Market Wrap – Apple and Amazon Giveth and Taketh Away April 28, 2022

Today was split into two sessions, Pre and post market. After a massive rally through the day despite Dismal US Q1 GDP Shrank 1.4% vs +1.1% expected. After hours we saw huge misses on Amazon and Apple which wiped out much of the day’s rally. Oil for its part soared back over $105.

All 11 sectors in the S&P 500 closed higher with gains ranging from 1.1% (utilities) to 4.0% (information technology). Another classic bear market rally it appears after the aftermarket sell off.

Treasuries maintained expectations for the Fed to prioritize tighter policy to keep inflation pressures in check. The 2-yr yield rose seven basis points to 2.64%, the 10-yr yield rose five basis points to 2.86% and the U.S. Dollar Index (103.59, +0.64, +0.6%) hit a 20-year high.

We look at the indices, $MSFT $AMZN $AAPL $FB $TSLA Gold, Copper, BTC, Natgas and oil in the podcast.

We talk through to today’s action and where to now … We talk through to today’s action and where to now …

Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share

Live on YouTube

In today’s post market wrap live from the trading room traders discuss the patterns through the options and futures markets that have played out perfectly from last week to today. We discuss trading psychology, risk management and trader development in today’s markets. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 @MetaJohnny1 plot out 2022.

Around the table today was packed with the Fed, geopolitics, domestic political influence and distortions, reading sentiment, patterns and order flow. After hours earnings and chart pattern review. This is a high-risk market.

Market Closes

Energy

  • WTI crude settled above $105 per barrel ($105.31, +3.56, +3.5%)
  • Brent Crude Futures 107.03 -0.23 -0.21
  • Natural Gas Futures 7.043 0.049 0.70
  • Unleaded Gasoline Futures 3.4351 -0.0408 -1.17
  • WTI off the high price of $129.44. The highest in 2008 was $147.27.
  • Rystad Energy said the war-induced uncertainty is likely to continue to impact gas prices.
  • “The gas market remains highly volatile, and news driven,” said Rystad analyst Fabian Rønningen. This week, in particular, “the market remains anxious for clarity on rules governing ruble payments for Russian gas supplies.”
  • BNEF data showed gas flows to U.S. export terminals Tuesday rose by +10.7% w/w to 12.8 bcf.   In March gas flows to U.S. export terminals rose to a record 13.77 bcf.

Commodities and FX

  • The U.S. Dollar Index climbed to its highest level since 2002 in the early morning, narrowing its gain to 0.6% at 103.59 later in the day.
  • Gold futures settled $15.40 lower (-0.8%) to $1,888.70/o pulled down by gains in both the US dollar and treasury yields.
  • Silver Futures 23.270 0.089 0.38
  • Copper Futures 4.4385 0.0050 0.11
  • Corn Futures 812.25 -1.25 -0.15
  • Wheat Futures 1086.25 0.50 0.05
  • Bloomberg Commodity Index 129.17 -0.48 -0.37
  • Bitcoin USD 39769 -158 -0.40
  • Ethereum USD 2938.97 -10.00 -0.34

Stocks

US Indices & S&P 500 sector watch:

  • DJIA 33301.93 61.75 0.19
  • Nasdaq Composite 12488.93 -1.81 -0.01
  • S&P 500 4183.96 8.76 0.21
  • Russell 2000 1884.04 -6.44 -0.34
  • NYSE Composite 15741.82 47.58 0.30
  • CBOE Volatility 31.60 -1.92 -5.73
  • NYSE Adv 2429 Dec 733 Vol 1.0 bln
  • Nasdaq Adv 2788 Dec 1769 Vol 5.0 bln
  • All 11 sectors in the S&P 500 closed higher with gains ranging from 1.1% (utilities) to 4.0% (information technology).
  • The higher oil prices provided an additional boost for the energy sector (+3.9%)

Key After Hours

US Markets YTD

  • Dow Jones Industrial Average -6.7% YTD
  • S&P 500 -10.0% YTD
  • Russell 2000 -14.6% YTD
  • Nasdaq Composite -17.7% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • UK: FTSE 100 7509.19 83.58 1.13
  • Germany: DAX 13979.84 185.90 1.35
  • France: CAC 40 6508.14 62.88 0.98
  • Italy: FTSE MIB 24055.56 225.45 0.95
  • Spain: IBEX 35 8512.20 34.50 0.41
  • Stoxx Europe 600 447.07 2.76 0.62
  • Switzerland: Swiss Market 12068.41 16.93 0.14
  • DJIA 33916.39 614.46 1.85
  • Global Dow 3858.80 4.27

