Indices
- Dow 40,113, +971, or+2.48%.
- Nasdaq 17,382, +1,096or+6.73%.
- S&P 5,525, +243, or+4.60%.
- MSCI EAFE 2460.46, +64.26or+2.68%.
- USD10Y 4.266%, -6.7bpor-1.55%.
- WTI Crude $63.18/bbl, -$1.27or-1.97%.
Markets Whistling Past the Graveyard?
The market rallied strongly for unknown reasons last week. One theory for the rally included the President walking back his threats to fire Fed Chair Jerome Powell after resorting to name calling on his social media platform and insisting the Fed cut rates. Of course, the dollar fell to a three-year low before the President walked back his comments on Tuesday. Another justification cited Treasury Secretary Bessent hinting at a de-escalation of the trade war with China. However, on Thursday China stated that there are currently no ongoing trade negotiations.
In the meantime, corporate America made clear the effects that Hoover era trade policies are having on their bottom lines and the American consumer. To wit:
- Tesla (TSLA) reported a horrid quarter. Their auto segment revenues were down 20% year-over-year and net income fell 71% year-over-year. Yet somehow TSLA traded up +23% for the week and carries a 163 P/E valuation. For comparison, Toyota trades at 7 P/E, Ford 6.88, General Motors 7.4.
- American Airlines (AAL) missed on top and bottom-lines and guided second quarter revs and earnings significantly lower.
- Pepsi Co (PEP) beat on earnings but missed on revenues, guided current year earnings lower and reiterated its revenue guidance.
- Proctor and Gamble (PG) beat earnings, missed on revenues, slashed current year guidance and announced that price hikes could be forthcoming.
- Southwest Air (LUV) lost less than expected, beat revenue projections and declined to reiterate full year guidance.
- Analysts cheered Alphabet’s (GOOGL) report as they beat top and bottom-line estimates, but YouTube advertising revenues were light, as were Google Cloud revenues.
- Previously bullet-proof Chipotle Mexican Grill (CMG) beat their earnings estimates but missed revenue projections and lowered their full year same store sales guidance.
First quarter earnings were supposed to be the worst of the year but since the introduction of tariff uncertainties into the equation, companies and analysts alike have been cutting their projections for the balance of 2025, so much so, that now Q1 is expected to be the best quarter for 2025 earnings and Q2 the worst.
Tariffs and Shipping
The President’s “Liberation Day” tariff announcement was Wednesday, post close April 2. It takes 30 days for containers to travel from China to L.A., 45 days to Houston, and 55 to New York. On Wednesday, Craig Fuller, CEO of FreightWaves reported that trucking volumes at L.A. were equivalent to those of Thanksgiving and Christmas Day, the two slowest days of the year. Import volumes at the Port of L.A. this week will be down -28% week-over-week and almost -11% year-over-year. Next week gets worse; down -9.7% week-over-week but down nearly -31% year-over-year. The first industry to feel these effects will be long haul truckers.
The Upcoming Week: Apr 28 – May 2
After consecutive weeks of light economic data, this week brings a deluge of reports; April Consumer Confidence, March JOLTS, April ADP Private Payrolls, March PCE, April Manufacturing PMIs, April Non-Farm Payrolls, April Unemployment Rate, and April Average Hourly Wages.
The earnings calendar offers no respite either; multiple consumer discretionary (KO, GM, BKNG, YUM, CAKE, MCD), Mag 7 members (AMZN, AAPL, META), an industrial giant (CAT), and two energy titans (CVX, XOM) all report this week.
Economic Calendar
- Monday – N/A. Earnings: N/A.
- Tuesday – April Consumer Confidence, March Job Openings and Labor Turnover Survey (JOLTS). Earnings: Coca-Cola (KO), General Motors (GM), Booking Holdings (BKNG).
- Wednesday – April ADP Private Payrolls, Q1 GDP, March Personal Consumption Expenditure (PCE). Earnings: Caterpillar (CAT), Yum Brands (YUM), META Platforms (META), Cheesecake Factory (CAKE).
- Thursday – Initial Jobless Claims, April Final U.S. S&P Manufacturing PMI and ISM Survey. Earnings: Mastercard (MA), McDonald’s (MCD), Amazon (AMZN), Apple (AAPL).
- Friday – April Non-Farm Payrolls, April U.S. Unemployment Rate, April U.S. Hourly Wages. Earnings: Chevron (CVX), Exxon Mobile (XOM).
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