May 2, 2024

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Trendsters, did yesterday's doldrums give you a case of the market blues? 

 

After weeks of stomach-churning market moves, the Fed just dished out a surprise: a dovish pivot. This could be the signal that reignites the bullish fire. Are you ready for a potential rebound?

 

The Fed's recent "pivot" signals brighter days might be ahead. After months of aggressive rate hikes, it seems policymakers are taking a gentler approach – fantastic news for those of us eager to snap up stocks on the rebound.

 

Today, we'll unpack why this shift spells opportunity, and why savvy investors might be eyeing long-term plays.  Plus, our Chart of the Day zeroes in on Microsoft, hinting that this tech giant could be set to climb. And fear not, a touch of market humor awaits in our Random Musings section. Let's dive in!

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TODAY'S MARKET MOOD

Moderately Bearish

 

 

MARKET ROUNDUP

The Fed Just Rang the “All Clear” Bell

 

Investors spent months hunkered down, bracing for another rate-hike storm. But yesterday, the Fed shifted gears – and Wall Street breathed a sigh of relief.

 

As expected, rates remained unchanged. However, Powell's comments suggesting "unlikely" further hikes were the surprise that sent a jolt through the markets. This change in tone sparked a brief rally, hinting that the worst of the rate-driven turbulence may be behind us.

 

The Scorecard

  • The S&P 500® index (SPX) fell 17.30 points (0.3%) to 5,018.39; the Dow Jones Industrial Average® ($DJI) gained 87.37 points (0.2%) to 37,903.29; the Nasdaq Composite® ($COMP) lost 52.34 points (0.3%) to 15,605.48.
  • The 10-year Treasury note yield (TNX) dropped more than 5 basis points to 4.63%.
  • The Cboe Volatility Index® (VIX) decreased 0.28 to 15.37.

 

Sector Spotlight: Financials and Energy

 

Financials perked up on the rate-hike pause, with lower rates generally good news for banks. Biotech and communications also rallied.

 

Meanwhile, the energy sector took a hit. Oil prices nosedived, pressured by rising U.S. crude inventories. It seems the energy markets are still grappling with supply and demand uncertainties.

 

Eyes on Tech Earnings

 

Amazon delivered a post-market earnings beat yesterday, boosting its share price. Now all eyes are on Apple, set to release its results after today's closing bell.

 

Navigating the Days Ahead

 

While the Fed's tone shift is a welcome change, don't expect instant smooth sailing. Markets are creatures of habit, and overcoming a rate-hike hangover might take time. It's a good moment for investors to revisit their portfolios and ensure they align with their current risk tolerance and goals.

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MARKET MISCHIEF

When the Fed Talks, Should You Walk?

 

The Fed finally hit the pause button on rate hikes... but is this the all-clear signal, or a clever trap? Let's just say stock markets are like teenagers after curfew – a little defiance can be expected. Remember,  inflation numbers have been a bit like those embarrassing childhood photos your parents love to dig up. Just when you thought they were gone, they're back to haunt you.

 

So, should you go all-in on stocks with a grin, or take a step back with a cautious eye on the inflation reports? Here's a bit of trivia to ponder: the Fed has a history of pausing rate hikes, then later resuming. Talk about playing hard to get!  This time might be different, but remember, markets have a mind of their own. Maybe just test the waters for now, and keep a floatie handy.

CHART OF THE DAY

Microsoft – Is the Tech Giant Set to Rebound?

 

Microsoft (MSFT) has had a rocky few months, but lately, its chart is hinting an intriguing possibility - a potential buying opportunity for long-term players.

 

The stock has been channeling its inner mountaineer, climbing steadily in a well-defined upward trend since January. Yesterday, MSFT dipped its toes near the trend's lower boundary – a level it hasn't tested since September. Interestingly, that previous dip occurred at the important 0.382 Fibonacci retracement level. It now hovers between the 100-day and 200-day moving averages, a technical tug-of-war hinting at a possible shift.

 

The CCI patterns surrounding the two lows show intriguing similarities. Does this suggest a repeat performance, and could MSFT be on the cusp of another surge? While no chart is a crystal ball, long-term investors might want to keep this tech titan on their radar. Patience is key – but that $450 target whispers some upside potential.

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ANALYSIS

The Fed's Surprise Pivot: Your Signal to Buy?

 

After weeks of inflation-induced market jitters, the Fed just flipped the script.  No rate changes were a given, but Powell's comments sparked hope: the rate-hike frenzy might actually be over, and those elusive cuts could still be on the table. It's a signal that could ignite a summer surge.

 

Let's rewind. Back in December, Powell hinted at potential rate cuts, sending stocks flying. Then, stubborn inflation numbers spooked the market, expecting a hawkish turn.  But that didn't happen.  Powell doubled down on his earlier outlook, suggesting the current policy stance is tight enough and cuts remain a possibility.

