Dead Boogeyman?

Last week saw a pretty dismal month of April finally come to an end with most indexes suffering a >4% loss for the month, the first monthly setback of the year. But stocks enjoyed a second consecutive week of higher prices after a wild ride that navigated some big earnings reports, a Fed interest rate decision meeting and a Jobs Report. The bulls remained in the driver's seat from the previous week on Monday as the recently-shaky stock prices of Apple and Tesla continued their recent recoveries and helped drag all the indexes modestly higher on the day, taking the S&P 500 to its highest level for a couple of weeks, ahead of a tsunami of Q1 earnings reports. There was a tangible change of mood however on Tuesday as stocks seemed absolutely determined to move lower ahead of Fed chairman Jerome Powell’s press conference the next day which suddenly had the feel of a possible big downside catalyst. Any excuse would do and when the normally-overlooked data point of the Employment Cost Index came in a tad hotter than expected and the very flawed statistic of Consumer Confidence came in colder, this was all that was needed to trigger a big spike in Treasury yields and a major selloff in stocks that sent the indexes plunging. Before markets opened on Wednesday, Amazon came out with a very robust earnings report, but Starbucks and CVS disappointed and their respective stock prices all responded accordingly. The market in general, however, basically did nothing all morning, holding its collective breath ahead of hearing from Powell and taking a largely as-expected Job Openings and Labor Turnover Survey (JOLTS) report in its stride. There was of course no change made to the Fed Funds interest rate, everyone knew that was going to be the case. The press conference was interesting though, as Powell skillfully threaded the needle, remaining absolutely on message that there will be interest rate cuts coming at some point, it’s just a matter of when. While acknowledging that recent data had shown inflation stickiness to be a real thing and that this was hampering the Fed’s ability to cut interest rates right now, he scornfully laughed off the idea that the next move would be to raise rates. Stocks and bonds initially lapped this all up and indexes exploded higher and bond yields fell hard as soon as Powell appeared to rule out a rate increase, with the S&P 500 jumping 1.2% in a matter of minutes. But stock prices then quickly reversed back lower to finish a smidge down on the day after seeming to recalibrate his message as actually having been; ok, we aren't about to raise interest rates, but we are still a long way from having enough confidence that inflation is under control to lower them anytime soon. Wall Street’s mood swung back to positive on Thursday and stocks rose nicely with the rate hike boogeyman apparently dead. But there was a little caution in the air as there were still plenty of wildcards to be negotiated before the relative safety of the weekend, with earnings from Apple (AAPL) after the bell and a big Jobs Report the next day. The Apple earnings report, the final one this season from the big guns, showed continued sales declines around the world and ongoing challenging conditions in China, but nothing was as bad as had been feared. This saw the stock price shoot higher in the after-market, helped by the announcement of a dividend increase and the biggest stock buyback in history. Pre-market on Friday, we learned from the Jobs Report that payrolls rose 175k in April, somewhat below expectations but still very solid. The unemployment rate was 3.9%, a fraction above both estimates and the previous month and, importantly for inflation optimism, wage growth rose only 0.2% month-to-month, below the 0.3% prediction. If Wall Street could have created a perfect jobs report in a laboratory, it would have looked just like this. Stocks screamed higher and Treasury yields plummeted, boosted by both the Apple data from the night before and the impeccable Jobs Report before taking something of a cold shower around lunchtime, but all the indexes still closed solidly higher on the day and back into the green for the week. Tuesday’s misery and pessimism suddenly seemed a million miles away, emphasizing the exhausting data-addicted rollercoaster nature of the markets right now. The interest rate futures market swiftly pulled forward the most likely month for the first rate cut to September from December, with the probability of a second cut in 2024 now priced at about 50/50. Wall Street seems unable to stay in the middle right now when it comes Fed expectations. It seems to constantly gyrate from the glass is completely full (six or seven interest rate cuts in 2024) to there’s nothing left in the glass at all (the next move is an interest rate increase) spending very little time anywhere in between and had convinced itself over the past couple of weeks that Powell could put rate hikes back on the table at this meeting, only to see him reject the idea out of hand. OTHER NEWS .. Finally! .. The term “Magnificent Seven” has been finally retired by analysts and the financial media as there’s overdue acceptance that Telsa (TSLA) ain’t exactly magnificent since, despite a recent rebound, over a third of the company’s value has evaporated just in 2024. This has resulted in Tesla’s rank by market capitalization now falling to #12. So, for the moment, the elite group of largest U.S. companies is now being referred to as “The Big Six.” (MSFT, AAPL, GOOGL, AMZN, NVDA and META) Unlike the Mag-7, which was being dragged down by TSLA’s dismal performance, the Big Six are generally in well-defined multi-year uptrends. Hero To (Almost) Zero .. Peloton (PTON), the poster child of a pandemic 2021 darling that then became a disastrous POS stock, fell to new all-time lows last week as a calamitous earnings report showed deepening losses, collapsing revenue and the number of both equipment purchasers and subscribers falling by the tens of thousands. The company announced the departure if its CEO, Barry McCarthy and a fifth round of layoffs, this time slashing 15% of the remaining global work force. The stock price has fallen 98.4% from its peak in July 2021. Another One Bites The Dust .. Billionaire Changpeng Zhao (CZ to his crypto buddies and the formerly-fawning media), founder of the world’s biggest crypto exchange, Binance, was sentenced to four months in prison, a significantly lighter punishment than requested by prosecutors who hoped to send a message about rampant crime in the crypto industry. His incarceration means that both of the former top dogs of crypto world (CZ and SBF) are currently felons behind bars on fraud and other criminal convictions. THIS WEEK’S UPCOMING CALENDAR .. While there’ll still be plenty of earnings reports to feast on this week, things will be quieter on the economic data front. Earnings releases will include Disney, Uber, AirBnb, BP, Occidental Petroleum, BioNTech, Warner Bros., Anheuser-Busch, Palantir Technologies, Tyson Foods, Ferrari, Honda, Roblox, Wynn Resorts and NRG Energy. Economic data to watch includes the Federal Reserve's Consumer Credit Data and the University of Michigan's Consumer Sentiment Index The Bank of England will announce a monetary-policy decision this week and is widely expected to keep its target interest rate unchanged. ARTICLE OF THE WEEK .. Got money to spend? How to best do that. LAST WEEK BY THE NUMBERS .. Last week’s market color courtesy of finviz.com Last week’s best performing U.S. sector: Utilities (two biggest holdings: Next Era Energy, Southern Co.) - up 3.8% for the week. Last week’s worst performing U.S. sector: Energy (two biggest holdings: Exxon-Mobil, Chevron) - down 3.3% for the week. * SPY, the S&P 500 Large Cap ETF, is made up of the stocks of the 500 largest U.S. companies. Its price rose 0.8% last week, is up 7.6% so far this year and ended the week 2.3% below its all-time record closing high (03/27/2024) * IWM, the Ru… This is a public episode. 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