by Ben Weiss, for the Call to Leap Team
Happy Friday, everyone! What an interesting (maybe a bit crazy) week, right? The market acted sharply in both directions, making me and surely many investors wonder what's next. We started the week picking up where we left off last week, with continued losses broadly across the market. We received much-lower-than-expected GDP data midweek, higher-than-expected PCE inflation data next, and then closed out the week with some barn burners for earnings announcements, both positive and negative.
We're halfway through earnings season and it's been as electric as many anticipated it would be. We'll take a look at how some of our favorite megacap stocks fared.
Through all the volatility, whether the market moves up, down, or sideways, we're here for each other in this wonderful CTL community. We got this, Wealth Builders!
Now, let's take a look at what happened this week and what's coming up...
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The market this week
My my, what a difference a week makes, or even just a few days. Following more than three weeks of significant losses, the market bounced back midweek and saw sharp gains to close out the week. The S&P 500 had its best week since November 2023—pretty remarkable considering how strong we started 2024. For comparison, below is last week's market performance.
Most sectors saw broad gains as we made our way through the second full week of this earnings season. Major players reporting their earnings this week included TSLA, V (Visa), META, GOOGL, and MSFT. But don't go anywhere—the hits keep rolling next week with announcements from AMD, SBUX, AMZN, MA (Mastercard), and AAPL, among many others. Phew! That's a lot of news to digest. Let's fasten our seatbelts and stay tuned.
By the numbers, the S&P 500 (+2.26%), DOW 30 (+0.32%), Nasdaq (+3.45%), Russell 2000 (+2.50%) all posted not only significant gains, but significant rebounds from last week. For reference, the Nasdaq lost -6.11% last week. The Nasdaq gained 2% on Friday alone, spurred by sharp gains from GOOGL, NVDA, and other large players. For the month of April, however, all of the Magnificent 7, except for GOOGL, are still in the red. Let's see if this rebound will continue or if we're seeing a bit of a false rally.
To the charts
SPY
This week's price action appeared to bounce back up and break above the recent bearish trend line (in red) we had drawn. It will likely take a few more days to see if this breakout is for real or if larger recent bearish pressure will win out.
In this chart, I've added 50, 100, and 200-day exponential moving average (EMA) lines along with the Moving Average Convergence/Divergence (MACD) indicator underneath, if you want to get a little nerdy with me.
For now, it looks like the light blue 100-day EMA did hold as support (the left yellow arrow) as we theorized it might last week. At the right yellow arrow, you can see SPY also climbed above the yellow 50-day EMA, which could have acted as resistance keeping SPY from climbing higher but instead now could turn into support to keep SPY from falling below the ~$506 level. On the MACD, the blue MACD line appears to have bottomed out and may soon crossover the orange signal line, indicating a potentially bullish trend reversal ahead. Need a refresher on using the MACD indicator?
Interestingly, SPY has returned to around the middle of the Bollinger Band on the daily chart, suggesting we have room to move in either direction from here. Need a refresher on using Bollinger Bands?
QQQ
Following last week's high volatility on the Nasdaq, we saw a significant reversal here too. We theorized the $412 level might serve as support as it served as resistance back in December and January. Often times support lines can later turn into resistance lines, and vice versa. We can see the price action clearly broke free from the very steep, narrow declining trend (in red), but now faces potential resistance from the popular $433 level tested many times as support throughout Q1 2024.
Now that QQQ has reversed and climbed above the light-blue 100-day EMA, it may find resistance at the yellow 50-day EMA and/or that $433 level mentioned above. Major company earnings announcements certainly have the capability to cause the market to gap up or down, disregarding apparent support and resistance indicators. The MACD indicator is also hinting at a potential signal line crossover coming up, similarly to SPY above. Let's see what this week holds in store.
Adding Bollinger Bands to the QQQ daily chart shows a similar middle-of-the-road situation. Stay tuned, as more Nasdaq companies report their earnings next week!
In the news
Show us what you've done...We received more macroeconomic data this week, including numbers for the US Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index. The GDP is the sum total of all of a country's goods and services produced at their market values. It's often used as a marker for a country's economic health but can be more nuanced to interpret. US GDP for the first quarter of the year came in at 1.6% annualized growth, well below the estimated 2.4%. Many investors and news sources are raising red flags that this number is a bad sign pointing towards "stagflation", or stagnant economic growth against a backdrop of persistently higher inflation. However, others disagree with that outlook, suggesting a lower GDP may actually be a good sign for tackling inflation, showing the economy may be cooling somewhat. The tricky balance continues to be between cooling the economy without going too far and slipping into an economic recession. The market initially took this lower GDP news hard but then quickly shrugged it off and rallied fearlessly to close out the week.
PCE data came in slightly higher than expected at a rise of 2.8% from this time last year, compared to an estimated 2.7% increase, showing that consumers are still spending despite higher price for goods and services. According to the US Bureau of Economic Analysis, "the PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior."
Earning our attention...We saw earnings announcements from major companies this week including TSLA, META, GOOGL, and MSFT.
TSLA missed earnings per share (EPS) by 8.5% and missed revenue by 4.1%. The stock price had been beaten down earlier in the week already, losing over 18% for the week. Following the disappointing earnings results, however, the stock actually rebounded 24% to close out the week. Investors seemed to be hungry for good news and may have found it when CEO Elon Musk reiterated the company's commitment to developing a robotaxi in the near future.
META beat expectations for both EPS by 9% and revenue by 0.9%, but the stock dropped sharpy over 18% following the earnings call as investors appeared to be spooked by the company's announcement to invest more heavily in AI—a bet that could take years to pay off. You may remember the stock had a massive 21% gap up last earnings season, and this price decline seemed to fill that gap pretty fully.
GOOGL crushed EPS expectations by 25% and also beat revenue by 2.3%. The company announced it would buy back $70 billion of its own stock, aiming to increase EPS value to shareholders with fewer outstanding shares available. Even more significantly, Google announced for the first time it will pay a dividend of $0.20 each quarter. While that's a modest dividend, its introduction nonetheless will excite existing investors and potentially attract a new slate of investors who are more focused on collecting dividends.
MSFT also got a nod of approval from investors after beating EPS by 4.3% and revenue by 1.6%. Revenue grew 17% year-over-year (YoY), driven largely by Microsoft Cloud revenue growing 23% and Azure revenue growing 31%, thanks to its AI services.
Hang in there! We've got one more week of earnings to go and then we can take a breather hopefully.
You got this, everyone! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. As always, let us know if you have any questions. 🙌🏻
-Ben and Steve
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