U.S. Equity Markets rebounded yesterday after Meta Platforms (META) reported first-quarter revenue and earnings that beat estimates as digital advertising revenue rebounded following three consecutive quarters of decline. The ‘year of efficiency’ is off to a good start, but time will tell if the reduction of expenses will be enough to sustain further growth. The NASDAQ 100 led Thursday’s gains closing higher by a whopping 2.76%. This across-the-board rally saw the VIX fall 9.51%, closing at a price of 17.01. Walt Disney (DIS) filed a lawsuit against Florida Governor Ron DeSantis after the recently appointed oversight board voided previous protections for the company. The legal battle adds another distraction for CEO Bob Iger who was re-appointed to the position just five months ago. The fledgling fate of First Republic Bank (FRC) appears to be caught in the crossfire of the sector’s biggest banks and the U.S. government. Major banks that came to the rescue a month ago are now balking at the idea of further involvement. Meanwhile, the U.S. government has also had a change of heart and is reportedly considering actions that would limit its ability to borrow from the Fed. House Republicans passed a ‘’Bill’’ Wednesday that would raise the debt ceiling enough to avoid default until next summer. However, the bill faces its likely demise as failure in the Senate is almost certain. House Speaker Kevin McCarthy (R., Calif.) believes that this should at the bare minimum serve as a starting point for negotiations with President Biden and Democrats. The American thoroughbred that is McDonald’s (MCD) reported first-quarter earnings and revenue on Wednesday that beat analysts’ estimates. As CEO Chris Kempczinski alluded to during McDonald’s conference call, the hamburger chain is often a recession-proof company – doing well in bad times, too. That is because as money gets tighter and economic uncertainty increases, consumers look to fast-food chains for their cheaper meal offerings. In fact, McDonald’s reported that U.S. traffic rose for the third consecutive quarter. Its higher-priced industry peers have struggled to maintain volume amid four-decade-high inflation, but the fast-food behemoth bucks that trend. Now, there is a very specific reason why McDonald’s tends to weather economic turbulence so well, which often, is a telltale sign of where the economy is headed:
Know Your Customer
You see, most investors believe that McDonald’s is one of the world’s most successful companies because it is arguably the smartest consumer-watcher out there. It truly understands how customers “tick” – from spending habits to engagement. It knows what works and what does not. After all, you simply don’t make it as long as McDonald’s has without some expertise in consumerism. But it is not about how successful the company may or may not be. It’s about how in tune with consumers McDonald’s is and what this information can tell us. You see, in its earnings release, McDonald’s confirmed it’s expecting a recession in the U.S. Why? Two reasons.
Consumers Are Buying Fewer Items
Units per transaction saw a slight decrease in the first quarter. That means customers are not getting that extra order of fries or that McFlurry to top off their dinner.
Price Resistance
Kempczinski also said on the conference call that customers are starting to push back against the company’s higher prices in certain markets. This is hugely significant. It shows that even though McDonald’s offers some of the cheapest food available, consumers are still having to make sacrifices for their own financial well-being. Fundamental changes to spending habits have already occurred. The bottom line is that the economy is entering a period of slowing economic growth, led by an increasingly sceptical consumer. European Markets closed lower. European Central Bank Vice President Luis de Guindos said that the Euro-Zone economy is looking like it will avoid another quarter of declining growth. While the area may escape a technical recession – defined by two consecutive quarters of negative growth – the outlook remains muted for the year. Elsewhere, Oil closed 0.62% higher while Gold again struggled closing lower by 0.5%
To mark my 2725th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 177 points yesterday and is now ahead by 3386 points for April after closing March with a gain of 6168 points, while finishing February with a gain of 3164 points, after closing January with a gain of 4687 points, while finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 1.96% higher at a price of 4135.
The Dow Jones Industrial Average closed 524 points higher for a 1.57% gain at a price of 33,826.
The NASDAQ 100 closed 2.76% higher at a price of 13,160.
The Stoxx Europe 600 Index closed 0.18% higher.
This morning, the MSCI Asia Pacific closed 1.1% higher.
This morning, the Nikkei closed 1.40% higher at a price of 28,856.
Currencies
The Bloomberg Dollar Spot Index closed 0.6% lower.
The Euro closed 0.1% lower at $1.1024.
The British Pound closed 0.2% higher at 1.2493.
The Japanese Yen fell 0.1% closing at $133.90.
Bonds
Germany’s 10-year yield closed 5 basis points higher at 2.46%.
Britain’s 10-year yield closed 6 basis points higher at 3.78%.
U.S.10 Year Treasury closed 6 basis points higher at 3.51%.
Commodities
West Texas Intermediate crude closed 0.62% higher at $74.76 a barrel.
Gold closed 0.5% lower at $1982.10 an ounce.
