/ April 17
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Thursday:
Housing Starts (1.41M exp.)
Initial Jobless Claims (224K exp.)
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Friday:
N/A -
Thursday:
UnitedHealth Group
American Express
Charles Schwab
Snap-On
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Friday:
N/A
Daily Briefing
*Stocks struggled under selling activity, leading the major indices to close sharply lower; the S&P 500 dropped -2.2%, the Nasdaq Composite fell -3.1%, and the Dow Jones Industrial Average declined -1.7%;
*There was a negative bias through the entire session following NVIDIA's (NVDA, -6.9%) announcement that it expects Q1 results to include up to $5.5 billion of charges associated with H20 products due to export restrictions for China; AMD (AMD, -7.4%) also announced an expected impact of $800 million;
*SPY got technically rejected from the lower trendline resistance level, at $544; to the upside, more selling pressure is mounting, as the benchmark ETF will experience the fabled “death cross”, with the 50-DMA crossing below the 200-DMA; while this is entirely inconsequential from our perspective, get ready for some bearish commentary from various pundits during the next week; one thing is for certain - $565 (S1) now becomes a formidable level of resistance, while $508 should offer some support;
*The MACD is still positive, despite yesterday’s significant decline; the signal was coming off such low values, that even a -2.2% drop in SPY did not change the positive outlook;
*Buying in Dark Pools picked up from yesterday within the top S&P 500 stocks (44.8% on average vs 41.96%), but the overall disposition remains bearish for around half of these companies;
*Institutions clearly prefer defensive plays here (COST, UNH), while shunning mega-cap tech risk (META, AAPL) and treasuries (TLT);
*The Gamma Exposure profile for these same assets tells a slightly different story; the options positioning around treasuries stands out, as TLT was sold among dark pools yesterday, while simultaneously being supported by options dealers (in positive Gamma regimes, assets are sold on rallies and bought on dips);
*All defensive companies maintain their positive GEX status - WMT, UNH, JNJ, COST and PG; again, this is a tell-tale sign relating to institutional investor positioning (risk averse);
*Selling increased noticeably in the afternoon following remarks from Fed Chair Powell, who appeared at an event in Chicago, indicating that he doesn't think the Fed will make progress on its dual mandate goals this year and that there isn't a so called "Fed put" in place;
*He also said federal debt is on an unsustainable path, though not yet at a crisis point; he highlighted that running large deficits during a period of full employment is a concern that needs to be addressed; he also pointed out that discretionary domestic spending is both small and declining as a share of the federal budget, and is not the core issue—despite political focus on it;
*His remarks also included the trade war — tariffs currently being floated by the White House go beyond the Fed’s worst-case scenarios and could trigger stagflation;
*Overall, we believe the speech gave traders an excuse to sell, rather than cement a new position from the Fed; to a certain extent, investors knew the Fed is in a tight spot — mr. Powell simply acknowledged it;
*The morning's economic data also contributed to the downside bias despite solid headline numbers in the retail sales report; total retail sales increased 1.4% month-over-month in March (vs consensus 1.3%) following an unrevised 0.2% increase in February; excluding autos, retail sales rose 0.5% month-over-month (vs consensus 0.2%) following an upwardly revised 0.7% increase (from 0.3%) in February; it marked the largest increase in retail sales since January 2023;
*The negative takeaway was related to the belief that last month's data may have been inflated by buying activity ahead of the tariff impacts and may decrease in the future;
*Mega caps and semiconductor shares led the downside charge amid ongoing uncertainty on the tariff front and related to growth concerns; the riskiest sectors of the market registered outsized declines: Tech (XLK, -3.44%), Communications (XLC, -2.7%) and Consumer Discretionary (XLY, -2.47%);
*The only sector in positive territory was Energy (XLE, +0.83%)
*TLT continued its rebound, gaining +0.56% on the day; the “slowing growth” outlook originating with Powell’s speech gave bonds a boost;