Can The Rally Continue?
Bitcoin to decline...
KR Opinion
As April draws to a close and we enter May, a significant week lies ahead, packed with key economic data and events, including the Federal Reserve's decision at the conclusion of the FOMC meeting.
Interestingly, this FOMC meeting has garnered unusually low publicity compared to past sessions, which typically see much hype around the Fed's decisions. This time, it seems almost assumed that the Fed will maintain the status quo, based on recent data.
However, I believe that if the Fed were to make a surprise move, this meeting would be the ideal time, given the low expectations. Such a shock could significantly impact the markets. A potential shift could involve adjustments to the quantitative tightening policy, affecting market dynamics.
In my recent YouTube videos, I've noted that earnings seasons often exceed expectations. This appears to be a mix of analysts setting conservative forecasts—whether intentionally or not—and companies underreporting potential earnings.
This pattern suggests a strategic 'low-balling'’ creating a consistent trend where most companies surpass expectations.
Despite occasional downturns, such as Tesla's recent disappointing earnings, which surprisingly did not deter market enthusiasm thanks to Elon Musk's charisma and future promises, the overall earnings landscape is predominantly positive.
This optimism boosts trading volume and benefits both Wall Street firms and companies through favorable stock price movements.
As we look ahead, expect a turbulent week filled with earnings reports, Federal Reserve updates, unemployment figures, and other significant metrics likely to drive market volatility. Prepare for daily fluctuations as these events unfold.
Looking back on Last week
After a sluggish start to the month, the stock market rebounded this week, boosted by earnings reports from nearly 40% of the S&P 500 companies and significant economic data releases. The Dow Jones Industrial Average increased by 0.7%, the S&P 500 advanced by 2.7%, and the Nasdaq Composite climbed 4.2%.
This positive trend was driven by strong earnings from key companies, steady activity in the Treasury market, and accumulating gains throughout the week. Across the board, buying pushed the equal-weighted S&P 500 up by 1.6%, with all 11 sectors ending the week positively. Major contributions came from the mega caps, notably boosting the performance of the information technology (+5.1%), consumer discretionary (+3.5%), and communication services (+2.7%) sectors.
However, not all mega caps fared well; Meta Platforms (META) saw a decline of 7.9% following its earnings report. In contrast, Microsoft (MSFT), Alphabet (GOOG), which reached a new all-time high, and Tesla (TSLA) experienced significant gains of 1.8%, 11.5%, and 14.4%, respectively, after their earnings announcements. The positive sentiment around AI following these reports also benefited semiconductor stocks, with the PHLX Semiconductor Index (SOX) soaring by 10%.
Economic reports also influenced market reactions, including the Advance Q1 GDP showing slower growth and rising inflation, the weekly jobless claims indicating continued labor market strength, and the March Personal Income and Spending report, which displayed robust spending but no progress on curbing inflation.
Despite this array of data, Treasuries remained relatively stable, which supported the overall positive momentum in the stock market. The 10-year Treasury note yield increased slightly by five basis points to 4.67%, while the 2-year note yield increased by three basis points to 5.00%.
Reviewing Friday's economic data as analyzed by KR Forecast:
- March Personal Income increased by 0.5% (KR Forecast's prediction: 0.5%), an uptick from the prior 0.3%. March Personal Spending rose to 0.8% (KR Forecast's prediction: 0.6%), matching the previous month's rate. The March Personal Consumption Expenditures (PCE) Price Index increased by 0.3%, consistent with the prior value and the KR Forecast's prediction of 0.3%. The core PCE Prices, which exclude food and energy, also rose by 0.3%, aligning with the forecast and previous figure.
This report's primary insight is that there has been no progress on reducing inflation. As a result, market participants should anticipate the Federal Reserve delaying any reductions in interest rates.
- The final April University of Michigan Consumer Sentiment Index registered at 77.2, slightly below KR Forecast's prediction of 77.9 and the prior figure.
The main conclusion from this report is that consumer sentiment remains stable despite higher inflation expectations. This stability is likely supported by the continued strength in the labor market and increased personal incomes.
