Market Meltdown paused—But is a rebound next? 24/04/2024

HOT stories for today
 

US market wrap:
 

• Markets advanced on Wednesday, though gains fell short of initial expectations. The S&P 500 opened the day with an almost 4% surge following a reconciliation between the White House and Fed Chair Powell, along with news that Chinese tariffs might be cut in half. The Dow Jones Industrial Average rose by 1.07%, the S&P 500 increased 1.67%, and the Nasdaq Composite jumped 2.50%, marking consecutive sessions of positive movement.
• Still, the major indexes closed significantly below their intraday peaks. On Tuesday, President Trump indicated a willingness to adopt a more conciliatory tone in trade negotiations with China. Treasury Secretary Scott Bessent added on Wednesday that both nations had a real opportunity to strike a “major agreement” on trade. A White House official also confirmed that the administration was weighing a reduction in Chinese tariffs, potentially trimming them by 50% to 65%. Shares of companies with significant exposure to China, which had been under pressure in recent weeks, rebounded. This included tech giants from the "Magnificent Seven" like Apple and Nvidia, which gained over 2% and more than 3%, respectively.

Market Meltdown paused—But is a rebound next?

• Wednesday’s market bounce signals a pause in the “Sell America” trade, as investors dove back into U.S. bonds and boosted the dollar. A softer tone from the Trump administration on China tariffs and Fed Chair Powell helped fuel the rally—but doubts linger. Long-term Treasury yields dropped sharply, with the 30-year seeing its biggest dip in months, while the dollar rebounded from a three-year low. Stocks also surged, with the Nasdaq leading the charge.
• Still, caution remains. Trade tensions continue to weigh on growth, confidence, and inflation. “The dollar's dominance is fading,” said Agile Investment’s Peter Azzinaro, citing soaring U.S. debt and a shift toward Europe and Asia. Treasury Secretary Scott Bessent stressed the need for fiscal discipline to support a strong dollar. But whether Trump’s latest pivot marks a true policy shift—or just a temporary reprieve—is up for debate. Bottom line: markets may be breathing a little easier, but the bigger questions haven’t gone away.
   

Stocks on the move:

• Chipotle Mexican Grill (CMG) — Chipotle fell short of revenue expectations for the first quarter and reported its first decline in same-store sales since 2020, causing shares to slip by 2%.
• Texas Instruments (TXN) — Shares of the chipmaker surged 4.8% after hours, following strong first-quarter results. The company posted earnings of $1.28 per share on $4.07 billion in revenue, surpassing projections of $1.07 per share on $3.91 billion in revenue.
• ServiceNow (NOW) — Shares jumped 9% after the enterprise software firm reported adjusted earnings of $4.04 per share and revenue of $3.09 billion for the first quarter, exceeding analysts’ forecasts.
• International Business Machines (IBM) — IBM shares dropped nearly 5%, despite the tech giant delivering results that topped Wall Street’s revenue and earnings expectations.
• Southwest Airlines (LUV) — Shares of the airline declined 3.7% after it announced plans to cut flight capacity in the latter half of 2025, citing continued softness in domestic travel demand.
   

Today’s action

• Asia-Pacific markets traded mixed on Thursday, following Wall Street’s gains as renewed hopes for a de-escalation in the U.S.-China trade war lifted investor sentiment. Japan’s Nikkei 225 led the region with a gain of more than 1%, while Australia’s S&P/ASX 200 added 0.56%. In contrast, South Korea’s Kospi slipped 0.47%, and the smaller Kosdaq index edged down 0.15%. Hong Kong’s Hang Seng Index fell 0.29%, and mainland China’s CSI 300 hovered near flat.
• The cautious optimism in Asia came after U.S. stocks logged a second consecutive day of gains. Futures tied to the S&P 500 rose 0.3% in overnight trading, while Nasdaq 100 futures also climbed 0.3%. Dow Jones Industrial Average futures, however, edged down 15 points, suggesting a muted start. Investors are now turning their attention to several key earnings reports expected Thursday, with tech heavyweight Alphabet, chipmaker Intel, and consumer giant PepsiCo set to report quarterly results. On the economic calendar, durable goods orders and weekly jobless claims will offer further insight into the health of the U.S. economy.

Watchlist: TSLA, IBM, TXN, LUV, PEP, GOOGL, NOW, CMG

Bitcoin
 

• Bitcoin is holding firm around $92,600 and showing potential for a rally—but the usual post-halving fireworks are missing. Since the April 2024 halving, the crypto has gained 43.4%, far less than previous cycles that saw gains as high as 7,000%. Historically, halvings—events that cut mining rewards in half—have fueled bullish momentum by tightening supply. But this cycle feels different. Analysts suggest the rise of bitcoin ETFs and a maturing market may be dulling the halving effect.
• Economic uncertainty under President Trump’s trade policies and the broader global outlook may also be weighing on crypto sentiment. Even the announcement of a U.S. strategic bitcoin reserve failed to spark a surge. Kaiko data shows that market volatility is down and policy uncertainty is up—two factors that may be keeping bitcoin’s breakout on pause, despite strong fundamentals.
  Watchlist: Bitcoin: 74 000-100 000, Ethereum:1500-2600, Solana: 80-150
   

Forex
 

• EUR/USD is hovering near 1.1340 in Thursday’s Asian session, pausing a two-day decline. However, a break below the ascending channel and the nine-day EMA at 1.1326 suggests fading bullish momentum. A deeper pullback could target the 50-day EMA near 1.0944, though reclaiming the 1.1573 high from November 2021 remains a longer-term goal.
• Meanwhile, the Japanese Yen (JPY) is gaining ground as risk sentiment cools. Safe-haven flows are back in play amid doubts over a quick U.S.-China trade resolution. Expectations for more BoJ rate hikes in 2025 and a potential U.S.-Japan trade deal are also boosting the yen. A dovish Fed outlook continues to cap USD/JPY recovery.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-144
   

Basic Materials
 

• WTI crude is trading near $62.20 per barrel in Thursday’s Asian session, recovering from early losses. Still, oil prices remain under pressure amid concerns that OPEC+ could ramp up production. Kazakhstan, a key OPEC+ member, signaled it won’t reduce output from its major fields, prioritizing national interests. However, downside may be cushioned by renewed optimism around U.S.-China trade talks.
• Meanwhile, gold (XAU/USD) is rebounding, snapping a two-day losing streak and climbing back toward $3,260. Diminished hopes for a swift U.S.-China resolution have revived safe-haven demand, while Fed rate cut bets and U.S. economic worries weigh on the dollar, supporting gold. That said, a positive market tone could limit further upside in the near term.
  Watchlist: GOLD 2600-3500, US Oil: 57.00-70.00

Key Economic Events Today:

EST time
08:30 am USD: Unemployment Claims
08:30 am USD: Core Durable Goods Orders
10:00 am USD: Existing Home Sales

Earnings

BMO (Before the US Market opens)
PG                 Procter and Gamble
MRK              Merck and Company
PEP               Pepsico Inc
CMCSA         Comcast Corp.
UNP              Union Pacific Corp.
AMC (After the US Market closes): GOOGL, TMUS

The TEFS Analyst team wishes you a successful day!