Morning Reads

Todays Open Interest Change




Earnings season is heating up this week as investors shift their focus from banking to other sectors of the economy. U.S. indices closed higher on Monday as stronger-than-expected Q1 results at Charles Schwab (SCHW) outweighed lower fee revenues and shrinking deposits at State Street (STT), though the session was quite choppy. Bank of America (BAC) and Goldman Sachs (GS) will follow up with their quarterly figures this morning, before the earnings parade brings out streaming heavyweight Netflix (NFLX) after the bell, as well as EV leader Tesla (TSLA) tomorrow.

Snapshot: Earnings for S&P 500 companies are expected to have declined 4.8% Y/Y in the first quarter, according to data from Refinitiv, marking the second consecutive drop in year-over-year earnings growth. While that would translate into the first "earnings recession" since the pandemic, it could be somewhat of a good sign. Inflation is coming down, which is weighing on pricing and profit margins, while the economy is still growing with many firms reporting strong top-line figures. A bigger problem could arise if executives start issuing downbeat forecasts or companies surprise investors with some serious or severe quarterly losses.

"The prior earnings recession started in 2020 Q2, lasting three quarters from start to finish. Today's earnings recession may also last three quarters if analyst expectations turn out to be correct," SA contributor Lipper Alpha Insight writes in a new article about the earnings recession. Analysts have also set the bar lower heading into earnings season by downgrading Q1 estimates, while earnings growth contribution and weights will play an outsized role in determining S&P 500 sector direction.

Go deeper: "Q1 estimates have declined significantly heading into earnings season which may set a lower bar for corporations to beat analyst expectations and surprise to the upside. The quality of a beat will matter, as investors look to hear from company management on numerous themes, including the macro-outlook, health of the consumer, impact of higher input costs on margins, employee hiring (or layoffs), and future capital expenditure plans." (2 comments)

Gimme an extension

Tax Day is officially here, coming later than usual this year because of the calendar cycle and a holiday in the nation's capital. It may be more painful for some investors due to 2022's market tumult, which saw indexes fall, bonds suffer their worst selloff in history and cryptocurrencies plunge in value. These declines can have big tax consequences for individual investors who sold assets held in taxable accounts, including people who dumped losing stocks to offset taxable capital gains from selling winners. Seeking Alpha has compiled answers to some of investors' most common tax questions, including how stock sales and dividends are taxed, how and which cryptos are taxed, and a brief explanation of the "wash-sale rule," which prevents investors from gaming the system by selling a stock at a loss for a deduction and then buying back the same stock the next day. (29 comments)

New market

Apple's (NASDAQ:AAPL) plans for a pivot to India can be seen by CEO Tim Cook's visit to the country, which is quickly becoming the tech giant's most important manufacturing base outside of China. Cook is set to open up the country's first Apple Store in Mumbai today, followed by a second one in Delhi on Thursday, after saying he was "very bullish on India" on last quarter's earnings call. Only about 4% of the nation's nearly 700M smartphone users have iPhones, but the company is hoping to build the brand and consumer loyalty, with Cook also reportedly set to pay a visit to Prime Minister Narendra Modi (Wedbush Securities calls it a "strategic poker move.") Apple's revenue in India is said to have grown by nearly 50% to a record $6B over the past year, and follows other fresh initiatives, like the recent rollout of an Apple Card with a high-yield savings account from Goldman Sachs (GS). (6 comments)

Meet the EVs

Treasury Department rules that go into effect today will reduce the number of electric vehicles that qualify for the full federal EV tax credit. The new guidelines stipulate that electric and plug-in-hybrids can only get the full tax credit if the vehicles are made in the U.S. and most of their batteries and critical minerals are sourced domestically or from the closest trading partners. Cars that will qualify for the full $7,500 tax credit include the Chevy (GM) Silverado EV, Chrysler (STLA) Pacifica PHEV, Ford (F) F-150 Lightning, as well as six other models, but some automakers like Rivian (RIVN) didn't make the cut (see the full list here). While the EV sourcing rules are set to tighten in 2025 - with battery minerals not allowed from a foreign entity of concern such as China and Russia - some analysts expect carveouts and adjustments to be made on pricing and sourcing rules that could potentially help EV startups such as Fisker (FSR) and Lucid Group (LCID). (220 comments)

Today's Markets

In Asia, Japan +0.5%. Hong Kong -0.6%. China +0.2%. India -0.4%.
In Europe, at midday, London +0.3%. Paris +0.4%. Frankfurt +0.4%.
Futures at 6:00, Dow +0.2%. S&P +0.2%. Nasdaq +0.4%. Crude -0.2% to $80.67. Gold +0.4% to $2014.80. Bitcoin -0.5% to $29,781.
Ten-year Treasury Yield unchanged at 3.60%

Today's Economic Calendar

8:30 Housing Starts and Permits
1:00 PM Fed's Bowman Speech

Companies reporting earnings today »

What else is happening...

Survey results: See the breakdown on how many traders want to use AI.

Watch these stocks for a potential rally as short sellers get tested.

Inflation to get 'sticky' around 4% to 5% - Mohamed El-Erian.

DeSantis ramps more threats against Disney (DIS) over tax-district scuffle.

McCarthy says House Republicans will vote on debt limit, spending cuts.

China's economy rebounds following years of zero-COVID measures.

Elon Musk's SpaceX (SPACE) delays Starship rocket launch.

Wheat futures jump on growing uncertainty over Black Sea grain deal.

Dominion squares off against Fox News (FOX) in high-stakes $1.6B case.

Biden administration notifies Congress of $259M sale of F-16 gear to Turkey.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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