted the lowest growth rate since the fourth quarter of 2015.  A continuing slowdown could prompt investors to take a closer look at Apple’s valuation.  The unit had a gross margin of 71.5% in the latest quarter, compared to Apple’s overall margin of 43.3%.  Roku shares plummeted more than 25% in extended trading.  The company missed on the top and bottom for its second quarter.  Intel slashed its full-year guidance and turned in worse-than-expected quarterly results.  The company launched new chips that compete with Nvidia’s graphics cards during the quarter.  On Tuesday, the U.S. House approved legislation Intel requested that would subsidize microprocessor manufacturing in the country.  McDonald’s said it had concluded the U.S. test of its McPlant burger as planned.  Analyst research reported lackluster demand for the meatless burger made using Beyond Meat patties.  McDonald’s sells the McPlant burger in several European markets but hasn’t announced a nationwide launch for the menu item in its home market.  Amazon executives said consumer spending remains strong despite decades of high inflation.  The optimistic commentary is a stark difference from warnings issued earlier in the week by Walmart and Best Buy.  Rival retailers have cut their profit outlook after observing consumer spending shifts.  Treasury yields moved slightly lower in early Friday trading, with the 2-year at 2.89%, the 5-year at 2.73%, the 10-year at 2.72%, and the 30-year at 3.08%. 

Though the U.S. economy officially fell into recession with the GDP at -0.09%, the energy around big tech earnings keeps the bulls buying with a hurry up and buy something mentality.  Could the party continue Friday?  Of course!  However, we could also see some profit taking heading into the weekend, with the T2122 showing a very extended condition.  As the market rallies, so do energy and food prices, even as the U.S. dollar remains strong due to the rising interest rates.  An interesting situation as we also enter a tax raising cycle on the biggest companies during a worldwide economic slowdown.  Today we get the latest reading on Personal Incomes & Outlays, Employment Cost Index, Chicago PMI, and Consumer Sentiment.  As we pump up the premarket, watch overhead resistance level and be careful chasing already extended stocks because a consolidation and rest could begin anytime.

Trade Wisely,

Doug