Wall Street is struggling to regain some form of serenity. America’s tech behemoths are doing flawlessly so far in their perilous quarterly results exercise (Microsoft, Alphabet, Meta), allowing the Nasdaq100 (NDX) to rise against the tide of most other clues. Alongside this much-needed support from US tech for the joyful realm of global equities, the crisis of confidence in the banking sector sees its embers rekindled, First Republic continues to fall (FRC -30% yesterday), CNBC reports that the government is currently unwilling to intervene despite recent reports of meetings with the White House, the Fed and the Treasury. The stock has already fallen about 49% on Tuesday after first-quarter results showed a bigger-than-expected drop in filings. On the macroeconomic front, stakeholders are preparing to take note of the US GDP while in Washington an agreement on the US debt ceiling seems very far from being found, atmosphere…
Activity seems chloroformed on the trading floors, equity volatility stabilizes, the VIX closes at 18.84. On the bond side, the MOVE index fell 5% to 130.39, a level that remains abnormally high and reflects the latent nervousness around the banking sector and probably also the growing fears about the debt ceiling of the United States. The S&P500 (SPX) index closed slightly above its lows for the day, in trading volumes recovering slightly. Today’s podium for the SPX consists of technology (the only sector to end its day in the green), consumer discretionary and communication services. US Treasuries are not moving much, the 2-year returns 3.95% this morning, the 10-year 3.45%. The dollar weakens a little more, the EUR/USD pair trades at 1.1043, it looks its resistance of 1.1076 almost in the eye. Gold tries to take advantage of this and goes back slightly above 2,000 dollars an ounce. Oil retreats to $74.48 a barrel on WTI Light Crude.
Goldman Sachs is doing Goldman Sachs by suggesting that the market could soon be under pressure, because the quants are running out of ammunition according to the New York investment bank, which explains to us that systematic fund managers have bought for more than $170 billion worth of global stocks last month, taking their exposure to its highest level since early 2022. Goldman’s model shows these same quants could be forced to sell as much as $276 billion if the market pulls back to the next month. What Goldman does not specify is how its proprietary equity trading book is positioned…
The big tech caps are therefore doing flawlessly for the moment and that’s good. They have taken up so much space in the indices that a simple sneeze from them can catch the whole rating. This year, 53% of the SPX’s performance is due to Microsoft, Alphabet, Amazon, Meta, Nvidia and Salesforce. 53%, 6 companies, I let you imagine the market if they start to fall on the stock market… I suggest that you keep a close eye on the transport index (TRAN), considered by many as a leading indicator and on that of small and medium-sized enterprises (Russell2000 – RTY). Take the performance of the SPX since the March 13 low, it comes in at +5.37%, which sounds pretty good right? Now look at the course of TRAN and RTY over the same period: -3.80% respectively -0.61%. Conclusion? The SPX is progressing mainly thanks to the behemoths of technology, transport contests this increase and SMEs shun it. So here we are faced with generals running up the hill while their army remains wisely on the plain and the motorized brigade retreats. Stock market history shows that this configuration is not necessarily penalizing for the SPX, on the other hand the other indices tend to suffer in such a context. And then May approaches with its stock proverb “à la Roubini” that I will refrain from quoting today, everything in its time.
This morning the Fed Funds do not budge, they continue to predict a 79% chance of a 25 basis point hike by the Fed on May 3, and above all a 94% chance of a 0.25% cut. January 31.
On the corporate side, there was a big day of earnings announcements in Europe and the United States, culminating in Amazon, after the closing of the NYSE. In terms of curiosities, we can note the legal action filed by Walt Disney in Florida against Governor Ron DeSantis, whom the group accuses of a kind of political vendetta against him. Ron DeSantis is the main opponent of DONALD Trump in the race for the Republican nomination for the presidential election of 2024, everything is explained.
Meta jumped 12% in off-exchange trading after sales resumed growth and user numbers improved. This indicates a recovery in digital advertising sales, which is boosting Snap and Pinterest, which both reported results today. Meta’s Reality Labs unit is reporting a bigger-than-expected loss, although the number of daily users has increased.
Recep Tayyip Erdogan is canceling an election campaign day to rest at home, after falling ill during a live television interview a day earlier. Turkey’s president is also canceling a rally scheduled for today in the city of Mersin, but will take part via video conference in a ceremony commemorating the country’s first nuclear power plant.
On the macro-economic menu of the day, the two statistics that will hold the attention are the American GDP for the first quarter of 2023 in its first estimate and the weekly jobless claims (2:30 p.m.).
Air Liquide publishes higher-than-expected revenue for the first quarter, thanks to the growth of its activities in the field of industrial sales and electronics. BASF: posts higher net profit in the first quarter, but lower sales. eBay: quarterly results are well received. +2.6% off session. Meta Platforms: Q2 outlook is solid. +11% off session. Samsung: Q1 earnings slightly below expectations. Iliad and Vodafone would relaunch talks for European mergers, according to Bloomberg. UK blocks Microsoft takeover of Activision Blizzard.
Tonight and this morning in Asia, the indices are trading up. Tokyo grabs 0.14% at the bell, Hong Kong takes 0.25%, Shanghai gains 0.67% and Seoul rises 0.44%. The SPX future recovers 14 points and Europe opens down 0.25%.
This article is originally published on allnews.ch