Daily Markets: Dip Buyers Rush In, But Can the Market Sustain This Momentum?

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board except for China’s Shanghai Composite, which gained back 2.49% after the other day’s rout, and Hong Kong’s Hang Seng, which eked out a 0.06 return on the day. Australia’s ASX All Ordinaries fell 0.75%, India’s Sensex gave back 0.94% while Korea’s KOSPI and Japan’s Nikkei lost 1.10% and 1.17%, respectively. Taiwan’s TAIEX led the way down declining 2.05% on the day. By mid-day trading, major European equity indices are up across the board, and U.S. futures point to a strong market open later this morning following yesterday’s sharp sell-off as dip buyers test the market waters. 

As the March quarter earnings season rolls on, with results so far better than feared, renewed Russia-Ukraine tension is leading oil to tick higher this morning. Recession concerns continue to bubble up due to slowing activity in China, as well as concerns over the zeal in which central bankers will fight inflation. In response, the much-watched 10-year Treasury yield remains lower so far this week even as both the Russell 2000 and the Nasdaq Composite moved past market correction territory into market crash territory with last night’s close. This could be the cause of what looks to be the return of dip buyers this morning, but we cannot ignore the underlying message being sent to the Fed that perhaps the market isn’t so sure about the economy’s ability to withstand the Fed’s telegraphed intentions between now and the end of 2022.

Data Download

International Economy

The May reading for Germany’s GfK Consumer Climate Indicator plunged to -26.5, widely missing the expected -16 figure and the downwardly revised -15.7 for April. The May reading marked the lowest reading on record and reflects soaring costs for households amid the Russia-Ukraine war, weighting on post-pandemic recovery expectations. 

Similarly, the April reading for Consumer Confidence in France fell to a reading of 88 vs. 90 in March and the expected 92. Again, the Russia-Ukraine war and rising inflation were cited as reasons for the drop in consumer confidence. 

Domestic Economy

At 8:30 AM ET we will get the latest weekly MBA Mortgage Applications data with the weekly EIA Crude Oil Inventories report following at 10 AM ET. In between, the Pending Home Sales for March will be published at 10 AM ET and are expected to drop 1.3% MoM.

Markets

Stocks experienced a broad-based decline yesterday with growth stocks leading the way as evidenced by the 4.0% drop in both the Nasdaq Composite Index as well as the Vanguard Mega-Cap Growth ETF (MGK), while the Russell 2000 moved 3.2% lower. By comparison, the S&P 500 fell 2.8% and the Dow Jones Industrial Average lost 2.4%. Ten of the 11 S&P 500 sectors closed the day in negative territory with consumer discretionary, information technology, and communication services posting the steepest declines. Year-to-date, here’s how the major market barometers stack up as well as those for crypto:

• Dow Jones Industrial Average: -8.5%
• S&P 500: -12.4%
• Nasdaq Composite: -20.2% 
• Russell 2000: -15.8%
• Bitcoin (BTC-USD): -18.3%
• Ether (ETH-USD): -23.3%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, American Tower (AMT), Boeing (BA), Check Point Software (CHKP), General Dynamics (GD), Kraft Heinz (KHC), Silicon Labs (SLAB), Spotify (SPOT), STMicroelectronics (STM), T-Mobile US (TMUS), and United Micro (UMC) are expected to report their quarterly results. 

For its March quarter results, EPS of $24.62 at Alphabet (GOOGL) came up short vs. the $25.54 consensus while revenue for the quarter rose 23% YoY to $68.0 billion, modestly ahead of expected $67.9 billion. By segment, Google advertising revenue for the quarter rose 22% YoY to $54.66 billion; YouTube Ads climbed 15% YoY to $6.9 billion; Google Cloud revenue jumped 45% YoY to $5.8 billion. In terms of management comments, Alphabet shared hybrid work is here to stay, and its products are well suited to match that demand; time spent on YouTube continues to grow; and large companies are migrating data centers to Google Cloud leading its growing deal volume. As it warned it will face tough comparisons in the current quarter, Alphabet unveiled its Board has authorized the repurchase up to an additional $70.0 billion of its Class A and Class C shares.

March quarter revenue and EPS at Microsoft (MSFT) topped consensus forecasts hitting $2.22 and $49.36 billion, respectively led by commercial bookings growth of 28% and Microsoft Cloud revenue of $23.4 billion, up 32% year over year. For the current quarter, the company targets revenue of $52.4-$53.2 billion. 

Visa (V) handily beat March quarter expectations as its revenue rose 25.5% YoY to $7.19 billion vs. the $6.82 billion consensus leading it to generate EPS of $1.79 vs. the $1.65 consensus. Payments volume for the quarter increased 17% YoY on a constant-dollar basis, cross-border volume excluding transactions within Europe increased 47% on a constant-dollar basis, and total cross-border volume on a constant dollar basis increased 38% in the quarter. Visa shared the impact of Omicron short-lived, and it saw robust cross border travel recovery that started in the fall and resumed in February as Omicron faded.