This morning on the Economic Front we have German Unemployment at 8.55 am, followed by GDP at 9.00 am. Next, we have Euro-Zone GDP at 10.00 am and German CPI at 1.00 pm. This is followed by U.S. PCE Deflator at 1.30 pm. Finally, we have the Chicago Purchasing Managers’ Index at 2.45 pm and the University of Michigan Consumer Sentiment Index at 3.00 pm.
Cash S&P 500
Thankfully we had no sell level in the S&P yesterday as the Index had its best day since January, closing higher by 1.96%. One bad economic report after another, it does not matter. The market gapped and then continue to ramp into the close as the S&P rallied 70 Handles from where I marked prices 24 hours ago. Amazon beat it earnings forecast after the close driving its share price higher by 12%. This follows the large gains in both META and MSFT as these big cap stocks lead the market higher. All three stocks are well outside the top of their respective Daily Bollinger Bands adding hundreds of billions in market cap to a large market that does seem impressed. I was suspicious of a month-end rally. This rally will see the $NYSI maximum overbought when we get the latest reading on Tuesday. I still believe that last week’s 4173 high print is significant. Today, I will be a seller from 4158/4178 with a tight 4191 ‘’Closing Stop’’. Given the volatility I am trading in smaller size. Imagine Apple rallying 10% next week when it reports. The danger is it could drive the S&P to the 4270/4290 major resistance before we finally rollover. This is what the recent liquidity injection does as fundamentals and a banking crisis do not matter. If you are wondering why markets rally into a recession: They always do until everything falls apart. Morgan Stanley said in their latest forecast that GDP growth will go negative in Q2 and a recession may be rather imminent. May is going to be an interesting month. Short-term the S&P has support from 4102/4117 where I will be a buyer with a tight 4089 ‘’Closing Stop’’.
EUR/USD
Despite the strong equity markets the Euro briefly traded below 1.1000 before having a small rally into the New York close. This move lower has me long at 1.1000 with a now lower 1.1050 T/P level. I will add to this position at 1.0940 while leaving my 1.0895 ‘’Closing Stop’’ unchanged.
June Dollar Index
The Dollar rallied to my 101.60 T/P level on my latest 101.10 long position and I am now flat. Today, I will again be a buyer on any dip lower to 100.40/101.00 with the same 99.95 ‘’Closing Stop’’.
Cash DAX
Just before the New York close the DAX traded higher to my 15890-sell level before selling off this morning to my revised 15858 T/P level and I am now flat. With Europe closed on Monday I am going to stay flat the DAX until I come back on Tuesday. The DAX is too expensive to buy and I do not want to be short ahead of a long weekend. If this changes I will come back with an update for my Platinum Members.
Cash FTSE
No Change. The FTSE traded heavy yesterday and I am still flat. I will continue to be a buyer from 7700/7780 with the same 7655 tight ‘’Closing Stop’’.
Dow Rolling Contract
Yet again the 50 Day Moving Average has proved to be a decent buy level. I am still flat as the Dow never came close to yesterday’s buy range by rallying 500 points from where I marked prices yesterday morning. I do not like the Dow but until the 50 Day MA is broken it difficult to be short. However, the Dow has resistance from 34050/34300 where I will be a seller with a 34505 ‘’Closing Stop’’. I will now raise my buy level to 33250/33500 with a higher and wider 32995 ‘’Closing Stop’’.
Cash NASDAQ 100
Yesterday’s near 3% gain in the NDX erased nine trading sessions of a slow trickle down that saw the NDX traded outside the bottom of its Daily Bollinger Band. Buying the dip in the NDX has worked well all of April but unfortunately we were not long for yesterday’s huge 350 point rally. The NDX has short-term resistance from 13280/13430 where I will be a small seller with a 13505 tight ”Closing Stop”. I will now raise my buy level to 12900/13050 with a 12795 ”Closing Stop”.
June BUND
No Change. I am still long from yesterday morning at 134.40. I will continue to look to add to this position at 133.60 while leaving my 133.05 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 134.85. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
My Gold plan worked well as the market traded lower to my 1975 initial buy level before rallying to my 1984.50 revised T/P level and I am now flat. Yet again Gold saw strong selling above 2000. Just. like everyone else I am reluctant to go short Gold despite the negative price action. Today I will continue to be a buyer on any dip lower to 1953/1968 with a lower 1941 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still long at a price of 24.90 with the same 25.60 T/P level. I will add to this position at 24.10 while leaving my 23.35 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Finally, as Monday is a Bank Holiday in Ireland and most of Europe, there will be no Daily Commentary produced. The DC will resume as normal on Tuesday morning. As usual any of my calls that are not hit today and get triggered on Monday, will see me come back with an updated email for my Platinum Members.
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