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đź“Š U.S. still the economic safe haven?

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Ticker Tea
April 16, 2024

I was expecting volatility this week, but a single-day +11% spike in the volatility index ($VIX) (chart, about) was shocking 👇

The stock market retreated on Monday, with all major indices facing significant losses largely due to the geopolitical tension in the Middle East. Israel and Iran traded tit for tat threats throughout the day, keeping traders on edge about the possibility of a regional war.

Higher bond yields were a major drag on stocks, with the 10-year Treasury note yield (chart) reaching a five-month peak. This rise followed stronger-than-expected U.S. March retail sales data (+0.7% m/m vs +0.4% est), dampening hopes for any imminent interest rate cuts by the Federal Reserve.

The move in the 10-yr defies conventional wisdom when there is geopolitical unrest:

uncertainty = flight to safety (US Treasuries) = ↓ yields

Perhaps the market is shrugging off the potential war, or giving a nod to a greater risk: the Fed’s “higher for longer” mantra. OR UST are no longer viewed as the safe haven given the US govt’s spending habits and escalating debt service payments (LINK). I’m interested to hear your view. Reply to this email with your thoughts. I will summarize the viewpoints in tomorrow’s email.

More food for thought…

A few equity headlines from yesterday 👇

» Salesforce (CRM) closed down over 7% due to Bloomberg's report of a potential acquisition of Informatica, raising concerns about regulatory scrutiny. (chart)

» Tesla (TSLA) dropped over 5% as CEO Musk announced a significant global workforce reduction amid slowing electric vehicle demand. (chart)

» Goldman Sachs (GS) gained over 2% after reporting first-quarter revenues that significantly exceeded expectations. (chart)

» Apple (AAPL) dipped over 2% following an IDC report that iPhone shipments fell short of expectations. (chart)

» M&T Bank (MTB) rose more than 4% after upgrading its full-year net interest income forecast. (chart)

» Intel (INTC) climbed more than 1% following Citigroup's positive catalyst watch announcement. (chart)

» Charles Schwab (SCHW) advanced over 1% with first-quarter new brokerage accounts surpassing consensus estimates. (chart)

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» Goldman Sachs ($GS) exceeded forecasts with a 28% leap in Q1 net income, driven by strong trading and dealmaking performances. The firm's shares spiked up to 6%, reflecting renewed confidence in its core financial operations. (link)

» The S&P 500 fell sharply below the 5,100 mark as tech giants like Microsoft ($MSFT), Apple ($AAPL), and Nvidia ($NVDA) faced sell-offs due to increasing bond yields and economic data that may delay Federal Reserve rate cuts. Increased options buying and robust US retail sales signal a mixed outlook for equities as inflation concerns persist. (link)

» $UBS strategists predict a significant risk that the Federal Reserve might increase interest rates to as high as 6.5% next year due to persistent high inflation and strong US economic growth. This scenario could lead to a sharp decrease in bond prices and a 10%-15% drop in equities. (link)

» U.S. retail sales in March exceeded forecasts with a 0.7% rise, driven by robust consumer demand and suggesting strong economic growth. The increase, particularly in control-group sales, indicates potential upward trends for Q1 GDP, despite ongoing inflation concerns. (link)

» Trump Media ($DJT) experienced a significant downturn, losing over $5 billion in market value as its stock plunged 18% to $26.61, erasing much of its early gains from this year. The sell-off deepened following a registration to allow insider share sales, exacerbating the stock's fall from its March peak. (link)

» Tesla ($TSLA) will lay off over 14,000 workers, more than 10% of its 140,473-strong global workforce, as part of a restructuring plan outlined by CEO Elon Musk in response to operational inefficiencies and increasing market competition. The news led to a sharp 5% drop in Tesla's stock price, as challenges mount from slowing electric vehicle demand and escalating competition, particularly from Chinese manufacturers. (link)

» Lockheed Martin ($LMT) has been awarded a $17 billion contract by the U.S. Missile Defense Agency to develop the Next Generation Interceptor, aimed at defending against intercontinental ballistic missile threats. This significant contract win comes as Lockheed faces reductions in F-35 orders and cancellations in other defense projects. (link)

» Salesforce's ($CRM) stock fell 7% after news broke that it is in advanced talks to purchase data management firm Informatica ($INFA), in what could be its largest acquisition since buying Slack in 2021. Informatica’s shares also declined by 6%, with the potential purchase price reportedly below Informatica's last closing stock price. (link)

  • Select ($10bn+) earnings releases scheduled for today + fwd 4BD’s 👇

  • Given the volume of daily releases during earnings season, we will limit the forward pipeline to forward 3-4 days until earnings season slows down.

  • Comprehensive list of upcoming earnings releases HERE

     

Results from yesterday’s economic releases & today’s schedule below 👇 Full schedule is here.

“We generate fears while we sit. We overcome them by action. Fear is nature’s way of warning us to get busy.”
Dr. Henry Link

Reply to this email & let us know how we can improve (difficult to read, too long, dry, etc.)

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