Technical time: Microsoft, Advanced micro devices, alphabetical reporting to close today
Clearly if not, it’s time for all of us to put on our Fed hats. Wer. It is only six weeks ago since the last meeting of the Federal Open Market Committee (FOMC), but they are meeting again today. The regular press conference with Fed Chairman Jerome Powell is coming off after the meeting ends tomorrow at 2 a.m. ET, and analysts expect no change in policy. Trading can be all this slow, which is typical when investors are waiting the last of Powell and company. Major indices do not move much during the night session. That being said, the Fed may be this week on the third-most important event after gross domestic product (GDP) and Tech earnings. Ahead of this afternoon, Tech Center takes over with earnings from Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), and Advanced Micro Devices (NASDAQ: AMD). More on all that further down. This earnings season is now about one-third complete, and 84% of companies have beaten Wall Street’s consensus revenue estimates, according to FactSet. That is well above the average level of positive surprises, indicating that analysts may have been too conservative. General Electric (NYSE: GE) did very well, but the stock is slightly lower, and Starbucks (NASDAQ: SBUX) also reports later, which could be interesting. Fed ahead as investors wait for views on latest strong data Unlike last month, this time we do not get a “point-plot” of Fed officials’ prospects for rates. For that, we have to wait until the mid-June FOMC meeting. But Powell may be asked to respond to recent booming economic data and higher-than-expected inflation readings. The Fed is returning to a healthy job picture high on its list, and the last two initial reports on unemployment claims and wage rolls from March both suggested progress. It may be interesting to get Powell’s thoughts on these numbers and what they might mean in advance. That said, it would be very surprising to hear Powell say about every moment becoming more hawkish. The Fed’s feet seem to be firmly planted in the dove camp, and Fed fund futures suggest no change in rate policy this year. Powell is likely to want to see some more solid job reports – including May payrolls – before making new statements about the job picture. It’s kind of unfortunate timing that the Fed meeting concludes Wednesday – a day before Powell and the rest of us get a first look at the government’s estimate for Q1 gross domestic product (GDP) growth (see more below) . Thursday also brings the weekly first data on unemployed claims. After two solid weeks in a row, it would be good to see more improvement. However, anything below 600,000 would expand the range of reports below this level. It’s still high, but a big improvement after months of 700,000 to 800,000 new claims per week. Before Covid, the average was well below 300,000, but it is unclear when we will return to such levels. Heart Of Tech Lineup As Microsoft, alphabetical approach alongside the Fed, earns hot and heavy this week, highlighted by a few key semiconductor companies (see below). There’s also MSFT and Alphabet (GOOGL) after today’s closing and Apple (NASDAQ: AAPL) after Wednesday’s closing clock. Amazon (NASDAQ: AMZN) hits bat on Thursday. We’ll talk more about AAPL and AMZN tomorrow, but with MSFT and GOOGL, cloud computing results are probably high on most investors’ lists of things to see, along with their forecasts for the coming quarter. Back in Q2 last year, GOOGL saw its advertising revenue decline when companies held advertising companies in Covid. When economies started to open up, GOOGL benefited from the bounceback for advertising companies – a big problem considering that it was about 81% of GOOGL’s total revenue in the past. The question is whether that power continued in Q1. The Google Cloud platform also had a great run last year, but still accounts for only a small aspect of total revenue and is far behind competitors such as MSFT and AMZN. We’ll see if that aspect of the business gets more traction. The stock has been on a downtrend in recent months, about 35% year to date. MSFT’s recent announcement of its $ 20 billion acquisition of artificial intelligence (AI) software company Nuance Communications (NASDAQ: NUAN) is likely to be in people’s minds as the company reports fiscal Q3 revenue later today, but so will the usual suspects like cloud, Office, and LinkedIn. The last time MSFT reported, fiscal Q2 Azure revenue grew by 50% and total commercial cloud revenue grew 34%, setting high bar for MSFT. That’s not all. Other major companies reported in the coming days include Starbucks, Amgen (NASDAQ: AMGN), Caterpillar (NYSE: CAT), Baxter (NYSE: BAX), Ford (NYSE: F), and Facebook (NASDAQ: FB) . Strap on those belts. Tesla’s quarter fully charged, but stock goes unrewarded All this follows a busy earnings afternoon yesterday with the latest from the EV universe with earnings from Tesla (NASDAQ: TSLA). Despite knocking on earnings and earnings and looking impressive on a bunch of other metrics, stocks fell in trading for the market. With