The Long Term Investor

Next week.....will be a BANNER WEEK. Probably the last FED rate hike of the year.....and.....APPLE earnings.

Fed decision, Apple earnings, April jobs report: What to know this week

https://finance.yahoo.com/news/fed-...-report-what-to-know-this-week-144601325.html

(BOLD is my opinion OR what i consider important content)

"Another jam-packed week awaits investors as May gets underway with key announcements from the Federal Reserve, Apple (AAPL), and the April jobs report all on the docket.

Before the opening bell on Monday morning, however, investors are expected to have resolution on the US government's efforts to rescue troubled bank First Republic (FRC), with Yahoo Finance's David Hollerith reporting Saturday that a deadline of 12:00 p.m. ET Sunday had been set for offers to buy the bank.

Yahoo Finance learned JPMorgan Chase (JPM) and Bank of America (BAC), the nation's two largest banks, are among those weighing bids following a government takeover of First Republic.

On Wednesday afternoon, the Fed is set to announce its latest policy decision, which investors expect will see the central bank raise interest rates by another 0.25%, as it continues to fight stubborn inflation well above its 2% goal. On Thursday after the closing bell, Apple will release its latest quarterly earnings. And before the market open on Friday, the US government will release the April jobs report.

Elsewhere on the schedule, key updates on activity in the manufacturing and services sectors of the economy, as well as the latest data on job openings, highlight the economic side of things.

On the earnings front, results from AMD (AMD), Starbucks (SBUX), Ford (F), Pfizer (PFE), and Uber (UBER) will highlight the schedule.

Also, Yahoo Finance will be live this week at the Milken Institute's Global Conference, where insights and reaction from CEOs and top minds will proliferate throughout the week.

Markets begin the new month after a resilient close to April's trading. GDP data out Thursday disappointed and results from Amazon (AMZN) late Thursday cast some doubt over the tech sector's rebound. Still, all three major averages pushed higher for the week with the tech-heavy Nasdaq rising 1.3%.

Year-to-date, the Nasdaq is up nearly 17% while the S&P 500 is up closer to 8.5% and the Dow Jones Industrial Average has gained just less than 3%.

The next major test for markets awaits Wednesday afternoon.

The Fed will announce its latest policy decision at 2 p.m. ET, with Fed Chair Jay Powell set to hold a press conference a half hour later.

According to data from the CME Group, markets are placing an 85% chance on the Fed raising rates by 0.25% on Wednesday.

A 0.25% hike in interest rates would push the Fed’s benchmark rate to a range of 5%-5.25%. The benchmark rate hasn’t breached 5% since July 2007. With no new economic projections set for release, Powell's comments will be in focus for investors.

"We believe the Committee will try to convey that while a June rate hike isn’t the incumbent scenario, the next move is more likely up than down," economists at JPMorgan wrote in a note to clients last week.

"Odds are rising that the May hike will be the final hike of this tightening cycle," wrote Ryan Sweet, chief US economist at Oxford Economics, in a note to clients Friday. "When the Fed increases interest rates, it exposes any fissures in either the financial markets or the economy. For instance, the tightening in monetary policy has contributed to the recent stress in the banking system."

Elsewhere on the economic data front, the April jobs report is expected to show 180,000 nonfarm payroll jobs were added to the US economy last month with the unemployment rate ticking slightly higher to 3.6%, according to data from Bloomberg. In March, the U.S. economy added 236,000 jobs while the unemployment rate fell.

The report will be closely watched for any signs of a softening labor market, which might influence the Fed's June decision on rate hikes.

The Fed's aggressive rate hike path has tightened credit markets and raised concern over the health of the regional banking sector in the wake of the Silicon Valley Bank collapse.

First Republic shares sank nearly 75% last week as the lender revealed it lost $100 billion in deposits during the March banking turmoil.

Despite already receiving $30 billion from a group of the largest banks in the US, First Republic is once again searching for a rescue, with resolution expected before the markets open in the US on Monday.

On the earnings side, Apple's quarterly results out Thursday will provide another look into how big tech is holding up amid fears of an economic slowdown.

