Morning in New York: focus on the change of the Fed's head

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Capital Markets Research, Freedom Broker.

The focus of the upcoming trading will be on the retail sales statistics for Ma (consensus for the total and core indexes: +1.4% m/m after +0.6% and +0.5% in Ma, respectively). The growth of the overall index is likely to be strong, also due to the jump in gasoline prices. At the same time, the market will share this effect and real consumer demand. Freedom Broker's forecast for the structure of this data is somewhat more subdued than the consensus. For the control group, which is directly translated into the GDP calculation, our benchmark is slightly more conservative. Overall, the publication is able to emphasize the sustainability of consumption and have a positive impact primarily on the Russell 2000 (IWM), which is sensitive to domestic demand.

The Senate Banking Committee hearing on the nomination of Kevin Warsh to head the Fed is the key event of the week on the monetary front. According to prepared remarks, Warsh intends to emphasize the independence of the regulator, focus on price stability and only once mention the situation on the labor market. This will signal a more "hawkish" stance of the potential Fed chief. The nominee's skeptical attitude to the regulator's large-scale balance sheet and its broad non-market powers will be closely monitored by debt market participants.

Additional uncertainty comes from the fact that Senator Thom Tillis is still blocking Worsh's nomination until the U.S. Department of Justice (DOJ) investigation into current Fed chief Jerome Powell is resolved. This calls into question a planned change in Fed leadership before Powell's term expires on May 15. If the hearings do take place, the market focus will shift to issues of Fed independence, possible political pressure on the staffing of its leadership, and Warsh's stance on the rate in the face of the energy shock. Any hint of politicization of the monetary policy can significantly increase the nervousness of the markets even without new macro data.

The ceasefire between the U.S. and Iran expires on April 22. US President Donald Trump has called its extension unlikely, while saying there is a chance of a framework agreement to end hostilities despite ongoing disagreements with Tehran. Iran has not yet confirmed its readiness for a new round of talks in Islamabad.

Quarterly results were presented by UnitedHealth Group (UNH), GE Aerospace (GE), 3M Company (MMM). RTX Corporation (RTX), Danaher Corporation (DHR), Halliburton (HAL), Northrop Grumman (NOC) will also report before the opening of the main session. Capital One Financial Corp (COF), Intuitive Surgical (ISRG), United Airlines Holdings (UAL), Chubb (CB), EQT Corporation (EQT), Interactive Brokers Group (IBKR), Annaly Capital Management (NLY) will report after the close of trading.

Futures on American stock indices demonstrate positive dynamics. We assess the balance of risks for the upcoming session as neutral with increased volatility. The fundamental factors include a successful start of the reporting season and persisting foreign policy tension, which restrains the directional movement of quotations. Macro statistics and Kevin Warsh's speech in the Senate will be the main catalysts of intraday dynamics.

- Tim Cook will become executive chairman of Apple (AAPL), with John Ternus taking over as CEO.

- Amazon (AMZN) shares gain about 2.4% after announcing an expanded strategic partnership with AI startup Anthropic. The market positively perceives the deepening partnership, which strengthens the competitive position of the AWS cloud division in front of Microsoft (MSFT) and Alphabet (GOOGL) in the generative artificial intelligence segment.

- Shares of Alaska Air Group (ALK) dropped by 2% amid the publication of quarterly reports. Despite the seasonal stability of demand for flights, market participants reacted negatively to management forecasts and signs of increasing pressure of operating costs on bottom-line margins.

- Quotes of Spruce Biosciences (SPRB) collapsed by 17% after the announcement of an additional placement of common shares and warrants. The market traditionally reacts sharply negatively to such corporate actions because of the risk of significant dilution of shares of current shareholders. The situation was aggravated by the lack of precise information about the amount of capital to be raised.

- Shares of BridgeBio Oncology Therapeutics (BBOT) rose 3% on news of the U.S. Food and Drug Administration's (FDA) accelerated review of its BBO-11818 drug BBO-11818. Investors are pricing the company in a potential shortening of the timeframe to bring this product to market.

Trading on April 20 on American stock exchanges ended mostly in negative territory. S&P 500 fell by 0.24%, Nasdaq Composite dropped by 0.26%, interrupting the longest series of growth since 1992. The Dow Jones lost a symbolic 0.01%, with only the Russell 2000 up 0.58%.

Moderate dynamics is explained by the pause after a powerful three-week rally. Most shares of the "Magnificent Seven" traded in the red zone, putting pressure on the overall stock exchange dynamics. The most pronounced correction was shown by Tesla (TSLA: -2.03% at the close of trading on April 20) and Meta Platforms (META: -2.56%).

The sector of raw materials and supplies (XLB: +0.67%) became the leaders of growth in the broad market due to the price jump. The outsiders were the health care industry (XLV: -0.93%) and utility providers (XLU: -0.89%).

Uncertainty about the supply of hydrocarbons from the Middle East led to a jump in WTI oil quotations. Nevertheless, a deep drawdown of indices was avoided. Despite the worsening geopolitical background and high volatility, the consensus is for a gradual de-escalation of the conflict between the US and Iran. The markets are additionally supported by a stable macroeconomic background and a good start to the reporting season.

This week, Fed officials are observing a blackout period before their April 28-29 meeting.

- Sila Realty Trust (SILA: +19.1% at the close of trading on April 20) will be taken over by affiliates of Blue Owl Capital (OWL: +0.4% ) for $2.4 billion in cash ($30.38 per share), representing a premium of about 19% to the close of trading on April 17. The deal is expected to close in the second or third quarter.

- AST SpaceMobile (ASTS: -5.3%) reported the loss of the BlueBird 7 satellite due to its insertion into a lower and incorrect orbit by Blue Origin's New Glenn rocket.

- The US Department of Justice filed an antitrust lawsuit against Cal-Maine Foods (CALM: -1.9%). The regulator suspects the largest US egg producers of price collusion and artificial coordination of tariffs using the Expana benchmarking service.

- Quarterly results of Cleveland-Cliffs (CLF: -2.1%) were better than analysts' expectations, but the company recorded a decline in sales of steel products in annual terms. Regarding the deal with South Korea's POSCO, the management remains cautiously optimistic, admitting that the Middle East conflict is delaying its conclusion, but negotiations within the framework of the memorandum continue.

- Biogen (BIIB: +3.4%) has agreed with TJ Bio to acquire exclusive rights to felzartamab (being developed for the treatment of autoimmune diseases) in the Greater China region. The company had previously bought licenses to commercialize the drug in the rest of the world, and the new deal will allow it to fully consolidate control of the asset.

This article was AI-translated and verified by a human editor