Welcome to your weekly trading preview! We added a Table of Contents to help you jump around:
This Week's Trading Calendar
Click the calendar image to enlarge it, then scroll down to see what's coming down the pipe the week of May 8:
The Week in Review...
What a week! We survived:
- Big earnings from Apple (AAPL), AMD (AMD), Starbucks (SBUX), Shopify (SHOP), and Qualcomm (QCOM)
- The FOMC and ECB Rate Decisions
- The Nonfarm Payrolls Report
- The regional bank collapse
And with Apple leading a big Friday surge, our big 4 horsemen ETFs recovered some of the midweek damage, with the QQQ's even getting in the green for the week:
Year-to-date, the QQQ's are still crushing the other big ETFs thanks to huge moves in names like Apple, Nvidia (NVDA), and Microsoft (MSFT).
The QQQ's also have no exposure to banks or energy, which have underperformed.
So it's been smooth sailing in 2023:
Now let's look forward to next week.
By the way, Scott Redler is hosting a free week in the Alpha Team VTF®, and he can walk you through all the events we'll talk about.
It's Inflation Time!
We're walking into a big week for inflation... and it's worldwide thing.
Yes, the US has CPI on Wednesday and PPI on Thursday.
Traders will be looking for evidence inflation is breaking down to support expectations that the Fed will pause after this past week's 25 bps rate hike.
The CME FedWatch Tool implies a 96.1% probability that the Fed does not hike at the June 14 Feed meeting.
FedWatch also shows the market is pricing in a 38.1% chance of a 25 bps cut in July.
We'll see if the CPI/PPI numbers sway these expectations.
And overseas, we get:
- Wednesday: Germany CPI, China CPI & PPI
- Thursday: New Zealand Inflation Expectations
- Friday: France, Spain, Brazil, and Russia CPI
England in particular has a busy economic calendar next week with:
- Monday: Retail Sales
- Tuesday: House Price Index
- Thursday: Bank of England Rate Decision & Meeting Minutes, Industrial Production
- Friday: GDP, Manufacturing Production
Earnings Season Slows Down But It's Not Over
85% of the S&P 500 have reported earnings (more on this below), but we've still got some notable reports hitting the tape this week.
Several consumer names report, including PayPal (PYPL) on Monday, AirBnB (ABNB) and UnderArmour (UAA) Tuesday, and Disney (DIS) on Wednesday.
Even with high inflation, The consumer seems to have unlimited money for things they desire (like iPhones and McDonald's fries), so it will be interesting to see if these companies show strength or strain.
AirBnB and Disney will also give us reads into travel demand.
Electric vehicle enthusiasts will be watching Lucid Group (LCID) on Monday and Rivian Automotive (RIVN) on Tuesday.
Tesla (TSLA) got slapped on earnings in April because of margin pressure, and Ford (F) is losing buckets of money in its EV business. We'll find out if Lucid and Rivian do any better.
And don't forget about Carl Icahn! His company Icahn Enterprises LP (IEP) moved its report to Wednesday, May 10.
IEP got smashed this week after Hindeburg Researched accused Icahn of accounting irregularities.
Look at this rollercoaster of a chart -- we're all eager to see how this one turns out:
So How Has Earnings Season Been?
According to FactSet... not bad -- at least relative to expecations.
85% of S&P 500 companies have reported, and so far:
- 79% of companies beat EPS estimates
- 75% of companies have beaten sales estimates.
- Earnings have declined by -2.2% vs. expectations for a -6.7% decline
Nobody's celebrating a -2.2% decline in earnings but it's not as bad as -6.7%.
Remember, the market's about expectations, and expectations were too low coming into earnings season.
Speaking of low expectations...
Traders Are in a Rotten Mood
Investors and traders remain remarkably bearish despite the market's stability.
According to AAII, just 24.1% of investors are bullish.
That's well below the 37.5% long-term average.
Plus, AAII said "bullish sentiment is unusually low for the 50th time out of the past 70 weeks," and "bearish sentiment is still above its historical average of 31.0% for the 71st time out of the past 76 weeks."
This is despite the SPY's 7.8% gain in 2023 and the QQQ's 21.2% rally.
Now let's dig below the surface to see what's been working this year:
A Look at Sector Performance in 2023:
2023's been a bizarre year.
It's almost like we're risk on and risk off at the same time.
On the risk on side:
Housing (ITB) is leading the market despite a slowdown in housing,
Tech (XLK, SMH) is booming and ARKK rebounded from a messy 2022.
And on risk off, gold (GLD) is outperforming and Treasuries (TLT) are up.
Who could have imagined both ARKK and gold outperforming?
Factoid of the Week
According to Bespoke Investment Group, nonfarm payrolls have exceeded economists' estimates for 13 straight months.
This chart is bonkers.
— Bespoke (@bespokeinvest) May 5, 2023
Non Farm Payrolls has now exceeded expectations for a record 13 straight months. https://t.co/UaURbFdG6a pic.twitter.com/4urENerxmy
Maybe we should stop trusting economists' long-term predictions?
After all, they can't predict anything even one month out...
Get to Know Sami Abusaad
How did Sami achieve greatness as a trader?
Find out here:
