The first-quarter earnings season kicks into high gear tonight in the US with key companies such as Alphabet, Microsoft, Starbucks, and AMD reporting after the bell. So far it has been an impressive reporting season, with about a third of the S&P 500 having reported numbers, 84% of companies have beat earnings expectations.
What the US markets do next will depend on the rest of the reporting season, and how Biden’s $2 trillion infrastructure bill plays out. Biden aims to approve a package in the coming months that revamp U.S. roads, bridges, airports, broadband, housing, utilities, and invests in job training along with care for elderly and disabled Americans. Republicans have signaled they could support a scaled-back bill based around transportation, broadband, and water systems.
April so far has been a strong month with the S&P500 moving up around 8% since late March. The XJO has gained 5%. The typical seasonal pattern for the markets is a rise into May and then ‘Sell in May and Go Away’. This means more times than not May is a bearish month. A correction in May is also common to see, especially if we see a strong move up into the pullback. Timing is always key it could come earlier or later watch the 4116 levels on the SP500.
The common theme we are starting to hear is supply issues. Tesla pointed out that they had challenges which they overcame with chip shortages. We will need to keep an eye on this as the year plays out, as this could hinder the arrival of new product. Locally Kogan and JBHIFI are selling off this week on the back of weak results posted by Kogan. What could contribute to weak sales is a lack of new products. The delay in supply of the new PlayStation 5 is a prime example of this.
The XJO is expected to open flat this morning, following similar leads from the U.S overnight. They weren’t able to clear their all-time high, which should translate into our market holding our own post-pandemic high of roughly 7100.
The AUDUSD rallied and stuck its head above 78 cents. This level of resistance has usually led to a quick retreat, but so far it has held strength – likely on the back of demand for our ore. This may put some pressure on our miners, though rallying commodity prices is more likely to keep the party going.
US shares closed fairly flat overnight, with the flagship S&P 500 closing slightly higher. US economic data showed slightly worse than expected durable goods orders than expected in March, though the numbers were an improvement over February. US earnings reporting continues to mostly come in better than expected, though Tesla traded lower in aftermarket trading after reporting lower sales than expected.
Overall, it was not a notable session for US markets, who drifted higher with their present bullish momentum. Most sectors finished higher, with Consumer Staples, Utilities, Healthcare, and Industrials dragging on the market.