Jim’s Notes – PCE & Earnings Boost Stocks

Moving the Market – April 26th Weekend Outlook and Update

Weaker than expected first quarter GDP and higher PCE quarterly data didn’t settle well with investors on Thursday. They were saved on Friday with ‘lower-than-anticipated’ monthly PCE data following the GDP report… but, the monthly and Y/Y data was hotter than the estimates. What? It was basically a relief that it wasn’t worse. Makes perfect sense then that stocks moved higher on Friday. The markets gap higher and the open and traded sideways the balance of the day. Earnings from the mega caps did their part to help the upside as GOOG, MSFT, and AMZN beat expectations. Contrary to popular belief the BOJ did nothing once again. The bank refused to raise interest rates and the yen (FXY) dropped in step with the announcement. The charts show the last week as an attempted rally from the lows on 4/19. With the dip on Thursday, it looks like an ABCD pattern. We would look for this to follow through next week if the upside is to resume. The answer will lie in the data as it is released in the coming weeks. Yellen speaks on Monday and if she details the latest Treasury/Fed scam/scheme to allow banks to buy treasury bonds without influence on their balance sheet the impact to the markets would be a rally higher… ie. liquidity for issuing more debt. That will be some news worthy of reading, not sure I can stomach listening to her. Going to be an interesting week as the month comes to an end and plenty of economic data on tap to go with more earnings.

The major indexes were higher on the day following positive earnings data and what some believed to be a better PCE index. Semiconductors, oil services, and crypto led the upside on Friday. The NASDAQ closed up 2%, DIA was down 0.9%, and the SP500 was down 0.4%. The major indexes closed lower with volatility moving to 15.3. The SOXX was up 0.4%. Small Caps (Russell 2000) were up 1%. The ten-year treasury yield was 4.66% down 4 bps for the day. Crude Oil (USO) was up 0.1%. (UGA) was up 0.1%. Natural gas (UNG) was down 2.2%. The dollar was up 0.3%. We are focused on managing the risk in the current environment and letting it unfold.

Monday Outlook: Markets were higher on Friday and showed a bottom reversal pattern on the chart. Buyers were ready at the open following positive earnings data. As we head to Monday we have the end of the month, Treasury Secretary, earnings, economic numbers, and geopolitics in the headlines… no shortage of information to drive stocks. The Fed has entered its quite period thus some peace and quiet prior to the FOMC meeting in two weeks. As always, we will take what the markets offer one day at a time.

Chart of Sectors: This chart starts at the previous high for the S&P 500 index on March 28th. Watching the bounce from the April 19th low currently for the leadership. XLK and XLY are taking the early lead.

Charts to Watch: See Notes on “Reality of the Markets”

Headlines Worthy of Note:

President Biden will continue to use TikTok to campaign even after banning it in the US. This was reported by the Financial Times. The law calls for TikTok parent ByteDance to divest itself from the app within the next year. If not, it will be banned in the US… The deadline is January 19th coincidentally the day before the presidential inauguration. Go figure.

MarketWatch reported the Treasury is ready to implement a program to ‘make the bond market more resilient.’ The Treasury is planning what is called the first Treasury buybacks in 20 years. Why? Wait for it, ‘support liquidity in the Treasury market.’ Why would we need to do this? Simply put, nobody wants the US debt paper. We are essentially going down the same path as Japan. For further rationale on this move by the Treasury, the New York Fed will conduct the Treasury buyback operations. Imagine the Fed and the Treasury teaming up to monetize debt the Treasury issues. Again the question is why? Let’s turn our attention to the BUDGET that the Biden Administration released on Monday… their own figures on the low side would grow the debt to $54 trillion versus the $34 trillion currently over the next 10 years. That is $2 trillion per year for those who don’t want to do the math. Those are insane numbers from the crazy people running the country currently. Talk about the highway to HELL, we are currently on it going as fast as we can.

Earnings from GOOG, MSFT, and AMZN lead the index higher. Google jumped 9.5% on Friday.

Quote of the Day: “The way my luck is running. If I were a politician I would be honest.” — Rodnye Dangerfield

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