Anyone holding out hopes of a surprise uplift from Alcoa got a massive letdown instead yesterday — a 92% drop in profits-sized letdown.
Of course, Alcoa is just a taster. Things get serious on Wednesday when the “black sheep” banks kick off their results, starting with J.P. Morgan Chase. You just can’t make a move without running into earnings gloomsters right now.
Here’s some refreshing cheer from IronFX Global’s Charalambos Pissouros, who says that given the global environment has stabilized in the last two months or so, the overall outlook for stocks isn’t that dire.
A “further setback in equity prices may provide renewed buying opportunities to investors who expect that these headwinds have dissipated, or are about to,” he told clients in a note.
Don’t count Wouter Sturkenboom as eager to dive into Wall Street or shift his underweight position on U.S. stocks, even if he thinks earnings could surprise a bit to the upside.
Sparks of hope within results may keep the market trading sideways and the bulls alive, says the Russell Investments strategist.
But “afterward, the ‘adults in the room’ will take a long hard look at the overall picture and won’t like what they see. That’s when we expect the rally to be halted, so toward the end of the earnings season and afterward,” he says.
That’s along the lines of our chart of the day, which makes a “lipstick on a pig” reference to stocks. In our call of the day, HSBC talks about why it cut its S&P 500 forecast.
Key market gauges
Alcoa aside, stocks are heading toward a firmer open, with futures on the Dow YMM6, +0.05% S&P ESM6, +0.09% and Nasdaq NQM6, +0.02% higher. Oil is helping out, as WTI CLK6, +0.50% pushes further above $40 a barrel, with Doha-meeting hopes running high.
The dollar USDJPY, +0.44% is up against the yen. That helped boost the Nikkei NIK, +1.13% NIK, +1.13% but the Shanghai Composite SHCOMP, -0.34% fell a bit. In Europe SXXP, +0.02% it’s up with Italian banks and down with luxury shares.
Gold GCM6, +0.29% is rising a little.
Small-business sentiment fell to a two-year low, the National Federation of Independent Business said this morning. Data showed import prices minus fuel dropped 0.1% in March. The Federal budget is due at 2 p.m.
A trio of Federal Reserve speakers, including S.F. Fed chief John Williams and Richmond Fed’s Jeffrey Lacker, are on the calendar.
HSBC’s global equity team has cut their S&P 500 target for this year to 2,050 from 2,100, saying there’s “zero upside.”
“The market remains bound by an uncomfortable mix of factors, including peak earnings and margins, above-average valuations and an appreciated USD. In addition, it is the best-owned market globally,” said the HSBC team, led by Ben Laidler and Daniel Grosvenor, in a note.
“The key downside catalyst remains the continued multiple risks to medium-term U.S. earnings,” they added.
Those risks include continued tepid top-line growth, wage-growth rebound, higher U.S. financing costs and less room for share buybacks. Plus, a steady decline in U.S. corporate tax rates have acted as tailwinds for health care and technology stocks, they say.
It’s not just the U.S., though. Out of eight global markets, HSBC is overweight on only two: the eurozone — “the one region in the world where we see potential for a positive earnings surprise” — and emerging markets, which they upgraded from neutral. They raised the U.K. to neutral from underweight, while Japan was cut to underweight.
As earnings gloom could be about to settle over banks, a few have found a way to make money.
Boeing BA, -0.52% has started talks to sell airliners in Iran. They could turn into one of the highest-profile deals between a U.S. corporate and Tehran since sanctions were lifted in January, The Wall Street Journal reported.
Now that former executive Martin Shkreli is out of the picture, KaloBios is touting “affordable pricing” on drugs.
Moneyball Economics’s Vice Index — which tracks spending on sex, drugs, gambling and alcohol — suggests that in the eyes of the consumer right now, everything is looking pretty awesome. That’s shown in the below chart:
But this “mad money” spending is all going to look less cheery by the end of summer, predicts Moneyball’s Andrew Zatlin in a blog post.
Zatlin says slowing wage growth and higher living costs — the benefits of lower gas prices will fade by summer’s end — will crimp the consumer’s style. Add to that the potential for interest rate hikes, which will cut into spending, and corporate malaise, which Zatlin says will eventually infect consumers.
“Expect central banks to do their best to prop up the markets, but at some point it’s just putting lipstick on a pig and the markets will tumble. Look for that in about six months,” says Zatlin. Read the whole post here.
“How are you going to get jobs for them? Many of them are ill-educated and have tattoos on their foreheads, and I hate to be generalized about it, but it’s true.” — Fox News host Bill O’Reilly criticizing Donald Trump’s attempts to win over black Americans at the polls. His full interview with the GOP candidate is in the YouTube post above.
Trump tweeted this out shortly before that segment:
Why does the liberal media think Bill O’Reilly (@oreillyfactor) is a complete and total vulgarian? I don’t think so!
— Donald J. Trump (@realDonaldTrump) April 11, 2016
Here’s urban dictionary on vulgarians: “One whose entire vocabulary consists of only filthy words.”
346 — That’s how many cases of Zika have been confirmed in the U.S. to date by the Centers for Disease Control and Prevention, which says the outbreak is much “scarier” than they originally thought.
A racially tinged joke from Hillary Clinton and NYC Mayor de Blasio at a charity dinner is going down as you’d expect.
— tᕼe ᒪᑌᑕᗩᔕ ᗷᖇOᔕ (@lucasbros) April 12, 2016
Texas school police officer fired for body-slamming 12-year old girl.
Six degrees of separation in the NBA. Every player since 1947 and how they all connect
A 6-year-old Afghan girl is the newest character on “Sesame Street”
Boko Haram is using an increasing number of children as suicide bombers
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