A relief rally finally.

"Life is too short not to celebrate nice moments!"

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SUMMARY

·         The Dow Jones Industrial Average jumped 1.3%, or nearly 500 points. The benchmark S&P 500 gained nearly 2.1%, while the tech-heavy Nasdaq Composite rose around 2.7%.

·         S&P 500 saw its third consecutive daily gain of over 1.5% on Thursday.

·         Over the past three trading sessions, the Nasdaq has soared over 8% followed by the S&P 500 at about 6% and the Dow at over 5%.

·         Alphabet was the first big tech company to report earnings since Trump's tariff announcements.

·         President Trump has no plans to fire Fed Chair.

Image courtesy of Craigburn Capital

A Long-Awaited Relief Rally

U.S. equity markets closed sharply higher on Thursday, with the S&P 500 seeing its third consecutive daily gain of over 1.5%. Overseas, Asian markets were mixed overnight, while European markets closed modestly higher following a better-than-expected reading on business sentiment in Germany. Bond yields finished the day lower, with the 10-year U.S. Treasury yield falling to around the 4.3% mark.

The stock market also surged early Wednesday but lost some of its speed as news emerged of a possible trade deal with China and President Trump's dismissal of any plans to fire Federal Reserve Chair Jerome Powell.

Treasury Secretary Scott Bessent said the Trump administration has an "opportunity for a big deal" on trade with China, a day after Mr. Trump signaled tariffs on China would come down "substantially." 

"You know things have reached crescendo when not firing the Fed Chair was the catalyst for a rally," said Jamie Cox, managing partner at Harris Financial Group.

After gaining more than 1,000 points in early trade, the Dow Jones Industrial Average closed up 1.1%, to close at 39,607. Wednesday marked the second consecutive day the index soared over 1,000 points.

"Stocks saw strong gains as Trump backed off his Powell threats and opened the door further to a China trade/tariff détente," Adam Crisafulli of Vital Knowledge wrote in a research note. "However, the SPX faded from its high in the afternoon as investors worry that the White House's tariff retreats won't fully eliminate the enormous trade headwinds facing the economy."

"Both U.S. equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased," said Hubert de Barochez at Capital Economics. "But the fact that the rally was sparked largely by conciliatory remarks from U.S. President Trump — whose rhetoric is notoriously volatile — raises questions about its durability."

Image Courtesy of Medium

Alphabet Blows it Out of the Water

Google parent Alphabet announced its fiscal first quarter earnings on Thursday, beating on the top and bottom lines.

Google is among the first Big Tech companies to report its earnings since President Trump's "Liberation Day" tariff plan.

For Q1, Alphabet reported earnings per share (EPS) of $2.81 on revenue of $90.2 billion. Analysts were expecting EPS of $2.01 on revenue of $89.1 billion, according to Bloomberg consensus estimates.

The company reported EPS of $1.89 on revenue of $80.5 billion during the same period last year.

Google's advertising revenue topped out at $66.8 billion versus expectations of $66.4 billion. Google Cloud Platform revenue was $12.2 billion versus expectations of $12.3 billion. The segment saw $9.5 billion in revenue in Q1 2024.

"We have seen some transaction velocity in e-commerce drop off of late, and given the macro noise, would expect digital ads to weaken in 2Q," Barclays analyst Ross Sandler wrote in an April 8 investor note.

The company also said it is boosting its dividend by 5% and authorized another $70 billion in stock buybacks. Shares were up over 5% on the news.

Economic Highlights

·         Initial jobless claims for last week were 222,000, slightly above the prior reading of 216,000, but well below the 30-year median of roughly 324,000, signaling healthy labor-market conditions.

·         Reports have surfaced that suggest U.S. tariffs on China could move meaningfully lower. Capital Economics projects the U.S. will lower import taxes on Chinese goods to as low as 60%.

·         Preliminary April S&P Global PMI data suggested that the U.S. economy continued to expand in April, but at a slower pace than the prior month.

·         Mortgage rates remained close to 6.8% again this week according to Freddie Mac data.

·         The Bitcoin long-term holder cohort saw a $26 billion value increase as BTC price surged to $94,900.

·         Trump's meme coin surged over 30% as the president courts crypto backers.

·         20% of companies in the S&P 500 have reported first-quarter results thus far. So far this quarter, 90% of reporting companies mentioned tariffs, Reuters said.

·         The Conference Board's Leading Economic Index (LEI), which is intended to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term, fell 0.7% in March to 100.5, below estimates for a 0.5% decline.

