In a shortened Easter week, stock markets attempted to strike a bottom on ‘Turnaround Tuesday’ but failed to break out of corrective channels and NDX closed the week right at the low. Meanwhile, 10-year yields and the US dollar broke to yet more 2022 highs with the US10Y reaching 2.82% and DXY breaking above 100. The USD was helped on by a 1c collapse in EUR triggered by the ECB meeting and the snail’s pace the bank has mapped towards normalization.
Earnings season opened with, as always, the major banks and the top DJIA stock UNH reporting. The reactions were briefly as you would expect, with UNH, MS and C all beating on EPS and revenue, and rising 2% briefly. JPM missed on EPS and WFC missed on revenue, both fell sharply. A clear sign of a bearish market is when beats rise less than misses fall. US CPI at 6.5% was lower than the 6.6% estimate, but still higher than last month. The market didn’t like it. Even the surprise strong beat on Michigan CSI on Friday (65.7 vs 59.0 est) could not lift spirits.
With so many markets closing right at weekly (some at yearly) highs or lows, it would be normal to see continuation of Thursday's moves early next week. However, there are some major reversals setting up and we can look for a dollar top in the coming sessions followed slightly later by yields topping out towards the end of the month. Stocks should turn higher by the latest on Tuesday and DAX looks ready to run sooner than most.
WEEKLY PRICE MOVEMENT
The biggest index mover was rate-sensitive NDX which was down 3.03%,. Clearly this was the issue, as other indices moved much less. The top forex mover was GBPJPY up 1.91%. Bitcoin and Ethereum pulled back again, and again FANGs underperformed NDX as a whole..
Last week's EURAUD long position gained 0.12%, which means I am ahead 3.96% this year, with 7/14 (50%) wins. This week I am buying EURAUD again.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK
In the absence of any major news, the focus is likely to be on earnings, with reports from so-called bellwether IBM and heavyweight JNJ (together 5.85% of DJIA), and NFLX and TSLA (5.95% of NDX). The scheduled macro news is primarily from outside the US, with China and Canada most prominent. Markets seem to have largely discounted Ukraine, and priced in the rate hike schedule. Note Europe is closed on Monday for the Easter break.
CALENDAR (all times are GMT, volatile items in bold)
Monday April 18
02:00 China GDP (YoY e4.4% p4.0%)
02:00 China Retail Sales (YoY e0.7% p6.7%)
Tuesday April 19
01:30 RBA MPC Minutes
04:30 Japan Ind Production
11:00 JNJ Earnings
12:30 US Building Permits/Housing Starts
20:00 NFLX, IBM Earnings
23:50 Japan Imports/Exports/TB
Wednesday April 20
01:15 PBoC Rate Decision/Statement (e3.7% hold)
06:00 Germany PPI
09:00 Eurozone Ind Production
12:30 Canada BoC CPI (Core YoY e5.0% p4.8%)
21:00 TSLA Earnings
Thursday April 21
09:00 Eurozone CPI
12:30 US Jobless Claims
12:30 Philly Fed Mfr Survey(Apr)
14:00 Eurozone Consumer Confidence
16:30 BoE Governor Bailey speech
22:00 Australia PMIs
23:30 Japan National CPI
Friday April 22
06:00 UK Retail Sales
07:30 Germany PMIs (Mfr e54.4 p56.9)
08:00 Eurozone PMIs (Comp e54.0 p54.9)
08:30 UK PMIs (Svcs e60.3 p62.6)
12:30 Canada Retail Sales (e-0.5% p3.2%)
13:45 US PMIs
14:30 BoE Governor Bailey speech
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