D&D Note (6.2.2022) ~ Markets Rally Despite Microsoft & FED Fears ~
Markets began the day down on news from Microsoft cutting Q4 guidance on unfavorable FOREX rates. The company cut its Q4 sales about 1% to $51.94B to $52.74B. Earnings range also cut by 4c or about 1.7%. And expects additional $460 impact from FOREX in Q4. Microsoft clarified today that this revised guidance is not due to fundamental reasons but purely a FOREX issue.
FED vice chair Lael Brained said “Right now, it’s very hard to see the case for a pause.” This further seems to suggest the FED will continue to hike interest rates another 50 basis points in September.
One would think a continuation in hiking rates and FOREX issues would cause Tech stocks to selloff but the markets looked past these issues and rallied strongly throughout the day with the NASDAQ gaining over 2.6%
Investors are still asking themselves does this rally have real legs as recently we still can’t push through 4200 on the S&P 500 to establish a new trading range. Many think we will still retest the lows sometime in June or July before being able to fully rally into year end.
If the S&P 500 can rally north of 4300 then D&D would look to potentially sell again, as we did in March, as we don’t have confidence we have actually put in the bottom on a closing print basis (we do think we put in the bottom on a intraday basis and want to see clarification of that bottom on a closing print basis).
Employment data today showed the slowest pace of job creation of this COVID pandemic recovery. The official Jobs Report comes out Friday morning and expectations are for 328,000 jobs added.
Russia has taken the majority control of Sieverodonetsk which is a strategic city and last major holdout for the Ukrainian resistance in the Luhansk region of the Donbas. Russia now occupies around 20% of total Ukraine territory.
Russian Foreign Minister Sergei Lavrov has called the new US $700 million military aid package “a direct provocation (by Ukraine), aimed at involving the West in military action.”
Ukrainian President Volodymyr Zelenskyy says that Russia has forcibly deported over 200,000 Ukrainian children.
UNICEF has reported on average that more than 2 children are killed and more than 4 are injured every day in Ukraine.
Stock Specific News:
Pet e-commerce company Chewy soars on earnings showing an unexpected profit with shares rising 22%.
Big data company MongoDB shares surge after earnings topped analysts expectations with shares rising 17.5%.
Personal generator company Generac stock jumps 9.8% after UBS names the company a top pick.
Hewlett Packard Enterprise drops after missing analysts forecast falling 5.3%.
Market Knowledge Tip:
Channeling the great late George Carlin and his 7 words you can’t say on TV, D&D has created the 7 things to know when determining to buy a stock:
- P/E Ratio
- Assets to Liabilities (balance sheet)
- Cash Flow
- Profitability per share
- Return of profits to shareholders through dividends and/or share buybacks
- Management competency
- Short Interest
Closing Markets (as of 1:15pm PST)
DOW up 1.33%
S&P 500 up 1.84% (4,176.82)
NASDAQ up 2.69%
VIX down -3.89% to 24.69
2 Year Note down -0.29bp to 2.64%
10 Year Note up 0.55bp to 2.91%
Oil up 1.839% to $117.38 a barrel.
Gold up 1.342% to $1873.50 an ounce.
Bitcoin up 0.95% to $30,336.78
Ethereum up 0.31% to $1,826.05
~ Dave James / Principal Trader and Market Strategist