Investors will focus on whether Apple is seeing slowdown in spending similar to what was called out by Amazon last week. And, of course, with Apple set to release new VR headsets later this year, investors will inquire — what’s the AI strategy?

Earnings season has broadly offered investors an upside surprise compared to Wall Street expectation.

S&P 500 companies are beating analysts estimates at the highest rate since the fourth quarter of 2021, according to FactSet. With just more than half of S&P 500 companies already reporting results, 79% of companies have reported earnings above estimates. That’s above both the five- and ten-year averages.

But as SoFi’s head of investment Liz Young pointed out to Yahoo Finance Live, those beats come against "unimpressive" expectations that have been revised downward this year.

"Margins are contracting," Young said. "And a lot of the story coming into this [earnings season] was that margins were so fat, that they could absorb some of these cost pressures. But now we're seeing, over time, a lowering of those margins and narrowing of those margins. So there's not going to be as much breathing room for companies."

Last week, big tech earnings from Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) catalyzed a market rally as results showed resilience despite a looming slowdown. That sentiment ultimately outweighed the gloomier outlook Amazon offered relative to its fellow tech titans.

Still, analysts argue this better-than-feared picture poses a significant challenge to those remaining bearish on the sector that punished most harshly amid 2022's aggressive rate hikes.

"Tech investors went into this week with some white knuckles and heartburn anticipating Big Tech stalwart earnings of Microsoft, Alphabet, Meta, Intel, and Amazon and now instead head into the weekend drinking a relaxing cappuccino with much better than feared tech earnings," wrote Wedbush's Dan Ives in a note published Saturday.

"The narrative for the tech sector is becoming clearer and clearer despite many tech haters yelling fire in a crowded theater heading into [first quarter] earnings."

MY COMMENT

Hopefully......we will now be free of the FED rate hikes after this week. A long awaited event.

APPLE will be the last of the TECH TITANS to report (not including NVDA).

 

That is a great post above Smokie. It really tells the story of the market strength. It also shows how broad the rally has been......it is definitely NOT a tech based rally. In fact it shows that the tech stocks have been DISRESPECTED and have a HUGE upside to rally more into the year.

 

You know as well as I have been doing this year to date.......over +19% at the moment.....I STILL have a long way to go to get back to my portfolio high.

I need another......+22%......from here to get back to my high in my various accounts. The good news.....I guess.....I still have plenty of UPSIDE.

This is partially a function of the FACT that it takes less to go down than come back up. For example if I start with $100,000 and lose 30%.....I am at $70,000. To get back to my $100,000 from $70,000....is going to take a gain of 42.85%.

 

Open today seems about typical for the markets lately. No clear cut direction yet....again normal lately for the morning markets.

BUT......YEA.....it is FED week. Probably the last rate hike this week. A banner day for investors.

I notice that JP Morgan took over First Republic. Nice to get that story out of the news now.

 

I like this little article:

US Q1 GDP Better Than Most Appreciate

https://www.fisherinvestments.com/e...mentary/us-q1-gdp-better-than-most-appreciate

(BOLD is my opinion OR what I consider important content)

Strong private sector demand belies headline slowdown.

"US Q1 GDP’s 1.1% annualized growth missed consensus expectations for around 2%. Pundits widely proclaim this slowdown is—at long last—a prelude to the recession they have expected for quarter after quarter now. But a look under the hood reveals underappreciated private sector resilience—the very fuel we think has propelled stocks off of October’s low. While these data are all backward looking, it shows sentiment surrounding economic growth remains excessively dire, which we find is often the case as bull markets begin.

Overall GDP growth rates frequently obscure moving parts below the surface—movement that can tell you much more about the economy than the headline number alone. Hence, we think it helps to look at GDP’s underlying components to put growth trends in context. As Exhibit 1 shows, inventory change (yellow) was the main detractor in Q1, lopping a large -2.3 percentage points (ppts) off headline GDP growth—the most since Q1 2021’s drawdown as goods consumption surged. For some broader perspective, consider: In the 120 quarters from Q1 1990 to Q4 2019—the eve of the pandemic—inventory change detracted more than this just 4 times.[ii]

Exhibit 1: GDP’s Combined Private Sector Demand Components Accelerated




Source: US Bureau of Economic Analysis (BEA), as of 4/27/2023. Real GDP and components, Q1 2022 – Q1 2023.