 

Why this matters: History shows that when the Fed cuts rates during an expansion, stocks take off.  The last four times this combo occurred, we saw rallies ranging from 30% to a whopping 90%!  Could this be the setup for another major upswing?

 

The Takeaway: While not a guarantee, the Fed's pivot offers a compelling reason to reconsider stocks. The time to act could be now, before the rest of the market catches on to the potential summer rally.

MARKET MOVERS

Stocks to Watch

 

AMD (AMD): Despite beating earnings expectations, AMD disappointed investors with its Q2 outlook, leading to a 9% share price dip.

 

CVS Health (CVS): A lackluster earnings report and weak full-year outlook send CVS shares tumbling 17%.

 

Estée Lauder (EL): Investors weren't charmed by the beauty giant's earnings forecast, causing a 13% drop.

 

Kraft Heinz (KHC): Weaker-than-expected Q1 revenue triggered a 6% slide for the food conglomerate.

 

New York Community Bank (NYCB): Despite a hefty quarterly loss, CEO optimism fueled a 28% NYCB rally.

 

Pinterest (PINS): The social platform defied expectations with strong Q1 results, boosting shares by 21%.

 

Pfizer (PFE): Exceeding Q1 forecasts and lifting its profit guidance sent Pfizer climbing 6.1%.

 

SiriusXM (SIRI): A Goldman Sachs upgrade sparked a 3.1% gain for the satellite radio company.

 

Super Micro Computer (SMCI): Disappointing quarterly revenue led to a 14% SMCI decline.

 

Yum Brands (YUM): The fast-food giant faced investor ire after a weak quarterly report, losing 4.2%.

 

Earnings Watch: Oil Giants and Big Pharma

 

Earnings season continues with reports from oil heavyweights ConocoPhillips (COP) and Shell (SHEL), plus pharmaceutical leaders Amgen (AMGN), Moderna (MRNA), and Novo Nordisk (NVO).

 

Jobs Report on the Horizon

 

After a volatile month for stocks, Friday's April Jobs Report could be the next big market catalyst. The Fed's recent dovish turn hasn't fully calmed investor nerves – will the upcoming jobs data tell a different story?

MARKET MUSINGS & TIME CAPSULE

 

Random Musings

 

Markets, like history, have a tendency to rhyme rather than repeat. Today's disappointing report card can be tomorrow's buying opportunity... if you read the footnotes.

 

A company's vision statement can be as grand as historical fiction, or as concrete as a financial forecast. The trick is discerning which is which.

 

Investing is a balancing act between the bold ambition of explorers and the cautious charting of navigators.

 

Diversification isn't just about asset classes; it's about diversifying the time horizons of your investments. Some holdings are for weathering storms, others for riding the waves.

 

Like a skilled author, successful companies know the value of a good plot twist to keep their audience engaged.

 

On this day in history, May 2

 

May 2, 1933: The Loch Ness Monster makes its first documented appearance in the modern era. Perhaps today, investors should be on the lookout for elusive market 'monsters'... the kind that look like bargains but ultimately prove mythical.

 

May 2, 1945: The fall of Berlin signals the end of World War II in Europe.  Wars end, market cycles turn –  reconstruction periods are often ripe with opportunity.

 

May 2, 1955: Tennessee Williams' famed play, "Cat on a Hot Tin Roof" premieres on Broadway.  A hot market, like a hot tin roof, can lead to hasty, ill-considered decisions.

 

May 2, 1863: Confederate General Stonewall Jackson is mortally wounded by friendly fire. Even the most skilled leaders face the dangers of unforeseen risks.

 

May 2, 1519: Leonardo da Vinci dies, leaving a legacy of innovation across art, science, and engineering.  Perhaps this anniversary underscores the enduring value of multidisciplinary thinking for successful investing.

THE FINAL LEDGER

Market Busta Rhymes

 

"History doesn't repeat itself, but it often rhymes." This quote, often attributed to Mark Twain, seems relevant as we watch companies rise and fall, markets dance between optimism and fear, and economic cycles rotate.

 

But perhaps a lesser-known gem from economist John Kenneth Galbraith provides a lighthearted twist:

 

"The only function of economic forecasting is to make astrology look respectable."

 

Remember, even the most sophisticated analysis can't fully predict the twists and turns of the market. Sometimes, the best strategy is to trust your well-researched instincts, tune out the noise, and focus on the long game.

Disclaimer:

 

Trading foreign exchange, stocks, options, or futures on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience.

 

This newsletter provides general information that does not take into account your objectives, financial situation or needs. The content of this newsletter or our website must not be construed as personal advice. COE Media is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation.

 

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