General Motors (GM) reported mixed March quarter results with EPS that topped expectations while its revenue for the quarter rose 10.8% YoY to $35.98 billion, coming up short of the $37.1 billion consensus. The company’s U.S. sales units dropped 20% to 512,846 vehicles during the quarter primarily due to supply chain issues escalated further by Russia-Ukraine war. For 2022, GM sees EPS of $6.50-7.50 vs. its prior $6.25-7.25 and the $6.70 consensus. Digging into that outlook, the company expects to deliver record U.S. sales for the Bolt EV and Bolt EUV in 2022 as part of its goal to produce 400,000 EVs in North America over 2022-2023. By the end of 2025, GM targets the installed capacity to build 1 million EVs in North America, representing approximately $50 billion in annual revenue.

Chipotle Mexican Grill (CMG) reported tasty March quarter results with EPS of $5.70 that topped the $5.63 consensus as revenue rose 16% YoY to $2.02 billion vs the $2.01 billion consensus. Restaurant comp sales for the quarter rose 9.0% YoY, which was impacted by restaurant level operating margin falling to 20.7% YoY from 22.3% in the year ago quarter due to higher wages and food costs. Those costs were mitigated by menu price increases and lower delivery expenses. Toward the end of the quarter, Chipotle raised its menu prices by 4% to further offset rising costs, particularly for dairy, avocados, and tortillas. In terms of the current quarter, the company sees restaurant comp growth improving throughout the quarter, in part at pricing and new menu items take hold and targets 10%-12% comp growth for the quarter. It also targets increasing its share buyback activity during the quarter and opening 235-250 new locations in 2022.

Citing ongoing supply chain issues, F5 Networks (FFIV) cut its 2022 revenue growth guidance to 1.5%-4% or ~$2.64B-2.70 billion vs. its prior outlook of 4.5-8% growth and the revenue consensus estimate of $2.76 billion. In reporting its quarterly results that were largely in line with expectations, Juniper Networks (JNPR) also cited supply chain issues, which extended lead times and elevated logistics and component costs. 

Inter Parfums (IPAR) issued upside guidance for its March quarter with revenue of $250.7 million vs. the $215.8 million consensus. The company also reaffirmed its 2022 EPS forecast of $3.00 and noted the March quarter was "was exceptionally strong with significant sales gains by our largest brands. Montblanc, Jimmy Choo, Coach and GUESS brand sales rose 22%, 7%, 22% and 36%, respectively.” 

China Southern Airlines (ZNH) reported its March passenger capacity fell 56.01% YoY with domestic routes down 56.9% and international routes down 29.1%, respectively.

According to the merger agreement, Twitter (TWTR) will be required to pay a deal termination fee of $1 billion to Elon Musk if the social media company ends the $44 billion takeover, while Musk would be required to pay Twitter a reverse termination fee of $1 billion if the deal is cancelled by Musk. 

IPOs

The initial public offerings for Tenon Medical (TNON) and SaverOne (SVRE) are slated to price this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Cheesecake Factory (CAKE), Coursera (COUR), Equinix (EQIX), Ford Motor (F), Las Vegas Sands (LVS), Lending Club (LC), Meta Platforms (FB), PayPal (PYPL), Qualcomm (QCOM), and United Rentals (URI) will be among those companies slated to report their latest quarterly results. Investors should remain on watch for companies that pre-announce their March quarter results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Thursday, April 28

• Japan: Japan Policy Rate
• Eurozone: Business Climate, Consumer Confidence and Economic Confidence – April
• Germany: CPI - April
• US: Weekly Initial & Continuing Jobless Claims
• US: GDP – 1Q 2021
• US: Weekly EIA Natural Gas Inventories

Friday, April 29

• Korea: Industrial Production – March
• China: Markit/Caixin PMI Manufacturing – April
• France: CPI – April
• Eurozone: GDP – 1Q 2021
• Eurozone: CPI - April
• US: Personal Consumption & Expenditures – March
• US: Chicago PMI – April
• US: Michigan Sentiment Index (Final) – April

Thought for the Day

"Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price." - Warren Buffett

Disclosures

• Check Point Software (CHKP) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Chipotle Mexican Grill (CMG) is a constituent of the Tematica BITA Cleaner Living Index
• Chipotle Mexican Grill (CMG) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Qualcomm (QCOM), Equinix (EQIX), American Tower (AMT),F5 Networks (FFIV), PayPal (PYPL) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• VISA (V), PayPal (PYPL) are constituents of the Tematica BITA Digital Payments & Fintech Sustainability Screened Index
• General Dynamics (GD), Microsoft (MSFT), VISA (V) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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