Asia

  • Hong Kong: Hang Seng 20276.17 329.81 1.65
  • Japan: Nikkei 225 26847.90 461.27 1.75
  • China: Shanghai Composite 2975.48 17.20 0.58
  • India: S&P BSE Sensex 57521.06 701.67 1.23
  • Australia: S&P/ASX 7356.9 95.7 1.32
  • S. Korea: KOSPI 2671.18 3.69 0.14
  • Global Dow 3858.59 4.06 0.11
  • DJIA Futures 33749 -79 -0.23

Recall in January: JP Morgan quant maestro Marko Kolanovic was out with a comment near lows that didn’t go unnoticed.

“Near term we recommend buying the dip on US indices given oversold conditions… though medium term we favor EM/China/Europe on a regional basis on improving activity and easing headwinds, and the UK on valuation.”

Marko Kolanovic Jan 10 2022
  • We stay positive on equities and expect omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll,
  • As this wave fades, it will likely mark the end of the pandemic
  • omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity
  • signs of supply constraints potentially passing their worst point

Recall back in October he said to buy the dip because fears of higher yields were overdone adding the market could absorb higher yields. “We don’t expect a broad market selloff unless yields were to rise above 250-300 bps (US 10y), which we don’t foresee in the near term,” From there the S&P 500 rose 11.5%.

Perhaps this time it’s’ different but nevertheless the algorithms liked it that day but from then ……… not so much

Bonds

U.S. Treasuries ended Thursday on a lower note with shorter tenors pacing the retreat. Today’s underwhelming $44 bln 7-yr note auction had little impact on the market, causing only a brief dip in longer tenors.

  • 2-yr: +7 bps to 2.64%
  • 3-yr: +8 bps to 2.81%
  • 5-yr: +7 bps to 2.88%
  • 10-yr: +5 bps to 2.86%
  • 30-yr: +2 bps to 2.93%
  • $44 bln 7-year Treasury note auction results (prior 12-auction average):High yield: 2.908% (1.508%).
  • Bid-to-cover: 2.41 (2.33).
  • Indirect bid: 65.0% (60.5%).
  • Direct bid: 19.8% (21.6%)

What You Need Know About Quantitative Tightening QT Bifurcations Explained – TRADERS COMMUNITY

Most of us are familiar with QE but what is QT? When the Fed reduces its balance sheet it is known as quantitative tightening, the flipside of quantitative easing. The US Federal Reserve at its December FOMC put the world on notice that tighter financial conditions are ahead. What does it mean? The possible Bifurcations would make Mandelbrot wince.

Where did it all start?

The Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last month’s FOMC and the release of Minutes which sent US stock markets sharply lower. That day in the Treasury market the 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, with growing expectations for a run-up to 2.00%.

News Highlights

USA

Market Notables

  • Amazon (AMZN) reports Q1 (Mar) results, revs in-line; guides Q2 revs and operating income below expectations… AMZN down 11.8%
  • Apple (AAPL) beats on top and bottom line driven by iPhone and margin beat; hikes dividend 5%; increases share repurchase program by $90 bln; Not providing Q3 (Jun) revenue guidance; It expects Q3 (Jun) impact from supply chain issues will be $4-8 bln, which is “substantially larger” than what it experienced during Q2 (Mar)… AAPL down 3.7%
  • Gilead Sciences (GILD) beats by $0.31, beats on revs; reaffirms FY22 EPS guidance… GILD down 0.1%
  • Intel (INTC) beats by $0.08, reports revs in-line; guides Q2 EPS below consensus, revs below consensus; raises FY22 EPS above consensus; reaffirms FY22 revenue guidance… INTC down 4.0%
  • KLA Corporation (KLAC) beats by $0.31, beats on revs; guides Q4 EPS in-line, revs in-line… KLAC up 0.1%
  • Robinhood Markets (HOOD) reports Q1 results, misses on revs, MAUs down 10%; does not provide Q2 revenue guidance, lowers FY22 operating expense guidance due to workforce reduction… HOOD down 12.2%
  • Roku (ROKU) beats by $0.02, beats on revs; guides Q2 revs below consensus; reaffirms FY22 revs guidance… ROKU down 0.7%
  • Stryker (SYK) beats by $0.03, beats on revs; guides FY22 EPS to lower end of projected range, expects organic net sales growth toward high end of guidance range… SYK up 1.2%
  • Western Digital (WDC) beats by $0.16, beats on revs; guides Q4 EPS in-line, revs in-line… WDC down 1.5%
  • Western Union (WU) beats by $0.08, reports revs in-line; guides FY22 EPS below consensus, revs below consensus… WU down 2.7%
  • Zendesk (ZEN) misses by $0.03, reports revs in-line; guides Q2 revs in-line; guides FY22 revs in-line… ZEN up 2.7%
  • Zymeworks (ZYME): All Blue Falcons confirms non-binding proposal to acquire company for $10.50 per Share in cash… ZYME up 40.9%