Changes in inventories are open to interpretation—they aren’t automatically negative. Inventories can fall because businesses can’t keep up with demand or because they might be anticipating less demand ahead. In our view, given widespread recession expectations, companies appear to be cutting fat this time around, getting lean and mean to weather potentially harder times ahead.

But there is an upside to this: Anticipation is mitigation, as Fisher Investments founder and Executive Chairman Ken Fisher says. Preemptive stockpile reduction would mean the economy is working off excess before an overall economic contraction, sapping much of a recession’s purpose—wringing out bloat. Such advanced preparation suggests that if we get a recession at all, it should be quite mild. Also note, the big inventory decline in Q2 last year caused headline GDP to dip negative after Q1 2022’s trade-driven decline—yet recession didn’t ensue. The reason: GDP’s main private sector demand components were positive throughout.

Go back to Exhibit 1. We consider consumer spending (dark green), business investment (light green) and residential investment (grey) better measures of private-sector activity in GDP—together, they best approximate the economy’s core drivers. Inventory change, net exports (exports minus imports, red) and government spending (blue) feed into GDP, but they tend to be less indicative of economic trends. For instance, more government spending isn’t always good.

As for the other components, only residential investment fell. But this isn’t a new trend. It has tanked over the past year as new home sales shriveled with mortgage rates’ spike. Note, however, even with big detractions in Q2 – Q4 2022, consumer spending and business investment (green bars) offset it, though barely in Q4. In Q1, residential investment shrank for an eighth straight quarter, but with mortgage rates easing—and new home sales picking up—it sliced off only -0.2 ppt. Housing markets seem to be stabilizing.

Meanwhile, consumer spending accelerated strongly in Q1 to 3.7% annualized from Q4’s 1.0%, contributing 2.5 ppts to headline GDP—the most since Q2 2021’s reopening-driven consumption surge. Notably, goods expenditures grew for the first time after declining slightly for four consecutive quarters. Services spending also continued chugging along as it has since the last recession ended in Q2 2020—and looks likely to keep going in Q2 2023 as well.

Q1 business investment was more mixed. Equipment spending tumbled -7.3% annualized in Q1, worsening from Q4’s -3.5% decline. This wasn’t too surprising, as monthly reports on capital goods orders and shipments implied a drop. Interestingly, though, equipment is no longer the biggest category within business investment. Exhibit 2 shows intellectual property products—think: software, R&D, media and entertainment—overtook equipment in Q4 last year for the first time (outside 2020’s lockdown recession). They kept climbing in Q1.

Exhibit 2: Software Overtaking Hardware




Source: Federal Reserve Bank of St. Louis, as of 4/27/2023. Real nonresidential investment in intellectual property products, equipment and structures, Q1 2002 – Q1 2023.

Although it is too early to tell whether a further pullback in equipment leads to a down cycle, intellectual property investment’s continuing rise points to a progressively bigger counterweight. It isn’t a secret digital products’ and services’ share of GDP is growing. This has been a long-running trend in the economy’s evolution. People have been calling it the Information Age for decades, after all. Intellectual property investment’s ascendance is just one manifestation of that.

All of this is, of course, backward-looking. It doesn’t preclude a recession in the future, even if it means that the US wasn’t in one last quarter—despite prevalent fears. But even if we do get GDP contractions ahead, it is worth remembering a simple point: Markets look forward. They pre-price widely known fears and forecasts. The ubiquitous recession expectations that seem to be continually shifting six months forward when GDP data undercut them suggest that, if we get one any time soon, it isn’t likely to shock stocks.

MY COMMENT

For more than a year we have been in a push for companies to work off excess inventory. It has now finally happened......and of course......now that is the big problem for stocks and the economy.

I agree with the above that the components of GDP that are positive will outweigh the factors that are...."supposedly"....negative. In fact some of the supposedly negative factors.....like inventory....are actually a positive for the economy and business.