TSLA earnings, the ironic thing is that one of the areas where they did best sold a chunk of their Bitcoin holdings. Many stocks have slipped on good results this earnings season, so it probably just reflects how the overall market is at near record levels. When we talk about it, expectations are high and it costs a lot to go up. The theme so far this season is that you may have a good quarter, but your share will not necessarily be rewarded. COUNT OF THE DAY: A STORY OF TWO COMMODITIES. Looking back over the last year with this chart, gold (/ GC candlestick) and rough (/ CL purple line) have traded in principle places. Strong economic growth in the US helped last month roughly to 14-month high and it is now not far below that, while gold was placed earlier this year partly thanks to progress against rough that hit the market volatility. Gold has been making a comeback attempt lately, but it is still well below levels earlier this year. If the Fed remains deaf, that gold could provide more support. Data source: CME Group. Map source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. GDP Watch: Of all the government data coming across the thread this week, a few reports are more relevant than Thursday’s release of the previous report on Q1 gross domestic product. The Wall Street consensus is according to research firm Briefing.com for a gain of 6.5%. That would not be too shabby after the gain of 4.3% from the previous quarter. However, the Atlanta Fed’s GDP meter looks even better than that of the analyst community, with a projected reading of 8.2%. It is probably obvious that we do not see lectures like this on GDP. A report by Goldman Sachs (NYSE: GS) recently predicted 8% total growth for the full year, which would be the best annual performance in nearly seven decades. Of course, this is against an easy comparison, seen 2020 a recession recorded. The more important question, and one that the Fed is likely to ask, is whether this kind of growth can get the economy back where it was for Covid. Some metrics, such as production and housing, have improved since pre-Covid days. Others, such as unemployment and earnings, are not there yet. On Patrol with Chips: Two more large semiconductor companies, Texas Instruments (NASDAQ: TXN) and Advanced Micro Devices are expected to report today after closing. Before we get to them, it helps to get a landing of the country by looking back in a little more detail at what Intel (NASDAQ: INTC) said in its report last week. analysts, but the quarter did not end without setbacks. First, overall sales were largely flat, raising questions about how other chipmakers might have performed in the quarter. Sales of INTC data chip chips were increased last year due to demand for work at home, but the chipmaker faces stiff competition from AMD and Nvidia (NASDAQ: NVDA) in that arena. Look for AMD to shed some light on the competitive image of the data chip today. Also on the downside, Apple – which uses INTC chips – has started turning to its own chip production for its Mac line. INTC said it intends to invest $ 20 billion in the development of new chip factories. Instead of building its product designs for castings for completion, INTC aims to become one, not only making its own chips, but also those of others, a potentially important move for the chip giant. What will TXN and AMD think in the course of this news? Is vertical integration now the state of the sector? Does INTC’s move in this direction pose a potential competitive challenge? We may have a chance to find out after closing. Yield Pauselange Could Depend on Europe: When the Fed meets in Washington this week, there is still a lot of debate on Wall Street about why the rally in Treasury revenue did not go through. The 10-year yield reached close to 1.78% at the end of last month, but is close to 1.58% this morning. One possible reason, according to some analysts, is the lack of competition from the significant German yield. The bond recently had a yield of negative 0.25%, which means that the spread between FS and the benchmark European rate is around 180 basis points. That is up from about 150 basis points earlier this year. As long as the premium to U.S. yields is so high, U.S. treasuries are likely to remain at levels where they will attract yield-hungry investors. This buying interest pumps up the underlying asset and reduces the yield. However, there is a chance that Europe’s economy could recover, which could mean a contraction in that spread and perhaps some competition from European and other world bond markets. This is one thing to see potential in May, especially as Europe makes more progress with vaccinations. As bond yields begin to creep in, look for a better chance of 10-year Treasury yields continuing what looked like a steady move higher, especially as U.S. inflation readings so steadily over the next few months stay as they were in March. A weak bond auction on Monday reinforced possible bullishness over yields. TD Ameritrade® comments for educational purposes only. SIPC member. 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