Morning in New York: macro data and bigtechs will set the direction of trading

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

Today, market participants will focus on the publication of a large block of important macro statistics. In particular, the data on personal income for Ma will be released (consensus: +0.3% m/m, February: -0.1%). Freedom Broker analysts forecast a 0.5% increase, which will compensate for February's decline. March personal spending statistics will also be released (consensus: +0.9% m/m, February: +0.5%). Freedom Broker is targeting a 0.8% m/m rise in the index. The main driver of this index growth will be the increase in retail sales amid high gasoline prices, which will accelerate spending on goods to about 1.4% m/m. The dynamics of spending on services remains questionable due to possible cuts in household budgets as a result of a sharp rise in energy prices. We expect households' service expenditures to grow by 0.5% mom, which will signal the continued sustainability of consumption.

The main trigger for markets will be the March price index of personal consumption expenditures (PCE), which the Fed considers as a key inflation indicator. The consensus expects an acceleration of the overall PCE growth from February's 0.4% to 0.7% m/m. Freedom Broker analysts forecast the indicator to rise by 0.6%. The acceleration of inflation is supported by a sharp rise in energy prices, which, according to our estimates, will amount to about 18% mom. The Core PCE is projected at 0.27% mom, while the consensus is 0.3%. A noticeable increase in price pressure could negatively affect the dynamics of stock indices, as it will reinforce Jerome Powell's tough statements following the FOMC meeting.

Also on Thursday, the preliminary estimate of GDP dynamics for the first quarter will be released (consensus: 2.2% (q/q, year-on-year) after 0.5% a quarter earlier). Freedom Broker expects the underlying economy to grow by 1.8%. At the same time, the FRB Atlanta's forecast model suggests GDP growth of only 1.2% due to the expected jump in government spending at the end of the shutdown. After the publication of data on household spending in March and other macro statistics, the benchmarks for economic growth will be revised.

Washington's statements about possible targeted military strikes against Iran to achieve unblocking of sea transportation routes continue to influence global commodity markets, keeping energy prices at high levels and increasing long-term inflation risks.

Eli Lilly (LLY), Caterpillar (CAT), Merck (MRK ), Valero (VLO), Royal Caribbean Group (RCL) reported for the quarter. Mastercard (MA), ConocoPhillips (COP) will also report quarterly results before the opening of the main session. Sandisk (SNDK), Apple (AAPL), Western Digital Corporation (WDC), Amgen (AMGN), Stryker (SYK), Reddit (RDDT) and Roblox (RBLX ) will publish their financial results after the end of trading.

Futures on US stock indices are moderately growing. We assess the balance of risks for the upcoming session as neutral with high volatility. The multidirectional signals from corporate reports of the technology sector coupled with the expectation of acceleration of PCE growth and ambiguous GDP data make traders take a wait-and-see attitude.

- Quotes Alphabet (GOOGL) added more than 6% amid the release of quarterly results, reflecting a steady growth in advertising revenue in the search engine and a sharp increase in revenue from Google Cloud amid high demand for AI infrastructure. Additional support for the corporation's shares was provided by management's comments on monetization of AI products and maintaining operational efficiency.

- Despite strong quarterly results, Meta Platforms (META) stock price collapsed by more than 8%. Investors were alarmed by a significant increase in the capex plan for the current year due to aggressive scaling of the AI infrastructure. In addition, the revenue guidance for the second quarter was generally at the consensus level.

- Shares of Microsoft (MSFT) are down nearly 2%, though its financial results were solid. Revenues rose 18% to $82.9 bln, revenues from Azure and other cloud services were up 40% YoY, confirming robust demand. The market's negative reaction was caused by the expectation of further growth in capital expenditures for the expansion of AI capacities.

- Quotes of Amazon (AMZN) add more than 2% after a strong report in which revenue and profit exceeded average market expectations. The main driver of revenue growth was the AWS segment, where revenue rose 28% to $37.6 billion, driven by demand from AI services. Advertising revenues also grew steadily. The company's revenue guidance for the second quarter was above average market expectations.