Time will eventually give us the answer whether or not we are going to see a recession this year. We might.....but I still dont see it right now out in the real world.

 

The markets so far.

Stocks mixed as JPMorgan Chase takes over First Republic

https://finance.yahoo.com/news/stoc...public-stock-market-news-today-135107658.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks were mixed at the open on Monday as Wall Street digests JPMorgan Chase’s takeover of regional lender First Republic Bank.

The S&P 500 (^GSPC) fell below the flatline, while the Dow Jones Industrial Average (^DJI) added by 0.17%. The technology-heavy Nasdaq Composite (^IXIC) slide by 0.15%.

Government bonds rose. The yield on the 10-year note added to 3.47%, while the rate-sensitive two-year note yield rose to 3.84% Monday morning. On the commodities front, Gold (GC=F) pushes back above $2,000.

Regulators seized First Republic (FRC) early on Monday and sold most of the bank's operations to JPMorgan in the largest bank failure since the 2008 financial crisis.

A number of banks, including JPMorgan and PNC, had submitted bids on Sunday to the Federal Deposit Insurance Corporation to acquire the embattled bank.

In other news, interest rates will be in the spotlight this week as the Federal Reserve's policy-making committee meeting kicks off on May 2. Markets put chances of a quarter-point hike at 86% as of Monday morning.

Additionally, data releases on construction spending, factory orders, jobless claims are on deck this week, and the big headliner at the end of the week will be the April jobs report. All the economic data is expected to lead to another volatile week for the Treasury yields.

Meanwhile, most of the big tech earnings are now in, and Wall Street is closely watching given how much the industry has bolstered the market this year. The question is will the rally continue. Apple’s quarterly results are next on deck for Thursday.

Also, results from AMD (AMD), Starbucks (SBUX), Ford (F), Pfizer (PFE), and Uber (UBER) will highlight the calendar.

In single-stock moves, shares of SoFi Technologies, Inc. (SOFI) fell 4% in Monday morning after the financial-services company topped earnings expectations for its quarter while seeing continued momentum in personal lending."

MY COMMENT

Not much going on today. Most of what will happen this week will occur in the second half of the week. So we might be in for a mild, lingering, market for a few days. Fine with me........just part of the normal market process as the short term eventually becomes the long term.

 

I really have no interest in the First Republic drama......although....it is over now anyway. If you are interested in that topic....here you go:

UPDATE 6-JPMorgan snaps up First Republic's assets in U.S. auction

https://finance.yahoo.com/news/1-u-regulator-seizes-first-074632675.html

MY COMMENT

After all the flailing around and all the wringing of hands......we end up exactly how you would expect. It is time to let the bank story die out. The banks that triggered all this stuff and ended up failing were ALL niche banks, focused on the wealthy, with poor management that lost track of actually running the business. Basically these banks were patsies and were used for as long as they were useful and than dumped by their shareholders and wealthy depositors.

From what I am seeing today this does seem to be the dominant story of the day. That does not make it.....relevant to anything.

 

Looks like some of the smaller EV companies are having a hard time. there is going to be a HUGE sort-out in this business. I never could understand the amount of attention that there companies got in the media.

Lordstown Motors warns of bankruptcy after Foxconn threatens to walk away from crucial funding deal

https://www.cnbc.com/2023/05/01/lor...tcy-warning-foxconn-funding-deal-falters.html

Rivian’s Troubles Don’t End at a 93% Wipeout

https://finance.yahoo.com/news/rivian-troubles-don-t-end-093000700.html

MY COMMENT

I just dont see it.....all the attention given to these very minor EV companies. At the same time the one company that is successful....and actually profitable......TSLA......is now demonized and bad-mouthed.

This is exactly why I dont invest in unproven companies.....MOST of them never make it. I want to see the beginnings of DOMINANCE before i put my money into a business.

 

Since there is NOTHING going on today.....I guess I will just sit and wait. Looks like a very BORING day for the markets.

AND......I continue to be fully invested for the long term as usual.

 

LOL....I just looked at my account. A surprise small gain so far. I was sure I would be negative.

