Markets

Daily Markets: Earnings Come Into Focus

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Today’s Big Picture

Equity markets in Asia-Pacific were mostly mixed today with Japan’s Nikkei falling 2.0%, China’s Shanghai Composite and Shenzhen Component both down 0.1%, while Australia’s ASX 200 fell 0.7%. South Korea’s Kospi added 0.7% and Hong Kong’s Hang Seng rose 0.1%. By midday trading, the major European equity indices were all in the red, and U.S. market futures point to a second day of losses. Once again, corporate earnings will be the focus of trading today as the vector and velocity of those reports picks up amid a light economic data calendar.

Data Download

International Economy

During its April meeting, the Royal Bank of Australia left its cash rate unchanged at a record low 0.1% and policymakers affirmed their commitment to maintaining highly supportive monetary conditions until at least 2024, when inflation is sustainably within the 2-3% target. There is a lot of “highly supportive” policies going on around the world.

Also today, the People’s Bank of China left both its 1-year prime loan rate and its 5-year fixed at 3.85% and 4.65% respectively.

Germany’s PPI came in stronger than the expected 3.3% YoY in March at 3.7% YoY, up from 1.9% in February. On a MoM basis, PPI was also stronger than the expected drop to 0.6% in March from 0.7% in February, instead rising to 0.9% - more of those base effects that we expect to see in the coming months as we compare opening activity to last year’s plunging demand levels as the pandemic lockdowns were just beginning.

The Unemployment Rate in the UK fell unexpectedly to 4.9% in February, from 5% in January, from which it was expected to rise to 5.1%. Average Earnings including bonuses in February rose less than expected to 4.5% in the three months to February of 2021, which was the smallest increase in the three months and following the 4.8% increase to the three months ended January 2021, a pace at which it was expected to remain. In response, the Sterling rose about $1.40 for the first time in a month.

Domestic Economy

Later today in the U.S. we will get the usual weekly Redbook retail sales report as well as the weekly API Crude Oil stock report.

Markets

The market started this week with a slight pullback. The S&P 500 fell 0.5% yesterday, the Nasdaq dropped 1.0%, the Dow 0.4%, and the Russell 2000 lost 1.4%. The U.S. dollar dropped 0.4% and Treasuries were mixed with longer yields rising as shorter-dated maturities fell. The weekend hit to bitcoin continued yesterday with the cryptocurrency sitting just above its 50-day moving average, down over 10% from its recent highs, but still up over 90% year-to-date. Crypto-related shares of Coinbase (COIN), Marathon Digital Holdings (MARA), and Riot Blockchain (RIOT) were down on the day, falling 2.6%, 8.7%, and 8.4% respectively.

Stocks to Watch

Investors will chew through quarterly results and parse forward-facing comments from Abbot Labs (ABT), AutoNation (AN), Johnson & Johnson (JNJ), Lockheed Martin (LMT), Philip Morris International (PM), and Proctor & Gamble (PG) among others before U.S. equity markets begin trading today.

Yesterday afternoon BMW (BMWYY) provided preliminary Q1 results that were quite strong, with automotive EBIT margins at 9.8%, the strongest EBIT since 2017. The company reported sales growth in all major regions and all brands as well as a strong used car market driving robust demand for the company’s pre-owned cars coming off lease.

Shares of Peloton Interactive (PTON) closed 7.3% lower yesterday as the company is fighting a regulatory warning about the safety of its Tread+ treadmill after a child was killed in an accident involving one. The Consumer Product Safety Commission said people should stop using the machine if they have small children or pets at home and is asking the company to recall the product. On Saturday Peloton called the warning “inaccurate and misleading.”

MarketWatch reports the U.S. House, in a 321-101 vote, approved a bill sponsored by Rep. Ed Perlmutter, a Colorado Democrat, that would prohibit banking-system regulators from penalizing banks or credit unions that do business with a “cannabis-related legitimate business,” their service providers or state or local governments with jurisdiction over the businesses. How appropriate for today’s date: 4-20.

PayPal (PYPL) announced the launch of crypto on Venmo, a new way for Venmo's more than 70 million customers to buy, hold and sell cryptocurrency directly within the Venmo app.

