SUPERNEWS

Macro

Powell Rally Fades, Apple Faces China Woes, Jobs Data Looms

Market reverses post-Powell rally amid Apple revenue concerns and inflationary job report anxieties.

By Barry Stearns

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5/2, 13:14 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Apple Inc.
Amazon.com, Inc.
Alphabet Inc.
QUALCOMM Incorporated
SPDR S&P 500 ETF TRUST
article-main-img

Key Takeaway

  • Powell's rally reversed as investors await Apple earnings and jobs report, with concerns over Apple's revenue drop and market share in China.
  • Qualcomm reports strong revenues in China, hinting at competitive pressures on Apple; both companies are key stocks to watch.
  • Momo crowd buys aggressively ahead of key events, while smart money trims positions; significant selling observed in gold and oil markets.

Market Dynamics Post-Powell Conference

Following Federal Reserve Chair Jerome Powell's press conference, the SPDR S&P 500 ETF Trust showcased a significant rally, driven by a mix of macro investors, technical analysis followers, and the momentum (momo) crowd. This rally, however, was short-lived as The Arora Report's cautionary stance was validated when the entire stock market rally was reversed. The anticipation builds around two pivotal events: Apple Inc's earnings report and the highly anticipated jobs report, with contrasting behaviors observed between the momo crowd's optimism and the smart money's cautious approach.

Apple's Earnings and Market Implications

Apple Inc, a key player in the technology sector and a significant component of market sentiment, is expected to report a 5% drop in revenues, marking a continuation of its revenue decline trend amidst challenges in China. This situation is exacerbated by the competition from local brands like Huawei, capturing market share from Apple. The earnings report is not just a reflection of Apple's performance but also a litmus test for the broader tech sector's health, especially considering Apple's role as a major customer of Qualcomm Inc, which has reported strong revenues from China.

Employment Data and Inflation Concerns

The upcoming jobs report, dubbed the "mother of all reports," is critical in gauging the employment landscape's strength. With initial jobless claims lower than expected and a slight increase in productivity, the data presents a mixed picture. However, the rise in unit labor costs to 4.7% against a 2.5% consensus highlights the ongoing challenge of managing inflation, a key factor for the Federal Reserve's monetary policy decisions.

Market Sentiment and Investment Strategies

The early trading session saw positive money flows into major tech stocks like Apple and Amazon, with neutral flows into Alphabet Inc. This activity contrasts with the significant selling pressure observed in gold and oil markets, indicating a volatile investment landscape. The momo crowd's aggressive buying in stocks and commodities, juxtaposed with the smart money's inactivity, underscores the market's divided sentiment. Investors are advised to adopt a cautious approach, balancing their portfolios with a mix of cash, hedges, and tactical trades to navigate the uncertain market conditions effectively.