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- Equity markets continue to set new highs as macro data supports bulls.
- Refinitiv data shows money market fund redemptions but still inflows to equities.
- Earnings season switches from bank stocks to reopening plays.
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Equity markets continue to remain bolstered from all sides as the macro environment produces strong numbers, earnings continue to smash estimates and inflation concerns take a back seat.
US retail sales on Friday were well ahead of estimates, China’s GDP growth smashed it out of the park registered at 18.2% and the bank stocks made fools of their analyst estimates with strong beats across the big investment banks and the more traditional core banks. Investment banking showed just how hot markets are as revenues from trading and corporate deal flow set Goldman, Citi, JPMorgan, and Morgan Stanely powering ahead. Morgan Stanley even managed to take a near $1 billion hit from Archegos in Q1 and still easily beat earnings forecasts.
Inflation has calmed down as the 10-year yield continues to soften. VIX equity volatility is at year lows and Bond market volatility has also dropped sharply.
The S&P 500 finished the week +1.38% closing at a record high. The Dow gained 1.19% on the week and also closed at a record high, while the Nasdaq gained 1.1% on the week but decided to save its record high close for another time!
All is going swimmingly for equities until geopolitical risk rears its head to slow the ascent. The US and Russia engage in a war of words and sanctions as Russia sends a few US diplomats home in response to US sanctions curbing US bank trading in Russian debt among other things.
Russia and Ukraine tensions rise as problems over Eastern Ukraine resurface. For now, the geopolitical situation is not denting equity market exuberance and it will need something more serious to hurt bulls.
Equity valuations have been looking stretched for a while but a seemingly inexhaustible money supply being pumped in the bubble just keeps getting inflated. Money supply continues going one way but more worryingly the velocity of that expanding money supply has set new record lows. The velocity of money is the amount of money actually used in exchange for goods and services so you want this figure to be high!
The number of stocks within the S&P 500 above their 200 day moving average continues to set new records. The same for the broader Russell 2000!
Further adding to the overheating argument is the latest data from Refinitv to the end of this week April 14. Money market funds (those that invest in cash, deposits, bonds, etc.) have lost huge flows of around$27.8 billion. Equity funds though continue to see net inflows.
This is no time to be bearish though! We turn our attention to what is likely to be another stellar week of earnings. It is a busy one again with bank stocks taking a back seat to more consumer and re-opening stocks.
2021-04-19 After Market Close United Airlines Holdings
2021-04-19 Before Market Open Coca-Cola
2021-04-19 After Market Close IBM
2021-04-20 Before Market Open Procter & Gamble
2021-04-20 Before Market Open Comerica
2021-04-20 Before Market Open Abbott Laboratories
2021-04-20 After Market Close CSX
2021-04-20 Before Market Open AutoNation
2021-04-20 Before Market Open Philip Morris Intl
2021-04-20 Before Market Open Lockheed Martin
2021-04-20 Before Market Open Travelers Companies
2021-04-21 Before Market Open ASML Holding
2021-04-21 Before Market Open Baker Hughes
2021-04-21 Before Market Open Halliburton
2021-04-21 Before Market Open Anthem
2021-04-21 Before Market Open Verizon Communications
2021-04-21 Before Market Open Telefonaktiebolaget L M
2021-04-22 After Market Close Snap
2021-04-22 Before Market Open Biogen
2021-04-22 After Market Close Intel
2021-04-22 Before Market Open AT&T
2021-04-22 After Market Close Seagate Technology
2021-04-22 Before Market Open Freeport-McMoRan
2021-04-22 Before Market Open Blackstone Group
2021-04-22 Before Market Open Southwest Airlines
2021-04-22 Before Market Open SAP
2021-04-22 Before Market Open American Airlines Group
2021-04-22 Before Market Open Valero Energy
2021-04-22 Before Market Open Credit Suisse Group
2021-04-23 Before Market Open Honeywell International
Source: Benzinga
Monday sees little economic releases due with only 3 and 6-month bill auctions so UAL, IBM, and Coke can bask in the spotlight.
Tuesday brings the release of the Redbook Index and weekly crude oil stocks. Oil has been charging lately as demand is forecast to increase and US stockpiles are falling sharply.
Wednesday has a 20-year bond auction which may kick some activity off among inflation bulls if it goes badly. Also on Wednesday, we get mortgage applications.
Thursday has the usual jobless claims data as well as the Chicago Fed Index. Also due for release is Existing home sales for March, expecting 6.21 million. Thursday also sees earnings from SNAP, Intel, Southwest, and American Airlines.
Friday rounds out a quiet week on the data front with New Home Sales for March expected to show a 12% rise. US Markit PMI completes the week. Credit Suisse releases earnings on Friday.
S&P technical levels
The key moving averages all remain as support levels below the current price and are in bullish formation. The RSI is getting very near overbought territory at 76. Technically, some would say over 70 is overbought but over 80 gives fewer false signals. Given as shown above that the number of stocks above their 200 day moving average is at a record level, the high RSI is no surprise!
MACD however is still crossed into a bullish signal from late March with no sign of any imminent crossover.
The trend is bullish but watch the 9-day moving average for the first clue of a turn in sentiment as the RSI remains close to the overbought area.
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