Hovering near record territory, US stocks are struggling for a big move as roughly three out of four companies have delivered strong earnings results and as financial markets are confident that the Fed will stay put and refrain on giving any clues on when they will taper asset purchases. The Nasdaq is drifting lower as the opening act for mega-cap tech earnings saw some disappointment with Netflix and Tesla. Since the majority of companies seeing strong earnings reports are only having an average share price gain of 4 basis points (0.04%), one can conclude that the majority of the good news has been priced in.
Wall Street seems fixated on pricing pressures, especially after many corporate updates discuss supply chain problems and with rising expectations to pass on costs to customers. The overwhelming consensus is that pricing pressures will peak during the summer and if the Fed can hold onto that belief, a near-zero interest rate environment might need to be priced much longer than what investors are currently thinking.
After first seeing the US consumer confidence readings for April, I first thought this might be a mistake. I then wondered how can this economy can be this strong, yet it seems we are years away from seeing the Fed raise interest rates.
US consumer confidence skyrocketed to a pandemic high as the last round of stimulus checks came to Americans and almost everyone who wanted a vaccine got one or at least set up an appointment. The headline reading rose from 109.0 to 121.7, a strong beat of the 113.0 forecast. While the present situation index jumped 28.5 points to 139.6 and the expectations survey rose from a downwardly revised 108.3 to 109.8. The short-term outlook improved moderately, but that doesn’t matter because the street knows this economy is about to run hot.
A tight housing market continues to send home prices higher. The S&P CoreLogic Case-Shiller index showed housing prices jumped to a 15-year high in February. This data is considered ancient but confirms the peak made in the housing market.
Tesla’s record profit, an easy USD101 million made on bitcoin, along with constructive comments sent bitcoin on a wild ride. Shortly after Tesla reported results after yesterday’s close, Bitcoin tumbled from around USD54,000 to $52,700 after cryptocurrency traders found out Musk’s company sold out of some bitcoin and made USD101 million.
Musk was a big cheerleader for Bitcoin after disclosing Tesla’s USD1.5 billion purchase, so some of his loyal following were initially upset that he quickly cashed out of a portion of his position.
Bitcoin quickly found solid footing after CFO Kirkhorn noted that Tesla’s bitcoin investment was a play to preserve cash. He added that bitcoin provided a way for them to store cash while preserving liquidity.
Bitcoin is shimmying back to the mid-USD50,000s and has almost recovered 50% of the mid-April plunge. A close above USD56,000 should be hard to come by, but if it does, that could open the door for a steady return back towards the USD60,000 level.
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