The Nasdaq sank 2% on Friday as Netflix dropped nearly 11% post-earnings and Club stock Nvidia fell 10%, entering bear market territory but still up more than 50% in 2024. Since its all-time high of $974 per share, Nvidia has dropped nearly 22%. The Dow Jones Industrial Average closed modestly higher Friday, led by an over 6% increase in American Express following earnings. The Dow was little changed on the week. Driving this week’s trading: concerns about higher Federal Reserve-controlled interest rates for longer and the escalating tensions in the Mideast. As the market was trying to make a stand Tuesday, Fed chief Jerome Powell said at an event that he sees a “lack of further progress” this year on inflation. That was no surprise to us. Jim Cramer has been saying the economy is too strong, and the risk of rekindling inflation is too great, for the Fed to cut rates any time soon. However, the comments were enough to sink stocks by the close. With investors on edge all week about how Israel would respond to Iran’s attack last week, it was understandably hard for anyone to be too bullish. The response came on Thursday night. While shrugging off an overnight decline in stock futures by Friday morning, the market quickly turned back lower about 30 minutes into the session. Perhaps it was an acknowledgment that as minimal as Israel’s retaliation was, and as much as we all want to see de-escalation, we are in a new world now, one in which the two nations seem increasingly prepared to fight directly, rather than through proxies. That means, at least for now, the geopolitical risks that investors must factor into valuation multiples or discount rates are heightened. We’re going to continue to watch those Israel and Iran tensions as well as the continued fighting in the Israeli-Hamas war and Russia’s war in Ukraine.
Following a much stronger-than-expected March retail sales report last month, fresh economic data and six Club stock earnings will take center stage in the week ahead. Economic data : The main event as far as macroeconomic updates are concerned will come at the end of the week, with the release of March personal spending and income data. Inside Friday’s report , we find the PCE price index and the even more important core PCE price index, the Fed’s preferred measure of inflation. The consensus estimate per FactSet is for a headline PCE increase of 2.6% year over year and a core PCE gain of 2.7%. While we do want to see the rate of inflation track lower and head toward the Fed’s 2% target, we reiterate that we aren’t investing based on the odds of when the central bank might cut rates. Market expectations for rate cuts in 2024 were at six earlier in the year. With a recent uptick in inflation, they’re down to one or maybe two. While lower rates may help stock multiples, that is not a sustainable path to higher equity prices over time. A strong economy, however, is supportive of earnings growth, which is the requirement for continued appreciation in equity prices. Earnings growth means that stock prices can keep rising even if the valuation multiples remain stagnant. Put simply, the long-term investor does much better in an environment conducive to earnings growth than one strictly supportive of valuation multiples or lower discount rates. Thursday brings the government’s first read on U.S. economic growth in the first quarter. Gross domestic product (GDP) is expected to have advanced in Q1 at a 2.2% annualized rate. The report is backward-looking, however, it will still provide insight into how the economy held up in the first three months of 2024. The state of the housing market is also in focus next week, with the March new home sales Tuesday and March pending home sales Thursday . Neither is going to be as market-moving as core PCE or even GDP. The housing reports, nonetheless, are important for investors to monitor given that shelter costs remain a major factor keeping inflation high. Any sign that the rate of home price advances are easing will be very welcome by investors. Earnings : The latest quarterly reporting season is starting to ramp into high gear with six Club names set to report next week. Danaher issues results before the open bell Tuesday . The state of biotech funding and inventories, along with the state of destocking at larger customers, and demand out of China are all items to watch. Meta Platforms reports after the market close Wednesday . More of the same would be great: continued strong engagement, discipline on costs, sustained top-line momentum, and further progress