[Chart courtesy of MarketWatch.com]

1. Moving the markets

Another early sell off pulled the Dow down by some 400 points, as a one-two punch hit the US markets. Global fears about an economic slowdown loomed large, leading to a slump in Chinese stocks, which pulled energy, commodities, and precious metals off their recent highs—along with all US equities.

As a result, bond yields cratered for the first time in a while with the widely followed 10-year dropping 7 basis points to close at 2.827%. Uneasiness about this week being a big one for corporate earnings did not help, with about 160 S&P 500 companies scheduled to report and half of the Dow Jones. All eyes are on the big boys like Amazon, Apple, Microsoft, and Alphabet (Google).

Despite the early dump, the markets found some footing and the subsequent reversal sent the Dow up over 200 points into the close. The lead dog was the Nasdaq with a 1.29% gain, which could be just a temporary bounce of hope, as the index has come off its highs by some 20%.

The loser of the day award goes to SmallCaps, which have dropped to their lowest since December 2020 and are currently down 22% from their highs, as ZH pointed out.

The US Dollar continued its trajectory to higher prices, the Chinese Yuan went the other way, and the Russian Ruble soared to its strongest relative to the Euro in 2 years.  

On deck later this week are the latest CPI numbers from countries around the world, which will have an impact on bond yields and equities.  

[Chart courtesy of MarketWatch.com]

1. Moving the markets

While the Dow continued to pump all day, the other two major indexes did not find a driver to participate in the ramp-a-thon and ended the session in the red. The S&P 500 closed just about unchanged while the Nasdaq surrendered 1.22%.

The Nasdaq had been struggling all day, which was the result of Netflix tanking an epic -35% (-63.1% YTD), after having disclosed the loss of 200k subscribers in the last quarter along with weak results and guidance. The Dow was helped higher by strong earnings from Proctor & Gamble.

FactSet posted this:

Roughly 12% of S&P 500 companies have reported first-quarter earnings thus far, with 80% of those names beating analyst expectations,

But the real story that’s behind the market’s tepid reaction during earnings so far is the lack of corporate guidance.

Bond yields sustained their drive higher with the 10-year touching the 2.94% level early on, its highest since late 2018, but closed lower by almost 10 basis points at 2.846%.

Noticeably absent was the short squeeze, which did an about face with member stocks tanking, as they are supposed to. Quipped Zero Hedge, after looking at this chart, tomorrow we should squeeze back up.   

The dollar pulled off its lofty level, Gold ended up about unchanged, but the gold ETF GLD gained +0.49%, while Crude Oil dumped and pumped but closed above the $100 level.  

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Today was comeback day with the S&P 500, after having fallen for two straight weeks, finally receiving a boost, along with the other major indexes, to end the session in the green. The Nasdaq led the charge with a gain of over 2%.

Some analysts contributed this bounce to sentiment and positioning as having been too bearish, hence a bullish response resulted, also because of better-than-expected bank earnings with Citizen’s Financial jumping more than 7%, while powerhouse JP Morgan added a more modest 2%.

A few tech and media companies like Disney (+3.8%) and Netflix (+3.7%) joined the party, while Microsoft and Alphabet each gained over 1%. “Despite recession concerns, the underlying economic data have been holding up fairly well,” added a strategist at Edward Jones.

Still, this solid rebound was astounding for two reasons:

1. It happened in the face of a continued surge in bond yields. The 10-year added almost 8 basis points (bps), to close the session at 2.94%, with the 3% level now in striking distance. It remains to be seen whether a break above it will bring bearish sentiment back in play.
2. The world as a whole and the IMF have slashed global growth outlooks, slamming crude oil lower, while Fed mouthpiece Bullard threated with 75 bps hikes instead of the previously announced 50 bps.

Traders and algos did not care, and the rally was on thereby erasing some of the recent losses. And, as you might have expected, the ever-lurking short squeeze gave an assist and helped sustain the bounce into the close.  

With yields heading higher, the US Dollar followed suit and reached its top level since June 2020, according to ZH. Gold was the victim of the dollar and bond yield surges and gave back some of its recent advances.