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Why Earnings Caused Yesterday’s Selloff

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What’s in Today’s Report:

  • Why Earnings Results Caused Yesterday’s Selloff (The Results Weren’t Actually That Bad)
  • Chart: PKG Dropped Sharply on Cautious Guidance

Strong earnings and guidance from tech giants MSFT (+8%) and GOOGL (+1%) after the close yesterday are supporting gains in U.S. equity futures today while more cautious results in Europe are weighing on overseas markets.

Economically, Australian CPI fell to 7.0% vs. (E) 6.9% y/y in the first quarter, down from 7.8% in Q4, but the inflation reading is still well above target and serves as a reminder that global central banks still have work to do in order to get inflation under control.

Looking into today’s session earnings season slows down somewhat with only a few notable companies reporting, including: BA (-$0.98), and GD ($9.34) before the bell, and META ($1.96) after the close.

That will leave investors focused on economic data early with Durable Goods Orders (E: 0.9%) and International Trade in Goods (E: -$90.0B) set to be released. There are no Fed speakers today but there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and impact stocks in afternoon trade.

 

In Case You Missed It: Our Special Technical Market Update for Sevens Report Subscribers Was Delivered Monday Morning

We continue to receive overwhelmingly positive feedback from our subscriber base regarding Monday’s special technical market update.

The report included analysis on all asset classes starting with the major equity indices across various time frames before looking at the latest investment style and sector trends. Additionally, we dove into currency, commodity, and Treasury market technicals to help identify trends that present both risks and opportunities to portfolios in these historically uncertain market conditions.

Earnings Season Update (What MSFT’s Results Mean for Markets)

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What’s in Today’s Report:

  • Earnings Season Update (What MSFT’s Results Mean for Markets)
  • EIA Analysis and Oil Market Update

Futures are slightly higher thanks mostly to momentum from Wednesday’s rebound and as earnings overnight were no worse than feared.

On earnings, TSLA rallied 6% after hours as Elon Musk teased more deliveries on the call in ‘23 than actual guidance, while IBM results were slightly disappointing.

Today focus will be on economic data and the key reports today are:  Durable Goods (E: 2.8%), Jobless Claims (E: 202K), Q4 ’22 GDP (E: 2.7%), and New Home Sales (E: 614K).  As has been the case through the end of ’22 and early ’23, moderation in the data, not an outright collapse, is what stocks and bonds need to extend yesterday’s rally.

On earnings, the key report today comes after the close with INTC ($0.20), while other notable reports include: V $($2.01), MA ($2.56), AAL ($1.14), JBLU ($0.19), and VLO ($7.45).

How Far Could This Relief Rally Run?

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What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.

Tom Essaye Quoted in Yahoo Finance on January 31, 2020

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“I wouldn’t be surprised if [IBM] is looking at Microsoft and hoping the same thing happens here,” said Sevens Report Research founder Tom Essaye on Yahoo Finance’s The First Trade. Click here to read the full article.

Ginni Rometty, President and CEO of IBM