I only have four of ten stocks UP at the moment....but they are pulling my results into the green. Those Up stocks are.....NKE, NVDA, HON, and GOOGL.

 

With about 45 minutes to go....today is still a wasted day. Nothing is going on with the averages at all. We have been lingering all day. I have been bouncing back and forth between a small gain and a small loss.

It is like everyone submitted their First Republic article today and than took the rest of the day off.

 

YES......a pretty meaningless day for me as well. I had a slight loss today......seven of ten stocks down at the close. My three winners were.....NKE, NVDA, and HON. I also got beat by the SP500 by 0.07%.

Obviously the markets are waiting for the FED mid week. I think people are just exhausted after the last week or two, especially waiting for the big tech earnings. There is so much contradictory information out there right now many people dont know what to think.

Lucky for me....I dont have to think....I just have to sit and wait for my accounts to simply work through all the day to day stuff and achieve the long term.

 

HERE is the close today.

Stocks muted as JPMorgan Chase takes over First Republic

https://finance.yahoo.com/news/stock-market-news-today-live-updates-may-1-200125510.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks were muted on Monday as Wall Street digested JPMorgan Chase’s takeover of regional lender First Republic Bank.

At the close, the S&P 500 (^GSPC) was little changed, while the Dow Jones Industrial Average (^DJI) slipped by 0.14%. The technology-heavy Nasdaq Composite (^IXIC) dipped by 0.11%.

Regulators seized First Republic (FRC) early on Monday and sold most of the bank's operations to JPMorgan in the largest bank failure since the 2008 financial crisis. JPMorgan Chase CEO Jamie Dimon said that the seizure of First Republic puts to rest a period of panic over the banking system.

"This part of the crisis is over," he told analysts on a Monday conference call.

A number of banks, including JPMorgan and PNC, had submitted bids on Sunday to the Federal Deposit Insurance Corporation to acquire the embattled bank.

Shares JPMorgan Chase & Co. (JPM) rose over 2% on Monday.

In other news, interest rates will be in the spotlight this week as the Federal Reserve's policy-making committee meeting kicks off on May 2. Markets put chances of a quarter-point hike at 86% as of Monday morning.

Additionally, economic data out on Monday showed that factory activity in the U.S. shrank for the sixth consecutive month in April as companies continued to slowdown amid demand weakness. The Institute for Supply Management’s gauge of factory activity climbed to 47.1 from 46.3, and above economists estimates of 46.8 for the month. A reading below 50 indicates that manufacturing in the U.S. is shrinking.

Jobless claims are on deck this week, and the big headliner at the end of the week will be the April jobs report. The economic data is expected to lead to another volatile week for Treasury yields.

On Monday, the yield on the 10-year note rose to 3.59%, while the rate-sensitive two-year note yield increased to 4.12%. On the commodities front, Gold (GC=F) pushes back below $2,000, reversing gains from earlier in the session.

Meanwhile, most of the big tech earnings are now in, and Wall Street is closely watching given how much the industry has bolstered the market this year. The question is will the rally continue. Apple’s quarterly results are next on deck for Thursday.

Also, results from AMD (AMD), Starbucks (SBUX), Ford (F), Pfizer (PFE), and Uber (UBER) will highlight the calendar.

In single-stock moves, shares of NVIDIA Corporation (NVDA) gained more than 4% following reports of Softbank Group Corp.'s chip maker Arm Ltd. filed an application with regulators for an initial public offering. NVIDIA dumped its plans to acquire Arm in 2022 amid regulatory opposition.

Shares of Coinbase Global, Inc. (COIN) sank more than 6% after analysts at Needham cut its price target to $70 a share from $73.

SoFi Technologies, Inc. (SOFI) shares fell more than 12% Monday after the financial-services company topped earnings expectations for its quarter while seeing continued momentum in personal lending."

MY COMMENT

Perhaps tomorrow will have more BUZZZZZZ for the short term markets. I note that JP Morgan went up nicely today. No doubt the markets like the fact that they have picked up First Republic Bank........in the usual sweetheart deal. They seem to be the big bank of choice when it comes to government bailout deals. They seem to always protest banking failures....but....in the end they end up with all the goodies.