Market Wrap – Tesla Earnings Rip and Tear, the Inverse to The Netflix Wipeout April 20, 2022

Tesla had all eyes on it after Netflix lost around a third of it’s value and $TSLA delivered record units at higher prices in the quarter with 1Q revenue $18.8bn,expected $17.92bn on 1Q Adj EPS $3.22 vs. 2.26 and Tesla 1Q Automotive gross margin +32.9%,expected +28.4%. The stock soared back up to $1040 on the news. Despite the selling in tech with $NFLX, $FB and $PYPL, the broader market held up thanks value stocks. The Russell 2000 +0.6% and DJIA +0.7% led with the tech wreck biting the Nasdaq -1.2%

We look at the indices, $UAL $AAL $AAPL $NFLX $SEV $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. 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

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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

  • Crude Oil Futures for June settlement up $0.14 at $102.19.
  • The May contract which goes off the board today settled $102.75 up $0.19 or 0.19%
  • Brent Crude Futures 107.03 0.23 0.22
  • Natural Gas Futures 6.825 -0.351 -4.89
  • Unleaded Gasoline Futures 3.2915 0.0441 1.36
  • 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.”
  • Weather forecasts shifted back a little warmer, “more appropriately, less cool,’” according to Bespoke Weather Services who said models backed off the level of cooling in the eastern half of the nation at the end of April and early May. In total, four gas-weighted degree days (GWDD) were dropped from the 15-day forecast, The pattern, though, still holds onto its overall cooler-than-normal tilt.
  • 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.
  • Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended March 25 were unchanged at a 2-1/4 year high of 137 rigs.  Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).

Commodities and FX

  • The U.S. Dollar Index U.S. Dollar Index fell 0.6% to 100.31, after four consecutive gains.
  • Gold Futures 1960.10 1.10 0.06
  • Silver Futures 25.300 -0.091 -0.36
  • Copper Futures 4.6640 -0.0540 -1.14
  • Corn Futures 809.25 9.50 1.19
  • Wheat Futures 1102.25 -6.75 -0.61
  • Bloomberg Commodity Index 131.03 -0.30 -0.23

Stocks

US Indices & S&P 500 sector watch:

  • DJIA 35160.79 249.59 0.71
  • Nasdaq Composite 13453.07 -166.59 -1.22
  • S&P 500 4459.45 -2.76 -0.06
  • Russell 2000 2038.19 7.42 0.37
  • NYSE Composite 16761.35 102.45 0.61
  • CBOE Volatility 20.32 -1.05 -4.91
  • NYSE Adv 2063 Dec 1150 Vol 852.0 mln
  • Nasdaq Adv 2280 Dec 2191 Vol 4.5 bln
  • S&P 500 communication services sector (-4.1%) dropped 4% amid weakness in NFLX and FB, smaller declines in the consumer discretionary (-1.4%) and information technology (-0.1%) sectors.
  • The Vanguard Mega Cap Growth ETF (MGK 222.21, -2.79) fell 1.2%.
  • Real estate (+1.9%), consumer staples (+1.5%), health care (+1.3%), and utilities (+0.8%)
  • The broader gains helped the benchmark index close back above its 50-day moving average (4416) after a flat open. 

Key After Hours


US Markets YTD

  • Dow Jones Industrial Average -3.2% YTD
  • S&P 500 -6.4% YTD
  • Russell 2000 -9.2% YTD
  • Nasdaq Composite -14.0% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • UK: FTSE 100 7629.22 27.94 0.37
  • Germany: DAX 14362.03 208.57 1.47
  • France: CAC 40 6624.91 90.12 1.38
  • Italy: FTSE MIB 24878.23 253.82 1.03
  • Spain: IBEX 35 8769.50 75.50 0.87
  • Stoxx Europe 600 460.10 3.82 0.84
  • Switzerland: Swiss Market 12310.17 28.75 0.23
  • Global Dow 4061.17 21.90 0.54

Asia

  • Japan’s Nikkei: +0.9%
  • Hong Kong’s Hang Seng: -0.4%
  • China’s Shanghai Composite: -1.4%
  • India’s Sensex: +1.0%
  • South Korea’s Kospi: UNCH
  • Australia’s ASX All Ordinaries: UNCH

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 Wednesday with gains in most tenors while the 2-yr note underperformed for the second consecutive day. 2-yr yield remained near its highest level of the year.

  • 2-yr: -1 bp to 2.57%
  • 3-yr: -2 bps to 2.78%
  • 5-yr: -3 bps to 2.86%
  • 10-yr: -7 bps to 2.84%
  • 30-yr: -11 bps to 2.88%

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

Pre-Market

  • Netflix (NFLX 255.19, -93.42): -26.8% after losing 200,000 global paid subscribers in Q1 and estimating it will lose 2 million more subscribers in Q2. Netflix beat EPS estimates but missed revenue estimates and issued downside Q2 guidance. The company is open to offering a lower priced service with advertising. 
  • IBM (IBM 132.18, +3.03): +2.4% after beating top and bottom-line estimates and expecting FY22 revenue growth (constant currency) at the high end of the mid-single digit range. 
  • Procter & Gamble (PG 161.50, +2.09): +1.3% after beating top and bottom-line estimates. 
  • Abbott Labs (ABT 121.00, +1.02): +0.9% after beating top and bottom-line estimates. 
  • Lululemon athletica (LULU 413.20, +8.54): +2.1% after announcing a five-year growth plan to double revenue by 2026 to $12.5 billion. 

Europe

  • Eurozone’s February Industrial Production 0.7% m/m (expected 0.2%; last -0.7%); 2.0% yr/yr (expected 0.8%; last -1.5%). February trade deficit EUR7.6 bln (last deficit of EUR27.30 bln)
  • Germany’s March PPI 4.9% m/m (expected 2.6%; last 1.4%); 30.9% yr/yr (expected 28.2%; last 25.9%)
  • Italy’s February trade deficit EUR1.662 bln (last deficit of EUR5.128 bln)
  • Credit Suisse warned that it will report a loss for Q1 due to higher provisions for legal matters.
  • Danone refuted speculation that it is looking to sell parts of its business.
  • The governor of Sweden’s central bank said that he is not worried about a recession at this time while the Czech central bank governor said that more rate hikes are in the cards.

Asia

  • Japan’s March trade deficit JPY412.40 bln (expected deficit of JPY100.80 bln; last deficit of JPY669.70 bln). March Imports 31.2% yr/yr (expected 28.9%; last 34.1%) and March Exports 14.7% yr/yr (expected 17.5%; last 19.1%)
  • Australia’s March MI Leading Index 0.3% m/m (last 0.4%)
  • The People’s Bank of China made no changes to its one-year and five-year loan prime rates despite expectations for cuts.
  • A former PBoC official called for a temporary easing of curbs on property debt.
  • The Bank of Japan offered to buy unlimited amounts of 5- and 10-yr JGBs after the country’s 10-yr yield climbed above 0.25% to a level not seen since early 2016.
  • Australia’s Finance Ministry now expects that 2022 deficit will be about 3.0% of GDP, up from October’s projection of 2.3% of GDP.

Looking ahead:

  • The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.3%)
  • 8:30 ET: March Existing Home Sales (Briefing.com consensus 5.80 mln; prior 6.02 mln)
  • 10:30 ET: Weekly crude oil inventories (prior +9.38 mln)
  • Treasury Auctions:
  • 13:00 ET: $20 bln 30-yr Treasury bond reopening results

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!