News

Monday, April 22nd, 2024

Market indices got the respite they were looking for today. After a woeful month-to-date following new all-time highs at the end of March, it was a welcome moment of relief. This was also based on no major economic reports out today, and those Q1 earnings reports out early were less than market-shaking. The Dow climbed +253 points, +0.67% on the session, while the S&P 500 gained +0.87% and the Nasdaq +1.11%. The small-cap Russell 2000 also was up +1.06% in regular trading.

While the Dow has fallen over a thousand points over the past month, it is the index closest to rebounding back to month-earlier levels. Market participants had demonstrated composure when, early on in 2024, it became clear that the five or six interest rate cuts they had been hoping for would not be coming to pass. What they found much harder to swallow was the implication that hotter CPI levels were going to keep that first Fed rate cut at arm’s length for the foreseeable future.

It’s a somewhat ironic turn of events. The day markets came crashing off their bullish trajectories, a week ago Friday, was also the unofficial start of Q1 earnings season, and the big banks reporting that morning — JPMorgan JPM, Citigroup C and Wells Fargo WFC — all made strong showings for the first quarter of the year. Although a strengthening economy leading to a petering-out stock market isn’t really ironic” anymore — it’s really just a continuation of “good news is bad news” we’ve been seeing since the Great Reopening started gaining traction more than two years ago.

Speaking of Q1 earnings, software developer Cadence Design Systems CDNS released its report after today’s close. Earnings of $1.17 per share outpaced expectations by 4 cents, though down from the $1.29 per share reported a year ago. Revenues were in-line at $1.01 billion. But shares are selling off more than -8% on the news in the after-market, as both earnings and sales guidance, while in-line for the full year, have been reduced notably for the coming quarter — by 20 cents per share from the Zacks consensus.

The so-called Magnificent 7 stocks begin reporting this week, starting with Tesla TSLA after tomorrow’s closing bell. However, the EV leader’s performance has been anything but “magnificent” year to date: it’s down -42%. What’s more, the company is anticipated to post -40% earnings growth year over year (though +11.5% on the top line) on expected margin contraction based on price cuts to its Models 3 and Y. There are also current questions regarding possible delays to its Model 2.

Reports from “Mag 7” companies that have performing well begin Wednesday. After the close that day, Meta Platforms META reports its Q1 figures, with revenues expected to come in +26.5% and earnings per share up a whopping +63.6%. Meta is also considered a major player in the A.I. space, and Wednesday’s conference call will likely enhance investors’ understanding of progress in that realm. The social media staple is riding a five-quarter positive earnings surprise into Hump Day’s report.
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