Let's get to the big story.
Breakdown.
Well this week, the Nasdaq and the S&P 500, notching all-time record highs, but below the surface, Wall Street may be seeing signs of buckling under the weight of geopolitical escalation, as well as renewed inflation concerns.
The earnings season is off to a red hot start now.
Over 80% of companies have beaten analysts' expectations so far, pushing their overall earnings growth rate to 15.6% as of the close yesterday.
But the S&P 500 tech sector.
Bucking that positive trend as the worst performing sector in the previous session and US business activity is picking back up this month, but the numbers may be deceiving.
Well joining me to weigh in at the end of a very long week is Eric Criscuolo, a Market Strategist at the NYSE.
Eric, happy Friday.
Good morning.
Thank you so much for joining us.
Happy Friday to you, Rany.
I'm always happy to be here.
Well, first and foremost, we did see record highs for the S&P 500 and the Nasdaq, but there's a lot.
Going on to this rally.
So given the fact that there's a disparity in year to date gains and gains that we've seen since March 30th in terms of leaders and laggard, what do you think is going on here?
Yes, you know there's been a lot of rotation back and forth between sectors, between investment themes, risk on, risk off, you know, defensive versus offensive type of plays.
So there's just the market is kind of swinging back and forth.
Software a couple of weeks ago it looked like it was starting to pick up some steam, gaining some momentum.
Yesterday it kind of came crashing down, so that's kind of hot and cold right now.
Semis are back in vogue.
Intel's results, it's up 25%, I think in the free market.
So you know semis are very strong right now again, so maybe you kind of see that trade, that divergence again where semis go higher, software lower.
I don't know, but that's certainly possible.
Next week is going. be huge as far as the tech sector goes because all the hyper scalers will be reporting basically on the same night, so we'll see what they say.
But yes, there's just a lot of divergence and even some like some of the thematic names like quantum computing, rare earths, space stocks, they will all rip higher one day and then if sentiment shifts, if an ex post by President Trump comes out or something about the straight comes out, which is good or bad, that will either continue or they'll just.
Reverse the next day and all those gains will evaporate.
So it's a very kind of on off, you know, just kind of moving between sectors right now and you know a lot of times you know you'll see that after we made a big move, broke through 7000, then we kind of broke through 7100 on the S&P.
So right now it's basically, OK, we cleared that kind of wall of worry, we hit those all-time highs.
Now what?
Yes, absolutely, Eric, and as you mentioned, next week will be a big week.
We Earnings as well as the Fed meeting most likely or maybe not Powell's last meeting.
We do get a press conference, but we'll have to wait and see.
So there's still a lot of uncertainty here, isn't there?
But we did get those layoff announcements coming out from Meta, Microsoft, and even Nike.
And as you mentioned, we do hear from some of the big tech names next week.
So how are you heading into next week?
Yes, so you know those those everyone is focused on what AI will do to the workforce right as far as that kind of macro theme.
And these announcements they kind of play into that doom scenario of AI disrupting the labor market, but also it could increase productivity, right, so it could be a net benefit for the companies for their margins.
We'll see how that plays out.
It is still very early innings right now, but for next week, a lot of things coming up.
We mentioned the earnings.
You mentioned the Fed meeting.
Maybe it's Powell's last meeting as chair, maybe not.
Who knows, you know, markets have basically priced the Fed on hold for the rest of the year with just all the uncertainty, with the uncertainty about inflation, with the uncertainty about oil prices, the labor market, you know, those layoffs that we're seeing, when if Warsh actually takes the chair role, who knows?
So there's just so much uncertainty around that.
But we'll see what Chair Powell says as usual, and then we'll see what the cadence is as far as who takes over for him at some point.
But then also the Bank of Japan, Bank of England, the ECB, they all have they all have policy meetings as well.
The market doesn't expect anything surprising, so it's probably going to be more about the commentary that they put out there.
And as you mentioned, central banks are meeting and announcing their rate decisions, but given what we have been watching in terms of rising energy prices and the geopolitical situation.
In the Middle East, that is something that we are all paying attention to.
And here in the US, of course we're going to be paying attention to inflation.
We get PC figures as well as GDP next week.
So a lot going on.
But one thing I do want to get your take on is that this week we saw the Dow Jones Transportation index go up and then go down.
So tell us about this car crash, and I'm talking about ticker symbol CAR.
Yes, that was one of the every now and then you see something like.
This happened in the markets.
It's basically it was a very mechanical thing that happened, a very idiosyncratic and specific thing where there was a huge, there was a big short interest position in the company Avis, and then a couple of funds got in and basically basically kind of controlled a lot of the outstanding shares.
Short squeeze happened and you just saw that stock.
Absolutely ripped from about $150 a month ago, maybe a couple of weeks ago, to about $800 in the span of a couple of weeks, you know, so something we generally don't see a lot of, but it does happen from time to time.
That one move basically took the entire Dow Transports up that was responsible for that entire move higher in the Dow Transports, which is why it outperformed by so much.
But then That only lasts for so long.
Those trades reverse and they reverse very hard, and that's what we saw Wednesday and Thursday with Car Avis falling very hard and so the transports now look like they're under a lot of pressure, but it's basically some idiosyncratic moves in one so it's really important.
You literally look under the hood when we and finally we have about 60 seconds here.
So I do want to ask you about the 17 straight consecutive days of gains when it comes to the semiconductor index.
So do you expect that to continue?
I mean, listen, usually it's hard to keep those streaks going.
Eventually.
Positions get overextended.
Investors want to monetize the gains they've had, you know that will fall eventually.
What goes up must come down, whether it's today or Monday, I don't know whether it's one day or 3 months of underperformance coming up.
I don't know.
But yeah, no, things get overextended, although they could overextend for a while, 17 straight days.
That's a long time.
And people probably thought it would be over in 10 days, right?
It, it basically doubled that.
So when it reverses, who knows, but it will reverse.
Markets go up and down, but it is, it is an interesting stat to throw out there.
Yes.
Well, Eric, always great having you on the show.
A lot of moving parts here on Wall Street, so I appreciate you taking the time to break it all down. pleasure.
Have a great weekend, Eric.
You too.
Thank you.