- Qualcomm (QCOM) securities rose by 11% on the background of the report publication. Despite a more restrained short-term outlook, investors positively perceived management's comments on the recovery of demand for smartphones, development of AI services for devices (Edge AI) and plans to enter the data center segment. Diversification of revenues and growth of income from the automotive business also contributed to the positive dynamics of quotations.

- Shares of KLA (KLAC) are down 6%, although its results and outlook for the next quarter were broadly in line with or even slightly above consensus. The market was expecting stronger upside after the rally in the stock. Investors reacted negatively to the fact that the company's guidance did not confirm a stronger strengthening of demand.

- Quotes of Carvana (CVNA) reacted to the release of quarterly results with a growth of almost 10%. The used car retailer reported adjusted EBITDA above forecasts and showed strong growth in volume sales. Investors continue to put a successful turnaround of the business model and further improvement of profitability into quotations.

Trades on April 29 on American stock exchanges ended multidirectionally, not far from the opening levels. S&P 500 corrected by symbolic 0.04%, Dow Jones decreased by 0.57%, Russell 2000 corrected by 0.60%. The NASDAQ 100 was up 0.58%, supported by strong reports from chipmakers Seagate (STX: +11.1% at the close on April 29) and NXP Semiconductors (NXPI: 25.5%).

The Magnificent Seven stocks traded mostly in the red zone in anticipation of the quarterly releases of the companies in this group.

Energy (XLE: +2.29%) once again became the leaders of growth in the broad market due to a new jump in WTI quotations. Utilities (XLU: -1.23%) and commodities (XLB: -0.86%) were the outsiders.

Treasury yields added 9-10 bps on the short end of the curve, while the 30-year UST yield reached the 5% mark for the first time since late March. Gold fell by 1%, silver by 2.3%.

The April FOMC meeting ended with the interest rate remaining unchanged, but was accompanied by a record level of disagreement among the committee members since 1992. The representative of the Board of Governors Stephen Miran, as expected, spoke in favor of a 25 bp rate cut. At the same time, three of his colleagues even opposed the retention of the monetary easing stance in the statement. Fed Chairman Jerome Powell emphasized that it would be difficult for the regulator to ignore inflationary risks caused by the oil shock, which effectively means refusing to cut the rate in the foreseeable future. The increase in oil prices caused by the US-Iran conflict continues to create additional inflationary pressure and complicates the adjustment of monetary policy.

Durable Goods Orders for March increased by 0.8% m/m against the consensus of 0.5%. Core capital goods orders unexpectedly rose by 3.3% m/m against forecasts of 0.5%. This indicates resilient investment demand in the corporate sector. Construction starts in March totaled 1502k vs. consensus of 1400k.

- SoFi Technologies (SOFI: -15.4% at the close of trading on April 29) reported better-than-forecast revenue and EBITDA, but recorded weak fee income for the technology platform. The securities were further pressured by a rise in consumer loan charge-offs and the company kept its full-year outlook unchanged.

- Management of Enphase Energy (ENPH: -9.1%) stated about the continuation of weak demand in the near term and deliberate adjustment of inventories. The market completely ignored the company's earnings, which turned out to be above forecasts, as well as localized recovery of equipment sales in Europe.

- Generac (GNRC: +16.5%) exceeded EPS consensus by about 35% and raised full-year guidance on the back of a notable expansion of the data center order book, strong operating margins and solid results from the commercial and industrial segments.

- General Dynamics (GD: +8%) reported strong Gulfstream business jet deliveries and improved profitability in submarine production. Management of the defense corporation raised its annual profit forecast.

- Brown-Forman (BF.B: -10.3%) and France's Pernod Ricard officially announced that they could not reach mutually acceptable terms for a merger deal, depriving the U.S. issuer's securities of a possible takeover premium.

- Teradyne (TER: -19.4%) reported a better-than-average first quarter thanks to strong demand for AI infrastructure solutions. However, the management presented a conservative guidance for the current quarter, pointing to the risk of a sequential slowdown in business development, which led to profit taking in the issuer's shares after an impressive rally since the beginning of the year.

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