IBM (IBM) reported Q1 revenue that rose 1% (before adjusting for currency swings) beating expectations by 2.4%, with all segments reporting beats, except for the financing division. Operating EPS beat by 7.3% and pro forma earnings came in at $1.77 a share, down $0.07 from the previous year, but $0.14 above consensus estimates. The company reiterated expectations for higher revenues and adjusted cash flow between $11 billion and $12 billion for the year.

United Airlines (UAL) reported operating revenues that were slightly better than the initially reported $3.2 billion for Q1 but the $7.50 per share loss was worse than estimated. Passenger revenue per available seat mile came in 4.7% below forecasts and available seat miles were 2.3% below estimates with a load factor below the 58.9% expected at just 56.8%. Management reported “strong evidence of pent-up demand for air travel.” (Yes, please!)

Volvo AB (VOLVF), the world’s second-largest truck-maker, is looking to have half of its sales in Europe to be electric by 2030. Today the company announced three new heavy-duty electric trucks designed for intercity regional transport and urban construction. Production of the trucks is expected to start in the latter half of 2022.

Axos Financial (AX) announced its wholly-owned subsidiary Axos Clearing has signed a definitive agreement to acquire certain assets and liabilities of E*TRADE Advisor Services, the registered investment advisor custody business Morgan Stanley (MS) acquired in its acquisition of E*TRADE Financial Corporation in 2020.

J2 Global (JCOM) announced its plan to separate into two independent publicly traded companies - J2 Global and Consensus, by spinning off at least 80.1% of outstanding shares of Consensus common stock to J2's shareholders.

InterDigital's (IDCC) subsidiaries have renewed their multi-year, worldwide, non-exclusive, royalty-bearing patent license agreement with Sharp Corporation (SHCAY).

The Oprah Winfrey-backed oat-milk maker Oatly Group AB has filed to go public in the U.S. and intends to raise at least $100 million.

Genworth Mortgage Holdings, a wholly-owned subsidiary of Genworth Financial (GNW) also filed for its IPO.

After today’s market close, CSX (CSX), Intuitive Surgical (ISRG), and Netflix (NFLX) will be among the companies reporting their quarterly results. Investors looking to get ready for those reports and others should visit Nasdaq’s earnings calendar page.

On the Horizon

  • April 21: EIA Energy Stocks
  • April 22: Jobless Claims, Chicago Fed National Activity Index, Existing Home Sales
  • April 23: Markit Manufacturing and Services PMIs, New Home Sales
  • April 26: Durable Goods Orders, Dallas Fed Manufacturing
  • April 27: S&P/Case-Shiller Home Price Index, Conference Board Consumer Confidence, API Crude Oil Stocks
  • April 28: Goods Trade Balance, Wholesale Inventories, EIA Energy Stocks, Federal Reserve Interest Rate Decision and Press Conference
  • April 29: US GDP Q1 (advance estimate), Jobless Claims, Pending Home Sales
  • April 30: Personal Income and Spending, PCE Price Index, Employment Cost Index, Chicago PMI, Univ. Michigan Consumer Sentiment
  • May 3: Markit Manufacturing PMI, Construction Spending, ISM Manufacturing, Total Vehicle Sales
  • May 4: Balance of Trade, IBD/TIPP Economic Optimism, Factory Orders, API Crude Stocks
  • May 5: ADP Employment Report, Markit Services PMI, ISM Non-Manufacturing PMI, EIA Energy Stocks
  • May 6: Jobless Claims, Unit Labor Costs, Nonfarm Productivity
  • May 7: Nonfarm Payrolls, Wholesale Inventories
  • May 10: Consumer Inflation Expectations
  • May 11: NFIB Business Optimism Index, JOLTs Job Openings, weekly Redbook retail sales, API Crude Oil Stock Change
  • May 12: MBA Mortgage Applications, Inflation Rate, EIA Energy Stocks reports, World Agricultural Supply and Demand Estimates (WASDE) Report, Monthly Budget Statement
  • May 13: PPI, weekly Jobless Claims, EIA Natural Gas Stocks
  • May 14: Retail Sales, Import/Export Prices, Industrial Production, Manufacturing Production, Capacity Utilization, Business Inventories, Michigan Consumer Sentiment Report, Baker Hughes Oil Rig Count

Thought for the Day

“If people never did silly things nothing intelligent would ever get done.” ~ Ludwig Wittgenstein.

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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