Apologies for the delay. Sunday’s new made what I had prepared rather stale. Wouldn’t want to serve you that. Italian Pride. Anyway, here’s a fresh Prebell Pregame
Oil Swam
As diplomacy failed over the weekend in Pakistan, the probability that we will soon reinsert the word “hot” before the word “war” increased rapidly. A number of reports across social media and reputable networks outlined a wide range of immediate recourse: resuming limited strikes, targeting civilian infrastructure, and a U.S. embargo of the Strait of Hormuz.
Oil futures went higher. Stock futures went lower.
Seems appropriate.
That said, it appears a Monday (today) 10AM deadline has been set for the embargo, leaving the door open for a “TACO” trade, which likely dampens any early session selling pressure. Furthermore, so long as forward earnings estimates remain resilient, I believe this market wants to give the benefit of the doubt to a bullish outcome.
So be patient.
Double-Edged Sword
Speaking of earnings, Q2s start this week; and, their resilience is responsible for downside protection markets have experienced. S&P 500 forward estimates went up through March. There is no telling how much worse the 9% drawdown would’ve been had the earnings compressed alongside the multiple.
Unfortunately, this is a double edged sword.
Due to their resilience, expectations for this earnings season haven’t changed. In fact, they’ve moved slightly higher, meaning there is no margin of safety when these companies report, despite the declines in individual names. As such, I don’t expect the market to be sympathetic toward CFOs who choose to leverage this crisis to issue a more achievable (the diplomatic way of saying “weaker”) guide.
If a majority of CFOs go this route, then downward earnings revisions are overdue and one should prepare for a retest of the lows. If a majority replicate their performance last April — provide constructive outlook in number and commentary — then we may be fine.
CFOs – especially those in the S&P 500 – are Street savvy. Managing analysts on Wall Street is part of the job, same as preparing the financial statements and forecasts. Consequently, I expect management teams to perform an encore of April 2025.
Key
Macro Economic Events
Corporate Earnings
High Importance
See Note Section Below For Additional Insight
Monday
Goldman Sachs (GS) | BTO
Tuesday
J.P. Morgan (JPM) | BTO
Citigroup ‘(C) | BTO
BlackRock (BLK) | BTO
Wells Fargo (WFC) | BTO
March’s Producer Price Index
Core PPI year over year | Est: No Est. Available; Prior: 3.5% | 0830
Producer price index | Est: 1.1%; Prior: 0.7% | 0830
Core PPI | Est: 0.4%; Prior: 0.5% | 0830
PPI year over year | Est: No Est. Available; Prior: 3.4% | 0830
Wednesday
ASML (ASML) | BTO
Morgan Stanley (MS) | BTO
Bank of America (BAC) | BTO
Empire State manufacturing survey | Est: No Est. Available; Prior: -0.2% | 0830
Michael Barr, Fed Governor | 0830
Michelle Bowman, Fed Vice Chair for Supervision | 1345
Thursday
Taiwan Semiconductor (TSM) | BTO
Initial jobless claims | Est: 215,000; Prior: 219,000 | 0830
Philadelphia Fed manufacturing survey | Est: 12.4; Prior: 18.1 | 0830
Industrial production | Est: -0.1%; Prior: 0.2% | 0915
Capacity utilization | Est: 76.3%; Prior: 76.3% | 0915
Stephen Miran, Fed Governor | 1035
Netflix (NFLX) | ATC
Friday
Mary Daly, San Francisco Fed President | 1130
Tom Barkin, Richmond Fed President | 1215
Christopher Waller, Fed Governor | 1400
Gorilla With Glasses 