US Market Technicals Ahead (19 Apr – 23 Apr 2021)Investors will look for further confirmation of the private sector’s recovery from the pandemic as the earnings season gathers pace, with dozens of companies from a wide range of industries will report quarterly results this week. So far with one week in, companies are beating earnings estimates by a wide margin of more than 84%, according to Refinitiv.
Meanwhile, U.S. economic data will remain in focus as investors watch for further signals on the strength of the economy, with the latest reports on home sales and manufacturing activity topping the agenda.
Elsewhere, in Europe, markets are keeping an eye on the European Central Bank’s monetary policy meeting for further guidance on interest rates and stimulus.
Here is what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) increased 1.41% (+58.3 points) to another record close, extending its weekly rally into its 4th consecutive session. The newly established all time high is now at 4,191 level for $SPX. US 10-year rates extended 5-week lows of 1.566%, despite strong inflation and employment data last week. In addition, housing starts rose to the highest level since 2006 last week, pointing to a strong rebound in both consumer spending and the jobs market.
The previously highlighted Bearish Divergence of $SPX remains valid, as sessional volume remains below its 50 days average range for the past week without any committed buying pressure reflected in this rally. A price retracement upon a eutrophic rally beyond the structure of a technical trend channel is always imminent on such scenario. However, the hypothesis of a short term correction for $SPX would remain healthy and strong for the bullish sentiment of the index.
The immediate support to watch for $SPX is now at 4,060 level, a break of the two weeks low.
Earnings Step Up into High Gear
There are about 80 S&P 500 companies reporting earnings in the week ahead, including 10 Dow stocks, in what will be the first big week of the first quarter earnings season.
In addition, this week’s earnings calendar also includes high-profile names like Coca-Cola ($KO), Johnson & Johnson) ($NJ), Procter & Gamble ($PG), Intel ($INTC), and IBM ($IBM), Snap ($SNAP), AT&T ($T), Verizon ($VZ), Lockheed Martin ($LMT), Halliburton ($HAL), Honeywell ($HON), and American Express ($AXP)
Most of the focus will be on Netflix ($NFLX), which is due to report its latest financial results after the closing bell on Tuesday. The streaming giant is forecast to report adjusted earnings per share (EPS) of $2.97 on revenue of $7.14 billion, according to estimates. NFLX shares hit a record high on Jan. 20, right after Q4 results, but has since slipped back. Options markets are pricing in a post-earnings move of 7% in the stock.
Earnings from battered airlines American Airlines ($AAL), United Airlines ($UAL), and Southwest Airlines ($:LUV) are also on the docket.
Flash U.S. PMIs
IHS Markit’s composite flash U.S. Purchasing Managers’ Index (PMI) for April is due on Friday, amid expectations for an increase to 59.9 from a reading of 59.7 in March The index, which measures the combined output of both the manufacturing and service sectors, is seen as a good guide to overall economic health.
In addition, this week’s rather light economic calendar also features the latest data on initial jobless claims, which fell to a new pre-pandemic low last week.
European Central Bank Policy Meeting
The European Central Bank is all but certain to keep interest rates at their current record low levels at the conclusion of its monetary policy meeting on Thursday. President Christine Lagarde will hold a closely watched press conference 45 minutes after the rate announcement as investors seek further clues on central bank’s future pace of bond purchases.
The ECB has boosted its bond buying program to prevent a rise in borrowing costs from derailing the region’s economy, however recent signs of a swift recovery could raise questions over when it will start to withdraw support.
Us500analysis
US Market Technicals Ahead (12 Apr – 16 Apr 2021)Price volatility is expected to pick up this week. First-quarter earnings season gets underway with updates expected from major banks such as JPMorgan Chase ($JPM), Citigroup ($C) and Wells Fargo ($WFC). While results are expected to be fairly strong, most will be watching to see what companies say about the outlook for the current quarter and the rest of the year, given expectations for faster economic growth.
On the economic data front, U.S. consumer price inflation (Tuesday) and retail sales (Thursday) will be the biggest data points of the week.
Global financial markets will also pay close attention to comments from a Fed Chair Jerome Powell at the Economic Club of Washington on Wednesday, for additional insight into the outlook for monetary policy in the months ahead.
Elsewhere, in Asia, China will become the first major economy to report first-quarter growth data when it publishes highly anticipated GDP numbers.
Here is what you need to know to start your week.
S&P500 (US Market)
The benchmark index ($SPX) furthered its ascend with a gain of +2.12% (+85.5 points) for the week, establishing an all time high closing of 4,122 level. This was aligned with our weekly market analysis highlighted last week.
It is important to note that the past week of daily incremental price action on $SPX has reflected a clear Bearish Divergence with its transactional volume. A price retracement upon a eutrophic rally beyond the structure of a technical trend channel is always imminent on such scenario. However, the hypothesis of a short term correction for $SPX would remain healthy and strong for the bullish sentiment of the index.
With price volatility expected to pick up this week due to the series of major economic events, the immediate support to watch for $SPX is at 4,030 level, a trendline resistance turned support level.
U.S. 1Q Earnings Season Kicks Off
The first quarter earnings season on Wall Street will kick off in the coming week, with banking giants JPMorgan Chase ($JPM), Goldman Sachs ($GS), and Wells Fargo ($WFC) all set to release their latest quarterly results on Wednesday.
Earnings from Bank of America ($BAC), Citigroup ($C), and Blackrock ($BLK) are then due on Thursday, followed by Morgan Stanley ($MS) on Friday.
Overall, Q1 earnings are expected to have jumped nearly 25% year-over-year, according to Refinitiv. That would be the biggest quarterly gain since 3Q 2018, when tax cuts under former President Donald Trump drove a surge in profit growth.
Financials are expected to show one of the biggest earnings gains, up 75.6% year-on-year, while materials are seen up 45.4%.
U.S. Consumer Price Inflation (CPI)
CPI is expected to have risen 0.5% last month and 2.5% over the prior year, according to estimates. If confirmed, it would mark the fastest increase in eight months.
Excluding the cost of food and fuel, core inflation is projected to climb 0.2% from a month earlier and 1.6% on a year-over-year basis, a tad faster than the 1.3% increase registered in February.
Rising inflation expectations helped spark a first-quarter selloff in Treasuries that drove yields to pre-pandemic highs in recent sessions.
U.S. Retail Sales
The consensus forecast is that the report will show retail sales jumped 5.5%, rebounding from February’s steep decline of 3%, which was the biggest drop since April 2020.
Excluding the automobile sector, sales are expected to rise 4.8%, snapping back from a drop of 2.7% in the preceding month.
Fed Speakers
A number of Fed speeches will get market attention in the week ahead, as traders watch for further clues on interest rates.
Topping the agenda will be remarks from Fed Chair Jerome Powell who will be speaking on Wednesday at an Economic Club of Washington event.
The Fed chair has reiterated lately that any emergence of inflation should be temporary and that the central bank will keep its accommodative policies in place for a long time.
China 1Q Gross Domestic Product (GDP)
China will post its first quarter gross domestic product (GDP) on Friday morning.
The data is expected to show the world’s second-largest economy grew 18.8% in the first three months of 2021 when compared to the year-ago period, accelerating from the previous quarter’s 6.5% pace.
Besides the GDP report, the Asian nation will also publish data on March trade balance, industrial production, retail sales, unemployment, and fixed asset investment.
China’s economy has shown signs of improvement in recent months, with activity rebounding to pre-pandemic levels thanks to a resurgence in global manufacturing and a sharp recovery in domestic spending.
