Welcome to the calm before the storm.
Of course, no one is talking about the “bomb cyclone” storm sweeping through the central US but the incoming earnings storm. Given that Wall Street has set the bar so low for results, companies may just drag themselves over it. The fun starts with J.P. Morgan and Wells Fargo WFC, +0.84% on Friday, following by Goldman GS, +0.93% and Citigroup C, +1.29% on Monday, with Netflix NFLX, -0.53% and a bunch of others also rolling out ahead of the Easter break.
Bank earnings preview: The Fed’s moves are squeezing profits once again
“...the U.S. earnings’ reports will be the next catalyst that will either push the indices higher, in case of continued corporate profitability, or send equities lower if investors start seeing further evidence of a domestic slowdown,” said Konstantinos Anthis, head of research at ADSS, the Abu Dhabi based financial services firm, in a note to clients.
Our call of the day, from Hussein Sayed, chief market strategist at broker FXTM, agrees, as he says it’s time for investors to start holding Wall Street itself responsible for further stock market gains.
“The boost provided to equity markets from the shift in central banks seems to be exhausted with the S&P 500 standing 1.7% away from an all-time high. Investors hoping for an interest rate cut may not see one coming any time soon, suggesting that they shouldn’t continue betting on monetary policy to push equities further,” he told clients Thursday.
Pundits have been telling us for a while that central banks can’t keep rescuing this stock market after years of easy-money policies, though the Fed managed to do just that at the start of the year. In Wednesday’s minutes from its March meeting, the U.S. central bank showed no indication of any cuts to come, with some members even saying they’d consider a hike, depending on data. The market is almost even on the chances of a cut vs. no change in December, but the likelihood of a decrease in rates rises in January 2020, according to the CME Group’s FedWatch tool.
Sayed says this earnings season will take a hard look at whether companies can stand on their own two feet as U.S. government spending boosts from 2018 fade. So watch profit margins — a gauge of how profitable a company’s business is — and guidance, says Sayed.
“The index has risen 15.2% so far year-to-date, and for the rally to be sustained, investors need assurance that we’re not going to hit an earnings recession. A dovish Fed won’t be enough to keep the party on,” he says.
Last word goes to asset manager Guggenheim Investment, which told clients in a recent research note, that they aren’t expecting a savage recession, but stocks could get crushed due to lofty valuations and one more thing — lack of central bank firepower.
Opinion: How investors can profit from a world economy still addicted to cheap money
The market
Dow US:YMH9 , S&P 500 US:ESH9 and Nasdaq US:NQH9 futures are modestly up. On Thursday the Nasdaq COMP, -0.13% led a higher day across the board, with the Dow DJIA, +0.15% and S&P 500 SPX, +0.07% also gaining.
The dollar DXY, +0.16% is steady, while gold US:GCU8 and crude US:CLU8 are falling.
Europe stocks SXXP, +0.06% are down. Asian equities were mostly lower, led by losses for China SHCOMP, -1.60% and Hong Kong HSI, -0.93% . Data showed China consumer prices picked up in March. And Black Hole excitement? China’s Phenix Optical 600071, +9.92% jumped 10% in Shanghai.
The chart
Are stocks overvalued? The debate rages on as the first-quarter reporting season is about to kick off. In our chart of the day, from Jesse Felder, founder of The Felder Report, offers some evidence that “euphoria toward owning stocks” goes further than investor love for some tech stars.
The median valuation of all stocks on the Dow Jones Industrial Average recently hit a record high and is more than 20% above its peak of the dot-com mania,” he writes.
“The valuation extremes we are witnessing today are more pervasive than anything we have seen before. And it’s clearly the result of the greatest volume of price-insensitive buying we have ever seen before, namely stock buybacks and the widespread adoption of passive investing,” says Felder. Read the full blog here.
The buzz
Cloud-computing group PagerDuty PD, +0.00% priced shares at $24, higher than an already elevated range, ahead of Thursday’s IPO. Five things to know about PagerDuty. Also ready to trade on Thursday, Israeli cybersecurity group Tufin TUFN, +0.00% , which priced shares at $14.
Read: All about African e-commerce site Jumia, which is ready to list in New York
Retailer Bed Bath & Beyond BBBY, -9.45% posted a surprise loss, but shares are up after earnings beat forecasts.
Think your conversation with Alexa are private? Thousands of Amazon AMZN, -0.28% employees would beg to differ.
Airline JetBlue JBLU, +1.92% wants to start long-haul flights, starting with London in 2021.
From Trump scandals to the auction block: The National Enquirer.
Weekly jobless claims and producer prices are on tap for Thursday.
Read: This economic slowdown is not a blip, warns strategist who manages $4.5 billion
The U.K.’s Brexit deadline has been pushed out to Halloween after late-night talks. European Council president, Donald Tusk pleaded with U.K. politicians not to “waste this time.”
Waiting for brexit like#Halloween pic.twitter.com/PPYDkch30Z
— Ameme Hack (@AmemeHack) April 10, 2019 The quote
“Today, the middle class looks increasingly like a boat in rocky waters.” — That was the Organization for Economic Co-operation and Development’s Secretary-General Angel Gurría, as the think tank launched a new report about how that sector of the population is increasingly falling on hard times.
The tweet
URGENT
Julian Assange did not "walk out of the embassy". The Ecuadorian ambassador invited British police into the embassy and he was immediately arrested.
— WikiLeaks (@wikileaks) April 11, 2019
Wikileaks founder Julian Assange has been arrested in London.
Random reads
Meet the 29-year old woman who led us to the black hole photo
Prosecutors want death penalty for suspected ‘Golden State Killer’
Childish Gambino’s “Guava Island” flick starts streaming on Amazon this weekend
Teeth whitening strips are not all they’re cracked up to be
Thousands honor ‘hero’ principal who died after donating bone marrow
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