Market 04/19: Three major shocks in the market on Friday

Fed officials continue hawkish and resonant impact of tax collection period on QT

Fed officials continue hawkish

Fed Chicago Goolsbee:

• Inflation is slowing but will take longer to bring back to 2%.

  • Fed's current tightening policy is appropriate.

• Maintaining tightening policy too long could affect employment.

• Need to pay attention to overdue consumer debt.

• Housing inflation is the main short-term issue.

Fed Atlanta Bostic:

• Economy slowing but weakening at a slow pace.

• Wage growth faster than inflation.

• May need to prepare for rate hikes if inflation doesn't ease as expected.

Market sentiment

• Market probability of Fed continuing to hold rates surges above 80% (vs 70% last week).

• Bloomberg NLP Fedspeak Index ticks higher, signaling rising hawkish sentiment.

  • Meanwhile, traders still price in nearly 96bps (~4 cuts) of Fed rate cuts over next 18 months.

Resonant impact of tax collection period on QT

• Money market fund assets fall 112 billion USD, sharpest drop since 2008 after Tax Day (Tax Day).

  • Corporate taxes collected 04/11-17 total 100.7 billion USD.

• Bank reserves at Fed also plunge most since 2022 tax season to 3.33 trillion USD as of 04/17 (vs 3.62 trillion USD prior week).

Middle East conflict: Israel strikes near Iran's nuclear facility

• Israel retaliates against Iran after missile and drone barrage. Strike targets Isfahan province, home to Natanz nuclear site.

  • Message from The Jerusalem Post on X: “Israel precisely targeted area around Iran's nuclear facilities - we can do worse, right here if we want.”

• US denies involvement in attack. Iran has no retaliation plans for now.

  • Senior Iranian commander claims "no damage" from attack.

• Iran suspends all flights to Tehran, Isfahan, and Shiraz.

Middle East tensions escalate, triggering sharp global market reaction:

• Global stocks biggest drop since Oct 2023.

  • MSCI ACWI down over 2% this week.

• Yields down 10bps.

• Stock futures down 1.5%.

• Gold up 1.5%.

• Oil up 4%.

• Bitcoin quarters record a sharp drop in capital inflows of 1 billion USD from peak to ~700 million USD.

Tech stocks continue to decline after TSMC CEO's remarks yesterday

• TSMC CEO says reshaping business operations, doubling capacity, however “still cannot meet demand due to excessively strong AI demand”.

  • Tech stock group continues to decline after the news.

  • TSMC is currently the world's largest chip manufacturer, supplying both Apple and Nvidia

Earnings reports: Netflix, P&G, American Express

Netflix: Stop reporting quarterly subscriber numbers from 2025

• Subscriber count: up +9 million QoQ, reaching 270 million.

  • Quarterly subscriber growth will be stopped reporting from 2025, forcing investors to evaluate the company based on revenue and regular earnings.

• Revenue: +15% YoY, reaching 9.4 billion USD (> expected 0.1 billion USD).

• Operating margin: +7% YoY, reaching 28%.

• EPS: 5.28 USD (> expected 0.76 USD).

Q2 FY24 Guidance:

• Revenue: +16% YoY.

• Operating margin: 27%.

P&G: Revenue misses expectations, price increase pace slows

• EPS: 1.52 USD (> expected 1.41 USD).

• Revenue: +1% YoY, reaching 20.2 billion USD (< expected 20.41 billion USD).

  • Sales in health care, baby, feminine, and family care segments recorded declines.

  • Revenue in China (P&G's second-largest market) and the Middle East was sluggish, significantly impacting overall revenue.

• Operating income: up +5% YoY, reaching 4.46 billion USD.

• Selling and administrative expenses (SG&A): up to 5.88 billion USD.

• Dividend payments and share buybacks: 3.3 billion USD.

American Express:

• Revenue: +11% YoY, reaching 15.80 billion USD (> estimate 15.79 billion USD).

  • …due to increased Card Member spending.

• EPS: +39% YoY, reaching 3.33 USD (> estimate 2.95 USD).

• Net interest income: up +27% YoY, reaching ~ 3.77 billion USD.

FY2024 guidance:

• Revenue: 66.6 billion USD (estimate 66.2 billion USD).

• EPS: 12.90 USD (estimate 12.81 USD).

Crypto market: US Senators push stablecoin regulation bill

• Senators Cynthia Lummis and Kirsten Gillibrand have announced a new bill hoping to advance stablecoin legislation.

• Telegram will allow Tether payment integration.

Some other news

1. Tesla recalls 3,878 Cybertrucks due to accelerator pedal that may get stuck.

2. Trump Media, $DJT, warns Nasdaq of market manipulation risk from "naked short selling" shares.

   • Since peaking on 03/26, $DJT down 58%, equivalent to ~3 billion USD.

   • Bshort selling without basis (naked short selling): short sell orders placed before the investor actually borrows the shorted shares.