Stocks opened sharply lower on Thursday as investors digested the disappoint earnings announcement from Meta, a large capital gains tax increase proposal from President Biden, and a GDP report that came in weaker than expected but also showed some heightened inflation concerns. Most of the indices closed in negative territory but technically it may be considered a positive reversal day. The Dow was down over 700-points in early trading and it cut that in half by the close, and the other indices actually did even better. Bonds were down on the inflation concern - yields up, but the weak GDP sent the dollar lower.
 |
|
Daily TSP Funds Return
|
It's another one of those days where what happened yesterday is rear-view mirror data because since the market close we saw major earnings releases and it was an opposite reaction to Meta's post earnings sell off.
Intel was down 9% after hours after providing weak guidance, but they are no longer the market mover they once were despite being one of the Dow 30 stocks. It is lowest market cap weighted stock in the Dow 30. On the other hand Microsoft is also a Dow stock but it's the 3rd heaviest weighted stock in the Dow so the 4.5% gain after hours (as of this writing) should give the Dow a boost today.
Alphabet also impressed investors with earnings and it is up nearly 14% after hours, so the Nasdaq is really celebrating after hours.
Here is the QQQ, the Nasdaq 100 ETF, and while it was down 0.48% yesterday after the Meta debacle, it was up 1.4% after hours after the release of those tech earnings.
So again, the charts will look a lot different if we compare the closing process vs. what has happened since Thursday's closing bell. Here is the SPY, which is the S&P 500 ETF. I drew in what was going on after hours as it was trading up near 507.70 after closing at 503.49.
The GDP report came out yesterday before the opening bell and it shook thing up as well, but we actually saw different reactions from bond yields and the dollar. The 10-year Treasury Yield was up, not because GDP was weaker than expected, but because within the report the personal consumption expenditures price index rose at a 3.4% annualized pace for the quarter, its biggest gain in a year. This is a key inflation data point for the Federal Reserve.
But the dollar was down because of the weaker than expected GDP, which came in at +1.6%, well below the expected +2.4% gain. The problem here is that bull flag on the UUP chart.
We all know about the key PCE Prices and the Personal Spending reports coming out before the opening bell today, so don't count your chickens yet. We will also get the Michigan Consumer Sentiment Report.
Next week it's more Magnificent 7 earnings, the April Jobs report on Friday, and an FOMC meeting on Wednesday but no interest rate changes are expected.
The S&P 500 (C-fund) was down sharply on Thursday but it closed well off the lows and back within that blue descending channel, which had broken earlier in the day. The after hours action should help improve the chart, as long as the PCE Prices and Personal Spending Reports don't come in too hot and trump the strong earnings reports.
DWCPF (S-fund) lost a half of a percent, but again that was well off the lows and we go into Friday with a positive reversal formation. The higher yields don't help here but the small caps didn't lag the S&P by too much yesterday.
EFA (I-fund) came in with the same size losses as the other TSP stock funds despite a weaker dollar. The 76 area looks like the make or break level and if there is some kind of washout below that line to take out the stops, the key will be where it closes - above or below the orange line. The 50-day EMA in purple is the next resistance level but if the futures hold up into the opening bell, EFA could gap up above it.
BND (Bonds / F-fund) had formed a bearish looking flag and yesterday that flag broke down. That's not a good sign for the PCE data today as it may be trying to tell us which way that report is going to push bonds. It needs to get back above that broken support line of the flag.
Thanks so much for reading! Have a great weekend!
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Daily Market Commentary Archives
To get weekly or daily notifications when we post new commentary, sign up HERE.
Like what you're seeing on TSP Talk? Why not Tell a Friend about us? We'd really appreciate it, and they may too.
Thanks!