in better monetizing Reels. CEO Mark Zuckerberg’s efficiency drive has boosted shares. This week, Meta said its free AI assistant is rolling out across its platforms and uses real-time knowledge from Google and Microsoft’s Bing search engines. Any more commentary in Meta’s earnings release or the call about AI and further plans to monetize Messenger and WhatsApp would be welcome. We also want to see Reality Labs’ losses narrow. Ford also reports after the close Wednesday . The mix of money-losing, demand-softening electric vehicles versus high-margin, in-demand hybrids will be a major high-interest dynamic. We would like to see management get more aggressive in buying back shares, something we recently addressed with General Motors ‘ planning to repurchase lots of stock. Honeywell is out with results before the bell Thursday . Management’s insights into the demand recovery in the company’s short-cycle businesses will be key as uncertainty on the timing here tempered the team’s outlook. Shorter-cycle businesses tend to have higher margins. Efforts to better streamline the company around CEO Vimal Kapur’s vision of three mega-trends — automation, the future of aviation, and the energy transition — will also be in focus. He’s nearly a year in the top job. Microsoft delivers its quarter after the close Thursday . It’s all about Azure cloud growth and the ways Microsoft can further monetize its large investments in artificial intelligence. The team doesn’t provide guidance until about 20 minutes into the post-earnings conference call — so any kneejerk stock reactions before the call are not to be trusted. Commentary around a rebound in personal computer sales would be welcome — not only for how it benefits Microsoft but also as a readthrough into trends at Club name Best Buy. Alphabet also reports after the bell Thursday . Last time around, the Google parent missed on advertising sales — and the quarter before that, the cloud results were short. Can the company get both right this time is the question? We would like to see Alphabet adopt a Meta-like approach to efficiency. We also want to hear more about Alphabet’s efforts to monetize AI and any feedback on the new products revealed at Cloud Next earlier this month. Monday, April 22 Before the bell: Verizon Communications (VZ), Albertsons Companies (ACI) After the bell: Cleveland-Cliffs (CLF), Nucor (NUE), SAP (SAP), Cadence Design Systems (CDNS)
Tuesday, April 23 10 a.m. ET: New home sales Before the bell: Danaher (DHR), General Motors (GM), United Parcel Service (UPS), General Electric (GE), PepsiCo (PEP), Lockheed Martin (LMT), Freeport-McMoRan (FCX), Spotify Technology (SPOT), RTX Corporation (RTX), JetBlue Airways (JBLU), Halliburton (HAL), Kimberly-Clark (KMB), Philip Morris International (PM), Sherwin-Williams (SHW), Quest Diagnostics (DGX), PulteGroup (PHM), Fiserv (FI) After the bell: Tesla (TSLA), Visa (V), Texas Instruments (TXN), Baker Hughes (BKR), Seagate Technology (STX), Mattel (MAT), Veralto Corporation (VLTO)
Wednesday, April 24 8:30 a.m. ET: Durable orders Before the bell: Boeing (BA), AT & T (T), Humana (HUM), General Dynamics (GD), Boston Scientific (BSX), Hilton (HLT), Thermo Fisher Scientific (TMO), Biogen (BIIB), Masco (MAS), Otis Worldwide (OTIS) After the bell: Meta Platforms (META), Ford (F), IBM (IBM), Chipotle Mexican Grill (CMG), ServiceNow (NOW), Viking Therapeutics (VKTX), Lam Research (LRCX), Whirlpool (WHR), WM (WM)
Thursday, April 25 8:30 a.m. ET: Initial jobless claims 8:30 a.m. ET: Gross domestic price 10 a.m. ET: Pending home sales Before the bell: Honeywell International (HON), Royal Caribbean Cruises (RCL), American Airlines (AAL), Altria Group (MO), Newmont Mining (NEM), Caterpillar (CAT), Southwest Airlines (LUV), Bristol-Myers Squibb (BMY), AstraZeneca (AZN), Mobileye Global (MBLY), Northrop Grumman (NOC), CNBC-parent company Comcast (CMCSA), Merck (MRK), Dow Inc. (DOW), Keurig Dr Pepper (KDP), Carrier Global (CARR), Union Pacific (UNP), International Paper (IP) After the bell: Microsoft (MSFT), Alphabet (GOOGL), Intel (INTC), Snap (SNAP), Roku (ROKU), Western Digital (WDC), DexCom (DXCM), T-Mobile US (TMUS), L3Harris Technologies (LHX), Skechers (SKX), Edwards Lifesciences (EW)
Friday, April 26 8:30 a.m. ET: Personal spending and income 8:30 a.m. ET: Core PCE price index Before the bell: Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), Colgate-Palmolive (CL), HCA Healthcare (HCA), Charter Communications (CHTR), AutoNation (AN), Newell Brands (NWL)
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