If stock prices traded down on a fear of bad things happening, then it stands to reason that they would rebound when those bad things that were feared didn’t happen.
Sure enough, we have seen some renewed buying interest so far this week on a sense of relief that the Israel-Iran conflict has not broken out into a wider regional conflict. There was some buying interest yesterday on the hope that some softening manufacturing PMI data for April might sway the Fed to opt for a rate cut sooner rather than later.
And today, there is a measure of relief that the earnings reports from Tesla (TSLA) and Boeing (BA) were better than feared. There was some added relief in the contention from Texas Instruments (TXN) that some industrial customers are nearing the end of an inventory correction cycle.
Of course, saying something is better than feared is not the same as saying something is good. Tesla’s operating results, for instance, left much to be desired with revenues declining 8.7% year-over-year, gross margins decreasing 199 basis points year-over-year, and adjusted earnings per share dropping 47% year-over-year.
There were no great operating shakes from Boeing either. It reported a 7.5% year-over-year decline in revenues, a non-GAAP loss per share of ($1.13) that topped the consensus estimate by $0.50, and free cash flow of ($3.9) billion.
Shares of TSLA, though, are up 11%, riding the company’s contention that it will produce more affordable models in early 2025, if not late 2024. Boeing’s stock is up 3.6%.
We would venture to say that the timing of these reports was good. A week or two ago, and the response might have been much different. Alas, the stock market has had some rebound momentum the past few sessions, so it is finding a rationale for the time being to emphasize what was better than feared, as opposed to focusing on what wasn’t good, to keep the rebound try going.
Currently, the S&P 500 futures are up five points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 99 points and are trading 0.6% above fair value, and the Dow Jones industrial Average futures are down 55 points and are trading 0.2% below fair value.
Post-earnings report gains in Dow component Visa (V), Humana (HUM), Hilton Worldwide (HLT), AT&T (T), and Biogen (BIIB) to name some others have also lightened the mood following last week’s dark streak of losses, and have tempered some (not all) of the anxiousness in front of earnings report after today’s close from Meta Platforms (META), IBM (IBM), ServiceNow (NOW), Chipotle Mexican Grill (CMG), Whirlpool (WHR), and Lam Research (LRCX).
One question that will swirl throughout today’s trade is, will the Treasury market keep the mood light? It did yesterday with a drop in yields following some mixed economic data and a well-received 2-yr note auction.
There will be a $70 billion 5-yr note auction today with results announced at 1:00 p.m. ET. A short time ago, the March Durable Goods Orders Report was released, and we’ll call it mixed taking into account the downward revisions for the prior month.
Specifically, durable goods orders increased 2.6% month-over-month in March (Briefing.com consensus 1.8%) following a downwardly revised 0.7% increase (from 1.4%) in February. Excluding transportation, durable goods orders increased 0.2% month-over-month (Briefing.com consensus 0.3%) following a downwardly revised 0.1% increase (from 0.5%) in February.
The key takeaway from the report is that it matched the framework of a soft landing for the economy, with nondefense capital goods orders excluding aircraft — a proxy for business spending — increasing 0.2% on the heels of a 0.4% increase in February.
The 2-yr note yield is up three basis points to 4.95% and the 10-yr note yield is up five basis points to 4.65% following some knee-jerk trading action after the report’s release.
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Originally Posted April 24, 2024 – Better than feared, but not good
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