Market 04/22: More than 1/3 S&P 500 companies report earnings this week

Focus this week: Earnings reports from major companies expected to boost S&P 500

Last week, S&P 500 dropped sharply -3%, the largest in over 1 year and closed below 5,000.

• Sector Technology recorded the strongest decline (-7.3%).

• However, excluding the group of 5 Big Tech stocks expected to increase -64.3% Q1 (Nvidia, Amazon, Meta, Google, Microsoft), S&P 500 is expected to decline -6%.

This week, more than 1/3 S&P 500 companies will report earnings, including 4/7 of the Magnificent 7 group (Alphabet, Meta, Microsoft and Tesla).

• Alphabet, Meta, Microsoft have all recorded business results outperforming S&P 500 year-to-date (except Tesla).

• Nearly 2/3 investors expect S&P 500 to rebound after earnings reports, the highest since October 2022.

Update on credit crunch in debt and consumer markets

The longer the Fed keeps rates high, the more evident the credit crunch pressure was last week on debt and consumer markets:

Bond yields have risen back to multi-month highs due to the possibility that the Fed will keep base rates high long-term.

• 2-year Treasury yield approaches 5%.

• Meanwhile, demand for global bonds also decreased due to geopolitical tensions in the Middle East: yields on both US Treasuries and German bonds rose sharply.

Market liquidity declines during tax season: money market funds see net outflows

• Taxpayers withdrawing money on Tax Day (Tax Day) caused bank reserves to drop the most in 2 years.

• In addition, money market funds also recorded the largest outflows since 2008 (~112 billion USD in the week to 04/17).

Consumer debt delinquency rate hits all-time high: consumer demand shows signs of slowing

• Q1 credit card delinquency rate at Discover Financial surges from 4.7% to 5.7%, highest since 2008.

  → Consumers are still maintaining record-high spending despite sharp drop in savings.

• However recently, retail chain Express has filed for bankruptcy, planning to close nearly 100 stores due to pressure from consumer demand, causing sales to drop sharply in recent years.

• Read more: Credit crunch for small businesses and recession risk.

Tesla cuts global EV prices

• Tesla simultaneously cuts EV prices globally (in US, China, Germany) due to declining sales + fierce competition in the Chinese market.

  • Tesla stock drops more than 4% in the session.

• Q1 earnings forecast down -40% YoY.

Crypto market: Bitcoin halving proceeds smoothly

• Bitcoin halving completed smoothly last weekend, fluctuating at ~66,000 USD.

• Bitcoin mining companies upgrade infrastructure (such as energy centers) and apply AI to cope with reduced revenue.

• Bitcoin holders in Switzerland are pushing for SNB to hold Bitcoin in central bank reserves by organizing a referendum to change the constitution.

Verizon earnings report: Subscriber numbers improve

• EPS: 1.15 USD (> expected 1.12 USD).

• Revenue: 33 billion USD (< estimate 33.239 billion USD).

• Verizon lost 68,000 monthly postpaid mobile subscribers from January to March - much lower than the 127,000 estimated post-holidays.

Company stock rose 2.5% after the report, but then fell sharply due to mixed good and bad signals from this report.

Events this week:

1. March new home sales - Tuesday

2. Durable Goods Orders - Wednesday

3. Q1/2024 GDP - Thursday

4. March pending home sales - Thursday

5. March PCE inflation - Friday

Some other news:

1. Large language models (LLM), iOS 18 AI features will be processed on-device instead of through the cloud system.

2. Iraq launched 5 missiles targeting a US military base in Syria. The US intercepted them in time before they reached the base.

3. New York Stock Exchange considering 24/7 trading proposal.

4. China imposes 43.5% tariff on propionic acid imports from the US.

   • This chemical is widely used in food, animal feed, pesticides, and the medical field.