What to know today

  • It’s not the end of the world as we know it.
  • Big delivery misses have consequences.
  • Let’s watch these price levels.
markets

Hello, Volatility

This is what markets do sometimes.

It’s been a while since we’ve seen price action like this.

The S&P 500 $SPX posted its lowest close since February 21 on Monday, slipping below its 50-day moving average for the first time since November.

At 162 consecutive days above the 50-day it was the 10th-longest such streak since 1950. And we’re talking about the biggest two-day slide for the SPX in more than a year.

After rising 403.57 points intraday, the Dow Jones Industrial Average was off 248.13 points by 4:00 p.m. ET. It was a tech-driven selloff, with the Nasdaq Composite shedding 1.79 percent.

And the CBOE Volatility Index spiked again, surging another 11.09 percent after Friday’s 16.10 percent jump.

The S&P 500 closed at its lowest level since February 21 on nagging inflation concerns and rising fear of a wider war in the Middle East.

Stronger-than-forecast retail sales data for March suggest the US consumer remains resilient enough to drive the economy, helped by a healthy labor market, but that same data are reducing rate-cut odds.

Crude oil traded lower as investors, traders, and speculators waited for word from Israel about its response to Iran’s retaliatory strikes on targets inside its territory and then traded higher when the Israel Defense Forces said it was preparing its next steps.

Between the figurative fight against inflation and literal war in Central Europe and the Middle East, stocks have suffered an unusually difficult April.

As Eddy Elfenbein noted in a late-session post on the social media site formerly known as Twitter, the stock market as represented by the S&P 500 has fallen all the way back to where it was in “those dark torpid days of late February.”

Price action is a little crazy right now, but it’s no time to panic. This is not the end of the world as we know it.

deep dive

Musk Makes More Moves

$TSLA seems to require a jolt.

The Magnificent Seven led the way lower on Monday.

Amazon.com $AMZN was down 1.35 percent, and it was the top performer. Alphabet $GOOGL was down 1.82 percent, and Microsoft was down 1.96 percent.

Apple $AAPL was down 2.19 percent, Meta Platforms $META was down 2.28 percent, and Nvidia $NVDA down 2.48 percent.

But the biggest loser was Tesla $TSLA, which shed 5.59 percent after Elon Musk told his company that he was laying off more than 10 percent of its global workforce.

Cuts in certain divisions could approach 20 percent. And two key executives announced they were leaving of their own accord, including senior VP Drew Baglino, one of four named executive officers at the company.

Baglino, who had been with Tesla for nearly two decades, led engineering and technology development for batteries, motors, and energy products and also co-hosted conference calls and other media events.

VP of public policy and business development Rohan Patel is also leaving the EV maker.

Tesla $TSLA announced significant layoffs and a key executive has left the company in the aftermath of its first-quarter EV delivery miss.

Explaining a move that could result in approximately 14,000 job cuts, Musk cited duplication of roles and the need to cut costs.

“As we prepare the company for our next phase of growth,” Musk wrote in an email seen by Bloomberg, “it is extremely important to look at every aspect of the company for cost reductions and increasing productivity.

“There is nothing I hate more, but it must be done.”

As of Monday’s close TSLA is down 35 percent year to date. It’s down 46 percent from its 52-week high and 60 percent from its November 2021 all-time high.

The big job cut numbers will attract a lot of attention and will account for the major chunk of the cost cuts.

As Wedbush Securities analyst Dan Ives said, Monday’s price action for TSLA “is as much about who is leaving as how many people are losing their jobs.”

Tesla and Musk will host their first-quarter conference call on Tuesday, April 23.

deep dive |
April 16, 2024

Musk Makes More Moves

WEEKLY MARKET OUTLOOK

Focus on These Signals

$XRT and $KRE are two tickers to watch.

Mish Schneider identifies the key question at the top of her Weekly Market Outlook: Will Israel retaliate?

That’s a big question, and if the market is a little spooked right now, Mish notes, it makes sense.

Mish is seeing a lot of discordance among her “Economic Modern Family” group of sector and industry ETF indicators, which generally means it’s not a great time to do a lot of trading.

The main thing Mish is watching right now is the behavior of the SPDR S&P Retail ETF $XRT. Retail gave a sign last week that maybe the market was ready for a selloff.

XRT was down 1.32 percent on Monday, but, as Mish notes, it’s sitting right on its 200-day average. “That would be your green line,” according to Mish, “that’s the key.”

If XRT breaks down further from there – and it doesn’t matter what narrative they push at you – that will put pressure on the rest of the market.

And if it holds and pops from here, it might be a good low-risk buying opportunity in some of those retail names.

Goldman Sachs $GS reported a 28 percent year-over-year increase in first-quarter earnings on strong investment banking and wealth management results.

If there was good news on Monday, it was in Goldman Sachs’s $GS first-quarter earnings report.

The erstwhile “vampire squid” reported 28 percent net income growth on strong investment banking and trading results. Management’s decision to roll back its consumer banking effort is paying off.

Return on equity was 14.8 percent on an annualized basis, Goldman’s best result since the first quarter of 2022.

GS was the top-performing stock in the Dow Jones Industrial Average on Monday, rising 2.92 percent.

All eyes are on the big financials right now, though we shouldn’t lose track of the regionals; as Mish notes, regional banks might be the second-most information-heavy group to watch behind retail.

The SPDR S&P Regional Bank ETF $KRE has been held down by buzz about a potential credit event since March.

But it hasn’t gone down, either, trending between 45 and 50.

If KRE breaks below 45 and XRT breaks below 76.50 – “I don’t care how bullish people are,” says Mish – that’s due warning that we’re in for some correction.

past issues

read more from our daily investor newsletter