The Week Ahead

Programming Note: Tomorrow’s MRKT Call will be broadcast at 9:30am to accommodate schedules. Here’s the link.

We've got a packed week ahead — big earnings reports, key GDP and jobs numbers, and likely more trade war headlines coming. And it’s all happening just as the market pushes back up against a potential resistance level. Futures opened slightly in the red Sunday evening. We’ll get into that in a second, but first, a few stories you might have missed over the weekend:

• Is the U.S. Talking to China About Tariffs? Trump Says Yes, Beijing and Bessent Say No. (Barrons)

  • The U.S. and China are giving conflicting messages about the status of talks to de-escalate tariffs, as evidence builds that a sharp slowdown in trade could soon send economic damage rippling through the U.S. and global economies.

• China’s Huawei Develops New AI Chip, Seeking to Match Nvidia (WSJ)

  • Huawei Technologies is gearing up to test its newest and most powerful artificial-intelligence processor, which the company hopes could replace some higher-end products of U.S. chip giant Nvidia. The steady advance by one of China’s flagship technology companies points to the resilience of the country’s semiconductor industry despite efforts by Washington to stymie it, including by cutting off access to some Western chip-making equipment.

• AI data center boom isn’t going bust but the ‘pause’ is trending at big tech companies (CNBC)

  • Microsoft’s decision to pull the plug on a data center in Ohio and a Wall Street report saying Amazon’s AWS was pausing some leases boosted market fears about an AI data center bust. But recent earnings from data center supplier Vertiv and Alphabet, as well as commentary from Amazon, suggest the fears are overstated. Commercial real estate executives say it is fair to say there has been a “pause” in some data center capex, but it is likely to be temporary, with hundreds of billions of dollars still to be spent.

• Plane tickets are getting cheaper as domestic travel demand weakens (CNBC)

  • Airfare fell 5.3% in March from last year, according to the Bureau of Labor Statistics’ latest data. Easter, a peak travel period that coincides with many school vacations, fell in March of last year, though fares also dropped 4% in February this year. Adding to pressure, executives said, is slower-than-expected growth from corporate travel, which is facing the same challenges many households are. Government travel plunged, too, amid the Trump administration’s cost cuts and mass layoffs this year.

• Unhedged and Burned, Stock Investors Brace for More Dollar Pain (Bloomberg)

  • For years, it was the money-minting trade for the investor set in London and Paris and Tokyo: Buy dollars and plow the proceeds into S&P 500 and Nasdaq stocks. Not only were US equity returns far superior to those generated at home, but they were magnified by the steady rise in the value of the dollar. So when both parts of the trade suddenly blew up after President Donald Trump launched his global trade war, the pain mounted quickly. A 6% decline in the S&P 500 this year ballooned into a 14% wipeout for investors who measure their returns in euros and yen. The speed at which it has all unraveled, along with the constant zig-zagging from the White House, is unnerving investors who had counted on the US to be the ultimate safe haven and generator of outsized returns.

• Treasury Market’s ‘New World Order’ Brings Fear of the Long Bond (Bloomberg)

  • The “Sell America” trade that gripped markets this month has left a potentially lasting dent in investors’ willingness to hold the US government’s longest-maturity debt, a mainstay of its deficit-financing toolkit. For bond managers at BlackRock Inc., Brandywine Global Investment Management and Vanguard Group Inc., the problem is that as President Donald Trump approaches his 100th day in office, he has generated a growing list of unknowns, forcing traders to focus on a broad array of issues beyond just the likely path of interest rates.

• Cutting Off Chinese Companies Risks a US Policy Own Goal (Bloomberg)

  • The US banned Huawei. Now it’s a bigger threat than ever. In May 2019, the US Department of Commerce added China’s Huawei Technologies Co. and 68 affiliates to the Bureau of Industry and Security Entity List ― a catalogue of companies subject to strict limits that effectively cut them off from the US technology sector. The government had been concerned about espionage and sabotage risks associated with Huawei for more than two decades, but the advent of 5G cemented the urgency to act as more devices and critical infrastructure would be connected to Huawei hardware. Unsatisfied with blocking Huawei at home, American officials launched a global effort to convince other countries to block it, too. The impact was immediate: Huawei’s revenue fell by more than a quarter over the next two years. But then something unexpected happened. Exiled from the world’s largest economy, Huawei refused to die. Its financial results picked up and last year Huawei’s revenue came close to its peak before the US restrictions.
    

We enter this week with some of the lowest implied vol (and smallest expected moves) in quite some time. The VIX closed below 25 on Friday and options traders have moved beyond attempting to price some of the near 10% swings we saw in early to mid April. The 2.5% SPX expected move for this week compares to 3% last week and above 6% in early April:

This Week’s Expected Moves:

• SPX/SPY: 2.5% (5375-5675)

  • QQQ: 3.0%

  • IWM: 3.0%

  • TLT: 1.9%

  • USO: 4%

In a bear market, investors tend to be rewarded for re-hedging or selling into a rally when the VIX gets back to the low 20’s (from a recent spike). The flipside of that is that when the bear market ends, the follow through rally can take the VIX into the teens. Therefore, if you believe the chaos is not over and this is simply a counter-trend rally, we’re getting to the point where you should perhaps be using more strength to adjust positioning.

This week is heavy on earnings and important economic data. Volatility (and market moves) may pick up into the second half. Wednesday morning we get PCE and GDP, Thursday morning ISM Manufacturing, and on Friday morning the NFP Jobs Number:

Economic Calendar: 

• Tuesday, April 29:

  • 9am - Housing Prices

  • 10am - Consumer Confidence

  • 10am - JOLTS Job Openings

• Wednesday, April 30:

  • 8:30am - GDP

  • 8:30am - PCE

  • 9:45am - Chicago Purchasing

  • 10am - Pending Home Sales

• Thursday, May 1:

  • 7:30am - Challenger Job Cuts

  • 8:30am - Initial Jobless Claims

  • 10am - ISM Manufacturing

• Friday, May 2:

  • 8:30am - Non Farm Payrolls

  • 10am - Factory Orders

A massive week for earnings reports with AMZN, AAPL, META, MSFT and more reporting:

Earnings (with expected moves):

• Monday, April 28

  • Pre-Market: MGM 8.5%

• Tuesday, April 29

  • Pre-Market: SOFI 11.5%, PYPL 7.8%, SPOT 10.3%, PFE 3.7%, KO 2.9%, UPS 6.6%

  • After Hours: V 4.1%, SBUX 7.2%, SNAP 18%

• Wednesday, April 30

  • Pre-Market: ETSY 11.2%, CAT 5.3%

  • After Hours: MSFT 4.5%, META 7.6%, HOOD 12.3%, QCOM 6.3%

• Thursday, May 1

  • Pre-Market: LLY 5.2% , MCD 3.6%, MA 4.1%

  • After Hours: AAPL 4.8%, AMZN 6.3%, RIOT 10% , RDDT 14.4%

• Friday, May 2

  • Pre-Market: XOM 3.4%, CVX​ 3.7%

There’s a lot of market cap reporting after hours on Wednesday and Thursday, which could lead to some big moves — both in the after-hours session and at the next morning’s open. With that much potential volatility right after the close, it’s especially important to manage any expiring SPY and QQQ option positions carefully.

We’ve got some great shows all week, be sure to tune in and remember tomorrow’s MRKT Call is live at 9:30 Eastern.

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