All factors faltered yesterday, as big earnings bombs from Travelers Companies (TRV) to J.B. Hunt Transport Services (JBHT) pressured the market. Insurance companies are supposed to be hot, and trucks should be filled to the brim.

Traditional safe havens saw gains, with Utilities (XLU) soaring. Conversely, Information Technology (XLK) was roiled by an earnings release that could spell trouble in paradise.

Earnings Season Bombs

Semiconductors: ASML Holding (ASML) laid an egg on its earnings report as demand was significant. 

Orders were the red flag, but management offered an unchanged outlook for the rest of the year, suggesting a strong summer pickup.

Hit By a Semi Truck

Semiconductor stocks were slammed, and the VanEck Vectors Semiconductor ETF (SMH) violated its 50-day moving average. There are oversold signs, but the Relative Strength Index (RSI) hints at more downsides first. Still, look at the run in these names. Yesterday’s ‘drubbing’ was a drop in the bucket.

Without a doubt, these are the stocks many have been hoping will roll back for a long time.

The worst-case scenario would be pulling back to fill that gap below 200 on the SMH chart.

This is undoubtedly a target-rich buy-the-dip environment, which is better for traders than long-term buy-and-hold investors.

Powell’s Pom-Pom Dilemma

The question is being asked out loud: was Jay Powell too excited about rate cuts?

Early this year, the Fed chair tried to temper expectations after he unveiled them last year with talk of rate cuts and very little pushback on the notion of a soft landing.

It’s a tough gig and Powell is human. However, it would be a disaster if the Fed returns to hiking rates.  He did the right thing on Tuesday, alerting the market to rates being higher for longer. 

Better Bond Auction

There was a bond auction that didn’t derail markets, but it is too soon to celebrate. While the sale of 20-year bonds was at the second highest yield since 2020, the size was considerably smaller than last week’s ten-year note auction, triggering tidal waves of angst across financial markets.

• The $13.0 billion 20-year bond is about a third of last week’s ten-year auction.
• A high yield of 4.818% was two basis points (bps) below the when-issued yield.
• Demand was encouraging, and yields eased during the session.

More to Come

Issuance will be massive and present a thorny issue for markets and the Federal Reserve.

The iShares 20 + Year Treasury Bond ETF (TLT) bounced slightly but is still mired in an alarming decline.

Today’s Session

A huge spike in the Philly Fed report for Current and Future activity, which bodes well for Industrial and Materials names (we are overweight both – if you are not check with your rep or research desk).

But there was a monster spike in Prices paid.

The employment parts of the report are even more worrisome red flags.

The number of employees declined sharply and average employee workweek plunged.

I think this is consolidation, but it is also confusion and doubt over how the Fed is doing its job, as inflation is still too high for most Americans.

Comments

He's never had control. I believe he is part of the Dem's machine RICHARD COLLIER on 4/18/2024 9:49:34 AM

I believe the Fed is a little late to the party. Inflation has been rising in 2024, people are losing their jobs, cpg items are continuing to rise. Everyday people are having to cut back on all purchases yet the government continues to spend, spend, spend. US debt is now greater that our GDP! Imagine earning 100K annually and your annual spend is $130K... unsustainable. Finally...No rate cuts or increases this year would be a good choice by the Fed. Let's try to stabilize our economy first. Cindy Wade on 4/18/2024 9:57:49 AM

No! Jay & Co. have been wrong all along. They should have started raising rates in Oct. 2021 when it was clear that inflation was NOT transitory. Instead the Fed waited until March of 2022 to begin. Way behind the curve there! They stopped raising rates too early in July 2023. Way too early again. Now we have inflation stuck at about 3% with indications it is gaining traction to the upside. How about You? You think they've got a handle on this economy??? Charles Haselberger on 4/18/2024 10:24:10 AM

The American economy is struggling because of our government's reckless overspending. I believe the Fed is not going to be able to counter the government reckless spending without causing a recession. Feeling Doomed! ed egger on 4/18/2024 11:11:23 AM

Charles, your chart on the morning of April 4th showing "The Fed has outprinted other Central Banks" is extremely concerning for the value of the USD and Bond Auctions. P. Krueger on 4/18/2024 11:15:16 AM

That would depend on your definition of "handle." Are their actions based on good data or bending to the political whims of this administration? Only time will tell. Michael W. Thomann on 4/18/2024 11:22:22 AM

JP & Co can try as they may, but with 2 ships full of drunken sailor spenders what chance do any of us have. Ron B on 4/18/2024 11:42:38 AM

Cue Buck Owens.. "I've Got a Tiger By the Tail" Phil Atwood on 4/18/2024 12:21:39 PM

I believe that because they stated at the beginning that the inflation was transitory when most economist comments (even Larry Summers) were contrary, the FRD was being political. If they didn't announce cuts in 2023 they would be branded political if they cut in 2024. His comments last fall were premature and, I believe, were to kickstart the markets to provide the perception that all things were good. The cat was out of the bag and they could or would not try to tamp down the euphoria. Jack Dokowski on 4/19/2024 9:51:14 AM

The Fed has an idea of what is going on, but their actions seem to ignore the reality. The impact of Bidenomics was and still is huge. Elevated interest rates have NOT stopped inflation, especially the core elements. Two forces have combined to negate the impact of interest rates - global supply chain interuptions, and the huge uncertainty around China/Russia/Ukraine/Middle East. Unfortunately, this is the "new normal" and the Fed and the White House (regardless of who the resident is) need to find a new formula. I wish I knew what that formula was. And more importantly, I wish I knew how to invest undern this "new normal." Roger Willis on 4/19/2024 5:13:19 PM

Re: Powell and company: It seems that they are making the right moves to keep economy moving and preventing interest rates from rising as best they can, except they should have more influence on convincing the executive and legislative government that the debt and excessive spending needs to be addressed now, and not delayed. Scary environment we are in. John Lovell on 4/24/2024 10:23:14 AM

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