Things you need to know.
- META and MSFT ignite the rally – other tech follows.
- More mixed eco data.
- AMZN & AAPL report – algo’s are disappointed, I am NOT.
- NFP today at 8:30….
- US & China are ‘engaged’ – who will kiss who first? 😉
- Try the Linguine
Well – it was a good day….the MSFT and META earnings lit the fuse – sending the algo’s into state of hysteria as they all tried to ‘jump back in’ – tripping over each other as the seconds turned to mins turned to hours…..and that whole ‘Sell America’ narrative that the left is trying to create just got blown up…..and while the day ended with stocks higher – they were well off the highs of the day…but that makes sense as well, since I believe the recent rally has gone too far too fast….the 10% move up in 9 days was a bit much…. the move took us right up and thru the trendline at 5604 – we didn’t even get a chance to kiss it….we just went for the gold and blasted thru it….……in fact, the move created yet another gap in the charts leaving us to have to ‘fill it in’. In any event –
The Dow ended the day +85 pts, the S&P up 35 pts, the Nasdaq +265 pts, the Russell +11 pts, the Transports lost 15 pts, the Equal Weighted S&P lost 10 pts while the Mag 7 Index jumped by more than 641 pts or 2.8%.
All your favorites gaining ground as the algo’s that couldn’t sell them fast enough 2 weeks ago – scrambled to buy them right back….
META +4.25%, MSFT +7.6%, AAPL +1.6%, NVDA +2.5%, GOOG +1.7%, AMZN +3.1%, all ended higher…. the Tech ETF – XLK + 1.5%… Now a separate report suggesting that Trump is ‘weighing a potential easing’ of restrictions on NVDA’s chip sales to the UAE helped to push it higher…. The UAE (United Arab Emirates) – Not CHINA! (Although there is news about China this morning – see below).
The eco data was mixed again…Challenger Job Cuts showing a significant decrease (62%) in announced layoffs from the prior month – which is a positive, but the report did go onto note that layoffs were still 63% higher y/y suggesting ongoing challenges (negative), so the bulls will play the m/m decline while the bears will focus on the continued y/y increase.
The Manufacturing PMI’s were as discussed – the S&P shows us in the expansionary zone, while the ISM suggests contraction…and that is due to the way they conduct the surveys….ISM’s sample is relatively small, while the S&P is much larger – so I would focus on the larger survey which is still showing expansion and that is a positive. If you want to accentuate a negative then you will focus on the smaller ISM survey.
Construction spending was weaker at -0.5% while Wards Total Vehicle Sales were better.
We had about 80 out of earnings reports and there were more significant beats than losses and no one suggested that they were choking on tariffs. And then we got the 2 – A’s!
AMZN – strong earnings beat – EPS of $1.59 vs. $1.36 – a 16% beat, Revenues of $155.6 bil vs. the $155 bil – up 8% y/y. Advertising up 19% y/y, cementing their position behind GOOG and META. Cloud Services +19% y/y while Operating Income rose 47% reflecting cost discipline and profitability improvements. OK – but there are some negatives..
Weak forward guidance due to tariff and exchange rate uncertainty. Potential ad slowdown – again due to tariffs. Increase in capex – while strategic is being viewed as pressuring short term cash flow in the short term. I am not in that camp – and increase in capex (for me) is bullish – this is about the long term NOT the short term. The stock traded up 3% or $5.80 during the day yesterday and this morning it is down 1.4% or $2.65.
And then everyone’s baby – AAPL…..what would Timmy say?
Positives – Earnings BEAT $1.65 vs. $1.63; Revs BEAT $95.4 billion vs. the estimate of $94.6 bil – EPS up 8% y/y and Revs up 5% y/y. Strong performances across their product lines – ALL of them beating the expectations…iPhones $46.8 bil, Mac’s $7.95 bil, iPads $6.4 bil. Robust cash flow and shareholder returns. They generated $24 bil in operating cf, returned $29 bil to shareholders via buybacks and divy’s of 25 cts/sh. And they have $153 billion on the balance sheet in NET CASH. Oh, one more thing – Timmy said that they were moving ‘most of their production’ to India by the end of 2026.
Ok – so what are the negatives?
Well, like others they have tariff concerns – Timmy citing a possible $900 million cost increase for the 3 qtr. – leading him to be cautious in his guidance…OK – stop the histrionics – that increase is LESS than 1% of his quarterly revenues….LESS than 1% – is that clear? Suck it up!
Service revenue guidance missed estimates – ok get ready for the miss! $26.65 billion vs. the estimate of $26.7 billion – let’s be clear – that is a 1/10th of 1% ‘miss’. Stop!