Europe

  • Sweden’s Riskbank made an unexpected 25 bps rate hike.
  • ECB President Lagarde said that the central bank has an unwavering commitment to delivering on its price target.
  • Italy’s April Business Confidence 110.0, as expected (last 110.1) and Consumer Confidence 100.0 (expected 100.4; last 100.8). February Industrial Sales 2.8% m/m (last 2.3%); 20.9% yr/yr (last 16.9%)
  • Spain’s April CPI was down 0.1% m/m (last 3.0%) but up 8.4% yr/yr (expected 9.0%; last 9.8%). Q1 Unemployment Rate rose to 13.65% from 13.33% (expected 14.20%).

Asia

  • The Bank of Japan lowered Japan’s GDP growth forecast to 2.9% from 3.8% and increased the CPI forecast to 1.9% from 1.1%.
  • Japan’s March Industrial Production increased 0.3% m/m (expected 0.5%; last 2.0%) and March Retail Sales rose 0.9% yr/yr (expected 0.4%; last -0.9%). March Housing Starts were up 6.0% yr/yr (expected -0.5%; last 6.3%) and March Construction Orders fell 21.2% yr/yr (last -2.3%).
  • Australia’s Q1 Import Price Index was up 5.1% qtr/qtr (last 5.8%) and Export Price Index was up 18.0% qtr/qtr (last 3.5%).
  • Singapore’s Q1 Unemployment Rate dipped to 2.2% from 2.3%.
  • Hong Kong’s March trade surplus reached HKD37.30 bln (last deficit of HKD32.10 bln) as imports fell 6.0% m/m (last 6.2%) and exports fell 8.9% m/m (last 0.9%).

Looking ahead:

  • The Day Ahead:
  • Monday: Nothing of note
  • Tuesday: March Durable Orders (Briefing.com consensus 1.1%; prior -2.2%), Durable Orders ex-transportation (Briefing.com consensus 0.5%; prior -0.6%) at 8:30 ET; February FHFA Housing Price Index (prior 1.6%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 18.9%; prior 19.1%) at 9:00 ET; March New Home Sales (Briefing.com consensus 770,000; prior 772,000) and April Consumer Confidence (Briefing.com consensus 106.0; prior 107.2) at 10:00 ET; and $48 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -5.0%) at 7:00 ET; March advance goods trade deficit (prior -$106.60 bln), March advance Retail Inventories (prior 1.1%), and March advance Wholesale Inventories (prior 2.1%) at 8:30 ET; March Pending Home Sales (Briefing.com consensus -1.5%; prior -4.1%) at 10:00 ET; weekly crude oil inventories (prior -8.02 mln) at 10:30 ET; and $49 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Advance Q1 GDP (Briefing.com consensus 1.1%; prior 6.9%), advance Q1 GDP Deflator (Briefing.com consensus 7.3%; prior 7.1%), weekly Initial Claims (Briefing.com consensus 182,000; prior 184,000), and Continuing Claims (prior 1.417 mln) at 8:30 ET; weekly natural gas inventories (prior +53 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: March Personal Income (Briefing.com consensus 0.4%; prior 0.5%), Personal Spending (Briefing.com consensus 0.6%; prior 0.2%), PCE Prices (prior 0.6%), core PCE Prices (Briefing.com consensus 0.3%; prior 0.4%), and Q1 Employment Cost Index (Briefing.com consensus 1.1%; prior 1.0%) at 8:30 ET; April Chicago PMI (Briefing.com consensus 62.0; prior 62.9) at 9:45 ET; and final April University of Michigan Consumer Sentiment Survey (Briefing.com consensus 65.7; prior 65.7) at 10:00 ET

Trust you all had a great day, sleep well and get your trading plan sorted.

Any questions please feel free to ask them below. Trade Smart!