META Triggers Selling
Will the Lows of Last Week Hold?
KR Opinion
Yesterday's market activity was marked by a peak during the overnight session, coinciding with the opening of the London market, followed by a general downtrend during the day. However, sharp fluctuations occurred, especially in the last hour, pushing us momentarily into positive territory for the session.
As predicted, this fulfilled my expectation of at least three upward sessions in this pattern, confirmed by Wednesday's close. Overnight, we witnessed a significant reversal from yesterday's trend, with futures currently down about 0.6%.
An interesting point of contrast emerged with Tesla and Meta's earnings release. Tesla's report failed to present any positive figures, yet the stock surged by 16%, eventually settling with a 12% gain at the end of the day.
Conversely, Meta released earnings that were generally as expected or slightly lower, yet its stock plummeted by 10%. The discrepancy likely stems from the different market reactions to corporate narratives and leadership commentary, particularly from Tesla's Elon Musk, who has hyped plans for more affordable cars and a more optimistic company trajectory.
Musk has highlighted the traditional automotive industry’s profit model, which relies heavily on maintenance and high-margin parts. This contrasts sharply with Tesla’s approach of lower maintenance costs and higher initial prices, supplemented by federal tax credits.
This divergence in stock performance illustrates the market dynamics often influenced by charismatic leadership and aggressive marketing, as opposed to companies like Meta, which are currently penalized for their hefty investments in AI despite strong demand for such technology.
Looking ahead, the market remains volatile, influenced by a mix of algorithmic trading and rapid shifts in sentiment. This week is packed with major earnings announcements from companies like Microsoft, Google, Caterpillar, Merck, T-Mobile, and Union Pacific, which will likely impact market sentiment as we approach the weekend.
Furthermore, significant economic reports are due, including the revised GDP, expected to rise by 2.4%, and the Personal Consumption Expenditures (PCE) numbers, which could catalyze substantial market movements on Thursday.
These upcoming events underscore market dynamics' complex and multifaceted nature, reflecting varying investor sentiments and economic indicators.
Looking back on Wednesday’s Action
Today's stock market showed mixed results. Major indices fluctuated above and below their previous closing levels, and the overall market sentiment was mostly negative throughout the day. On the New York Stock Exchange (NYSE), declining stocks outnumbered those that advanced by a ratio of 3-to-2, and on the Nasdaq, decliners led by a 4-to-3 margin.
The S&P 500 remained almost unchanged, while the Nasdaq Composite saw a slight increase of 0.1%. However, the Dow Jones Industrial Average and the Russell 2000 experienced declines of 0.1% and 0.4%, respectively.
The market initially rose, driven by positive reactions to certain earnings reports. For example, Tesla's stock surged 12% to $162.13, an increase of $17.45, after announcing plans to start production of affordable models in early 2025 or late 2024, despite missing earnings and revenue forecasts.
Texas Instruments also performed well, climbing 5.6% to $174.81, gaining $9.34, after indicating that some of its industrial customers might be finishing a period of inventory adjustment. This helped the PHLX Semiconductor Index, which rose by 1.1%.
On the downside, Boeing and Humana faced losses following their quarterly results, dropping 2.9% and 3.7%, respectively. Seven of the S&P 500 sectors in the broader market posted gains, led by consumer staples, which rose by 0.9%. The industrial sector recorded the most significant loss, down by 0.8%.
In the bond market, Treasuries saw losses, adding to the negative tone in stocks. The yield on the 10-year Treasury note rose by five basis points to 4.65%, and the 2-year note yield increased by two basis points to 4.94%. These shifts occurred after a report on Durable Orders for March exceeded expectations, and a $70 billion 5-year note offering attracted weaker demand than a 2-year note sale conducted the previous day.
· S&P 500:+6.3% YTD
· Nasdaq Composite: +4.7% YTD
· S&P Midcap 400: +4.3% YTD
· Dow Jones Industrial Average: +2.1% YTD
· Russell 2000: -1.5% YTD
Reviewing Today's Economic Data
- The Weekly MBA Mortgage Applications Index decreased by 2.7%, following a previous increase of 3.3%.
- March Durable Orders rose by 2.6%, surpassing the KR Forecast consensus of 1.8%. The previous figure was revised down to 0.7% from 1.4%. Excluding transportation, durable goods orders in March increased by 0.2%, slightly below the KR Forecast consensus of 0.3%, with a prior revision to 0.1% from 0.5%.
- A key insight from the report suggests it aligns with a moderate economic slowdown, with nondefense capital goods orders excluding aircraft—a measure of business investment—rising by 0.2%, following a 0.4% increase in February.
- The Weekly EIA Crude Oil Inventories indicated a decrease of 6.37 million barrels after a prior increase of 2.74 million.
For Thursday's economic calendar:
- At 8:30 ET, the agenda includes Advance Q1 GDP (KR Forecast consensus 2.4%; previous 3.4%), the Advance Q1 GDP Deflator (KR Forecast consensus 2.9%; previous 1.6%), weekly Initial Claims (KR Forecast consensus 215,000; previous 212,000), Continuing Claims (previous 1.812 million), the Advance March Goods Trade Balance (previous -$91.8 billion), Advance March Retail Inventories (previous 0.5%), and Advance March Wholesale Inventories (previous 0.5%).
- At 10:00 ET, March Pending Home Sales are forecasted by KR Forecast to be 1.0%, down from the previous 1.6%.
The weekly natural gas inventories will be updated at 10:30 ET, with the prior week's edition being +50 billion cubic feet (cf).
WaveTech Database