Week of April 30 Economic Releases:
- 08:30 ET: Employment Cost Index for Q1
Trading Impact: High
KR Forecast's Prediction: 1.1%
Consensus: 1.0%
Prior: 0.9%
- 09:00 ET: FHFA Housing Price Index for February
Trading Impact: Low
Prior: -0.1%
- 09:00 ET: S&P Case-Shiller Home Price Index for February
Trading Impact: Low
KR Forecast's Prediction: 4.5%
Consensus: 6.7%
Prior: 6.6%
- 09:45 ET: Chicago PMI for April
Trading Impact: Low
KR Forecast's Prediction: 47.5
Consensus: 44.5
Prior: 41.4
- 10:00 ET: Consumer Confidence for April
Trading Impact: High
KR Forecast's Prediction: 103.0
Consensus: 104.0
Prior: 104.7
May 1 Economic Data Preview:
- 07:00 ET: MBA Mortgage Applications Index for the week ending April 27
Trading Impact: Low
Prior: -2.7%
- 08:15 ET: ADP Employment Change for April
Trading Impact: Medium
KR Forecast's Prediction: 185K
Consensus: 175K
Prior: 184K
- 09:45 ET: S&P Global US Manufacturing PMI - Final for April
Trading Impact: Low
Prior: 51.9
- 10:00 ET: ISM Manufacturing Index for April
Trading Impact: High
KR Forecast's Prediction: 50.5%
Consensus: 50.0%
Prior: 50.3%
- 10:00 ET: JOLTS - Job Openings for March
Trading Impact: Medium
Prior: 8.756M
- 10:00 ET: Construction Spending for March
Trading Impact: Low
KR Forecast's Prediction: 0.2%
Consensus: 0.4%
Prior: -0.3%
- 10:30 ET: EIA Crude Oil Inventories for the week ending April 27
Trading Impact: High
Prior: -6.37M
- 14:00 ET: FOMC Rate Decision for May
Trading Impact: High
KR Forecast's Prediction: 5.25-5.50%
Consensus: 5.25-5.50%
Prior: 5.25-5.50%
May 2 Economic Data Preview:
- 08:30 ET: Initial Claims for the week ending April 27
Trading Impact: High
KR Forecast's Prediction: 215K
Consensus: 213K
Prior: 207K
- 08:30 ET: Continuing Claims for the week ending April 20
Trading Impact: High
Prior: 1.781M
- 08:30 ET: Trade Balance for March
Trading Impact: Medium
KR Forecast's Prediction: -$69.5B
Consensus: -$69.0B
Prior: -$68.9B
- 08:30 ET: Productivity-Prel for Q1
Trading Impact: High
KR Forecast's Prediction: 1.0%
Consensus: 0.8%
Prior: 3.2%
- 08:30 ET: Unit Labor Costs-Prel for Q1
Trading Impact: High
KR Forecast's Prediction: 2.3%
Consensus: 2.5%
Prior: 0.4%
- 10:00 ET: Factory Orders for March
Trading Impact: Low
KR Forecast's Prediction: 1.3%
Consensus: 1.6%
Prior: 1.4%
- 10:30 ET: EIA Natural Gas Inventories for the week ending April 27
Trading Impact: Low
Prior: +92 bcf
May 3 Economic Data Preview:
- 08:30 ET: Nonfarm Payrolls for April
Trading Impact: High
KR Forecast's Prediction: 225K
Consensus: 250K
Prior: 303K
- 08:30 ET: Nonfarm Private Payrolls for April
Trading Impact: High
KR Forecast's Prediction: 185K
Consensus: 175K
Prior: 232K
Here is a list of just the earnings releases for each day during the week of April 29:
- Monday, April 29: 92 earnings releases
- Tuesday, April 30: 202 earnings releases
- Wednesday, May 1: 368 earnings releases
- Thursday, May 2: 474 earnings releases
- Friday, May 3: 93 earnings releases
Total earnings releases for the week: 1,22
- Monday, April 29: Pfizer and McDonald's are reporting.
Tuesday, April 30: Advanced Micro Devices (AMD)
- Wednesday, May 1: Shopify,
- Thursday, May 2: Amazon and Apple are set to report their earnings
- Friday, May 3: Cigna and Dominion Energy
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