Wearables? Yeah, that’s a bit weaker – $7.52 bil vs. $7.95 bil and there are always the ongoing regulatory and legal challenges – but for me – none of the negatives change the long-term fundamental story. But apparently there are a bunch of others that want out…. this morning it is trading down $6 or 2.9% in pre-mkt trading…Whatever!
Now today is all about the Non-Farm Payroll Report – NFP – and that is expected to show an increase of 138k new jobs, while the unemployment rate remains at 4.2%, Avg Hourly Earnings m/m of +0.3%, y/y of +3.9% – now remember – the ADP employment report was much weaker than expected due to employers being a bit cautious…Will we see the same thing here and if we do – expect the naysayers to jump all over it suggesting the end of the world is upon us!
In addition – we will get Factory orders which are estimated to be up 4.5%! A significant jump over last month’s +0.6% and Durable Goods of +9.2% – Two extremely healthy numbers that signal strong consumer and business confidence, as well as potential growth in manufacturing and industrial activity. It suggests companies are investing in equipment and consumers are spending on high-value items, which can drive economic expansion, job creation, and higher GDP growth. To be clear – these are part of those KEY ‘Hard Data’ numbers we spoke about on Tuesday.
Bonds declined a bit yesterday – both the TLT and TLH down 0.9% – but again, that should surprise no one….they have rallied nicely – up about 6% in the last month and with the level of anxiety dropping – you can expect the bond trader types to lock in those recent gains….
Gold – yesterday it traded all the way down to $3209 – before closing at $3222 – representing a swift 8% pullback in 2 weeks. We identified that move and I said that if we tested it and held, then a bounce would not be a surprise… This morning – we bounced! Gold is up $50 at $3271 – but it is just a bounce – because as the news gets more favorable – the ‘flight to safety’ will fade and gold will retreat. The trendline support is $3109.
Oil is churning just below $60 – at $58.96. You know how I feel. I would not be surprised to see oil trade down to and test $55. Look for earnings from XOM and CVX this morning…and listen to what they have to say about future demand.
CVX – just reported – beat on earnings but missed on revenues……the stock is trading at 52-week lows at $136.26….and is down 6% ytd. With oil at $59 – Chevron can weather the storm – but if oil falls much further then they may to have to cutback on its share repurchase program. More to come.
This morning US futures are up again – word that the US and China are engaged in discussions is the focus and that is a POSITIVE….But remember – both of these ‘guys’ need to save face – neither can look like they got taken out behind the woodshed – they both need to ‘win’….Let’s see if Scotty (Bessent) can make that happen. At 6:30 am – Dow futures +215 pts, S&Ps are up 27, Nasdaq is + 70, while the Russell is up 19 pts.
European markets are all open again – and are all higher…. France in the lead – up 1.7% with Spain carrying up the rear at +0.7%. Investors there hopeful that Donny and XiXi will play nice…..Inflation in the Eurozone held steady at 2.2%.
The S&P closed at 5,604 up 35 pts – as noted above – we pierced short term trendline resistance – which is positive….and the Nasdaq pierced its short term trendline resistance and that is positive as well. Now, like I said – we created more gaps on the way up that will need to be filled, so don’t think it’s all just yet…. but it does feel a bit less anxious, don’t you think?
Futures are pointing to another RISK ON day, and we’ll see how that works out at 8:30 when we get the latest NFP report. It is Friday, and if the market suspects that we will get more news over the weekend concerning US/China – then they will continue to take stocks higher…if we see a change in the mood, then NOT.
Expect the excitement to continue…. stick to your plan and remain resilient – aren’t you glad you didn’t bail 3 weeks ago? The S&P has taken back 17% while the Nasdaq is up 21%. Happy Friday!
Take good care,
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Linguine with a Roasted Tomato & Garlic Cream Sauce.
Yum…. for this you need:
2 boxes of cherry tomatoes, a dozen (or so) whole garlic cloves, Cream Cheese (Philly works well), fresh spinach, Fresh grated Parmegiana, olive oil, s&p, oregano and of course the linguine.
Preheat your over to 375 degrees.
On a sheet pan – add the cherry tomatoes and the whole garlic cloves. Season with s&p and the oregano. (don’t overdo it). Drizzle the olive oil and be sure to coat well. Do not soak, just coat. Place it in the oven and roast for 40 mins. (make sure not to burn).
Bring a pot of salted water to a rolling boil – when the tomatoes are all done – add the linguine. Cook for 8 mins.
Now take ¾ of the mix and blend with 8 oz of cream cheese, a handful of fresh spinach, and a handful of the parmegiana.
Now – pour the blended tomatoes into a warm sauté pan. Add back in the rest of the roasted tomatoes and garlic.
Now add the pasta and add one ladle of the pasta water (tears of the Gods).
Stir to coat – add another handful of parmegiana cheese and stir again.
Serve immediately. Always have more Parmegiana on the table for your guests.
Buon Appetito
