What to know today

  • The S&P is struggling.
  • Tesla is stalling. 
  • Bitcoin is rising.
markets

Against the Wind

Geopolitics, inflation, and earnings are all problematic right now.

The S&P 500 closed in the red for the sixth straight session on Friday. The index has now put up a negative number for three weeks in a row. And its streak of five consecutive positive months is in serious jeopardy.

This is not a normal April.

Usually, April is kind to investors.

Since 1950 and through 2023 it was in fact the second-best month for stocks with an average return of approximately 1.5 percent, according to Ryan Detrick of Carson Group.

Detrick has pointed out as well that stocks generally lag during the first half of April before surging in the second half of the month.

If it’s going to happen this April, it’ll have to be this week.

Although they tend to be choppy into Memorial Day, the average election-year return for the S&P 500 since 1950 is 7.3 percent.

We were/are coming off five straight months of gains for the S&P. And we’re still within one of the most positive long-term trends for stocks, defined by the four-year presidential election cycle.

Digging a little deeper, numbers at the index level often lag things like breadth, the number of stocks making new highs and/or new lows, and shifting leadership among sectors and industries.

It’s fair to say this bull market has been on pause while funds flow into assets where people think they’ll find better returns moving forward. That’s the way these things work over time.

“Sector rotation is the lifeblood of bull markets” is how you’ll hear many technical analysts explain the process.

Friday’s headline numbers for the major indexes do indeed reveal some strange below-the-surface happenings – the Dow Jones Industrial Average closed up 0.56 percent, while the S&P 500 lost 0.88 percent and the Nasdaq Composite was down 2.05 percent.

That’s quite a spread. And it is as simple as Neflix $NFLX and Nvidia $NVDA and Meta Platforms $META and Amazon.com $AMZN weighing on the latter two indexes, with geopolitical tensions and inflation concerns providing significant background noise.

NFLX opened Big Tech reporting season on Friday with a substantial beat on new subscriber additions but also said it will no longer report that kind of data on a quarterly basis.

Wall Street has kept a close eye on that number as a key barometer of streaming-service health. NFLX prefers that analysts focus on revenue and profit, like it’s a mature company.

And that’s why NFLX, which is following along with Apple $AAPL and META in holding back key numbers about unit growth and app subscribers, respectively, had its worst day in nine months, falling more than 9 percent.

Magnificent Seven reporting season gets underway when META reports after the close on Wednesday. Microsoft $MSFT and Google parent Alphabet $GOOGL will report after the close on Thursday.

AMZN is scheduled to report on April 30, Apple $AAPL on May 2, and NVDA on May 22.

The weekend was relatively quiet on the Iran-Israel front, though the US Congress did pass a bill to provide military support to its ally in the Middle East as well as to Ukraine and Taiwan.

And we should look forward to what will probably be a “dovish” print for the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge.

deep dive

Times Get Tougher for Tesla

Management will report earnings on Tuesday.

It appears that 100 percent of the 3,878 Cybertrucks manufactured and delivered by Tesla $TSLA from November 13, 2023, to April 4, 2024, are the subject of a federal recall in the US.

“On affected vehicles,” reads the Safety Recall Report issued by the National Highway Traffic Safety Administration, “when high force is applied to the pad on the accelerator pedal, the pad may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.”

It’s the latest in a series of suboptimal developments for the EV maker.

Exxon Mobil $XOM has surpassed Tesla $TSLA in terms of market capitalization amid rising oil prices and falling EV sales.

TSLA shed another 1.92 percent to close at $147.05 on Friday and has lost 40.82 percent year to date, making it the second-worst performer in the S&P 500 in 2024. The stock is now down 64.13 percent from its November 4, 2021, all-time closing high of $409.97.

If it were to sink below $120 per share and Toyota Motor $TM were to hold steady the latter would re-take the lead as the world’s No. 1 automobile producer by market capitalization. And Exxon Mobil $XOM has already overtaken it.

TSLA, whose market cap exceeded XOM’s by $1 trillion in November 2021, will report results after the market closes on Tuesday.

deep dive |
April 23, 2024

Times Get Tougher for Tesla

BITCOIN

After the Fourth Halving

“The real test has only just begun.”

Bitcoin $BTC hovering around $65,000 on Sunday evening, having risen more than 1 percent following the fourth halving on April 19.

Halvings are written into the blockchain’s code and will happen every four years until the total number of BTC reaches 21 million. That end date is still more than 100 years out.

They effectively restrict new supply. The thing about this one is that it comes after the introduction of spot BTC exchange-traded funds that have dramatically increased demand for the world’s No. 1 cryptocurrency.

As this nice chart put together by Jake Wujastyk illustrates, BTC enjoyed extremely healthy runs following the first three halvings in 2012, 2016, and 2020.

Bitcoin $BTC has seen gains of 9,717 percent, 383 percent, and 587 percent in the 12 months following previous halving events.

BTC is up more than 50 percent so far in 2024. But it remains below the all-time high north of $75,000 in mid-March.

The bull case seems obvious here, and it has multiple analysts saying BTC could hit $100,000 this year.

Tim Copeland, the editor-in-chief of The Block, has some questions. “For the bull case,” Copeland writes, “if bitcoin’s price cooperates, it could see a surge in demand from the ETFs and this could create sustained momentum.”

This would create a virtuous cycle of more interest and more demand and more adoption, BTC advancing farther along its current trajectory.

There is a bear scenario: “The halving has cut revenue for bitcoin miners nearly in half. This has the potential to reduce the number of profitable miners and could result in the hash rate dropping over time.” A higher hash rate is indicative of a more secure, healthier proof-of-work blockchain network.

“If the price drops in the bear scenario,” Copeland explains, “it might lead to selling pressure from the ETFs and lower transaction fees, which coupled with the reduced mining rewards could mean fewer miners keeping the network secure.

Copeland notes that this theoretical concern may one day have to be grappled with and that with the fourth halving in the past “the real test has only just begun.”

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