·         March U.S. durable goods orders soared 9.2% month over month compared with consensus for 1.5%. However, with transportation excluded, growth was flat and lower than the 0.3% Briefing.com consensus

·         Chances of a May Fed rate cut were 5% early today, according to the CME FedWatch Tool. June rate cut odds are 60%.

Thursday Markets Snapshot

Index	Tuesday Close	Point Change	Percentage Change
S&P 500	5,484.77	+108.91	+2.03%
Dow Jones Industrial Average	40,093.40	+486.83	+1.23%
Nasdaq	17,166.04	+457.99	+2.74%

 

Image Courtesy of Reuters

Stocks on the Move

·         Super Micro Computer (SMCI) added another 1.3% after climbing 7.6% on Wednesday.

·         Palantir (PLTR), Marvell Technology (MRVL), and AppLovin (APP) were tech stocks that also moved amid hopes for trade progress.

·         Texas Instruments climbed 8% ahead of the open after the chip firm beat analysts' earnings and revenue estimates and gave in-line second quarter guidance for EPS.

·         Procter & Gamble dropped 1.5% in pre-market trading after beating analysts' earnings per share consensus but falling short on revenue and guiding fiscal year 2025 earnings per share below Wall Street's view.

·         IBM dropped nearly 7% ahead of the open despite stronger-than-expected earnings and guidance.

·         Intel fell on a downbeat forecast despite strong earnings. In the coming quarter, Intel says it expects second quarter revenue of between $11.2 and $12.4 billion. Wall Street was looking for $12.8 billion.

·         ServiceNow added 8% after the software and cloud computing company beat earnings expectations and shared guidance that topped Wall Street's consensus.

·         Chipotle fell 3.6% as quarterly sales fell year over year at stores open a year or more and the company reported a "slowdown" in consumer spending. First quarter revenue missed analysts' average estimate.

·         Southwest dropped 4% after announcing its cutting flights this year and withdrawing previous guidance. The company beat analysts' EPS estimates and revenue met consensus. "Amid the current macroeconomic uncertainty, it is difficult to forecast given recent and short-lived booking trends," Southwest said in a release. But the company expects to reduce capacity to adjust for lower demand.

·         American Airlines slipped 0.6% despite reporting a narrower-than-expected quarterly loss. Revenue missed analysts' estimates and the company withdrew guidance based on the uncertain outlook.

·         Merck jumped 1.2% ahead of the open despite lowering its full-year profit outlook as quarterly earnings and revenue beat expectations. Cancer drug Keytruda sales rose 4%, but total worldwide sales fell 2% including foreign exchange. "Merck's outlook includes the impact of tariffs," the company said, which it expects to lead to incremental costs of approximately $200 million.

·         Tesla reported a miss on both the top and bottom line in its latest earnings report.

·         Alphabet's stock soared more than 5% on a stellar earnings beat.

·          Skechers slid as it withdrew 2025 guidance on economic uncertainty.

Company News

·         Apple Inc. will remove its secret robotics unit from the command of its artificial intelligence chief.

·         Intel's CEO says he met with TSMC CEO to discuss a collaboration.

·         Meta cut jobs at its Reality Labs division.

·         Goldman predicted negative growth in the first quarter.

·         Waymo reported 250,000 paid robotaxi rides per week in the United States.

 

The Week Ahead

April 28: U.S. Treasury refinancing estimates and expected earnings from Waste Management (WM).
April 29: March Job Openings and Labor Turnover Survey (JOLTS), April Consumer Confidence, and expected earnings from Coca-Cola (KO), UPS (UPS), Pfizer (PFE), Royal Caribbean (RCL), Honeywell (HON), Archer-Daniels-Midland (ADM), Altria Group (MO), General Motors (GM), Kraft Heinz (KHC), Starbucks (SBUX), and Visa (V).
April 30: March PCE and Core PCE Prices, first estimate of Q1 GDP, Bank of Japan interest rate decision, and expected earnings from Caterpillar (CAT), Microsoft (MSFT), Meta Platforms (META), Qualcomm (QCOM), MGM Resorts (MGM), and Allstate (ALL).
May 1: April ISM Manufacturing Index and expected earnings from Eli Lilly (LLY), CVS Health (CVS), Mastercard (MA), McDonald's (MCD), Apple (AAPL), Amazon (AMZN), U.S. Steel (X), Roku (ROKU), Amgen (AMGN), and MicroStrategy (MSTR).

 

 

 

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