The collateral damage from that Netflix (NFLX) quarterly financial result reverberated well beyond content makers to just about every stock that benefited partly from hype and excitement about the future.  These are stocks of companies that, unlike Netflix are still coming out of the gate, not at the end of a monster two-decade growth ramp. 

Yesterday, the wrecking ball swung blindly, nonetheless.

Moreover, every high Beta name is susceptible to excessive punishment for the slightest earnings miscue or even good news that is deemed just not good enough. It’s rough and makes it easy to make panicky moves that could be regrettable in weeks or months. By the same token, if the value proposition changes even by small degrees, look out below.

Ray of Sunshine

The word Wall Street is now using is “quality” to describe what they are buying. The thing is there is no real definition, but it’s essentially anything that’s not growth or defensive. The shift into quality and out of non-quality is shockingly fast. As this is going on, growth sectors (see red square) will get very oversold.

Market Breadth Buy Signal

Another way to think of “quality” is the New York Stock Exchange (NYSE) stocks versus the NASDAQ Composite stocks. Yesterday, there was a huge surge in new highs on the NYSE, and the ratio to new lows matched the highest points of the year.

I will say, however, the overall light volume makes the selling less ominous and buying less euphoric.

Market Breadth	NYSE	NASDAQ
Advancers	2,118	2,402
Decliners	1,196	2,397
New Highs	172	108
New Lows	97	209
Up Volume	2.62 billion	1.90 billion
Down Volume	1.78 billion	2.82 billion

I would like to see this trend last at least one week. If this happens, the volume would pick up as the pressure mounts to be ‘long’.

Start Spreading the News

The New York Stock Exchange finished above both key moving averages (see circle) after holding and bouncing off a strong support point. The big test starts at 16,900 and breaks out through 17,000.

What’s Up with the VIX?

The CBOE Volatility Index (VIX) was down yesterday, which is kind of peculiar considering the level of angst in the air. The fact is, even with the slump at the start of the month, the VIX never got anywhere near March or February levels.

Do I Hear 75?

With all the focus on the 50-bps point hike in Fed Funds next month, the June meeting is the one that stands out. Suddenly, their Street is leaning to a 75-basis point hike. 

I’m not sure why the Street isn’t modeling for a 75-basis point hike in May other than a sense that inflation data during the month still won’t confirm peak inflation. It’s just a hunch.

Portfolio Approach

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Today’s Session – Friendlier Roads & Skies

Earnings are coming through and powering the market higher. Tesla (TSLA) is crushing it and staying well ahead of the pack.  

• Revenue $18.8 billion consensus $17.92
• Earnings $3.22 consensus $2.27

Lots of excitement over the robo-taxi that will hit the streets by 2024

Less excitement but great comments on Optimus robot – which would end up being biggest business

Musk has the magic touch – case in point GM, BMW, Nissan, Kia and Polestar all had EV ads in the Super Bowl, and Tesla had none. The next day:

Airlines

American Airlines (AAL)

• Revenue $8.90 billion consensus $8.82 billion
• Revenue passenger miles 44.29 billion +97%
• March revenue greater than 2019
• Demand environment “very strong”

United Airlines (UAL)

• Revenue $7.57 billion
• Revenue passenger miles $6.35 billion
• Second quarter return to profitability
• Business travel returning

Note:

Philly Fed was a downer

Rent Too Damn High – Dollar Too Damn Strong

I think the US Dollar is too strong, but with bond selling, it’s become a de facto flight to safety favorite.  But it’s not great for multinational companies and their stock prices.

Comments

Charles, what other currency comes close to the value and validity of the greenback? Yen? Euro? Yuan??? None... US interest rates highest among major countries Al Ambrose on 4/21/2022 11:33:01 AM

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