April 11,2018.

With fundamentals regaining the limelight tomorrow and on Friday, yesterday was all about the news, macro and micro. First-off, the market rode a wave of optimism after China’s Xi framed himself as the converse of Trump yesterday. Among other things, he discussed ways to open his economy, from lowering car tariffs to strengthening intellectual property rights and reducing consumer product tariffs. On the micro/domestic level, Facebook’s Mark Zuckerberg was in the spotlight. Standing before a phalanx of U.S. senators, the company’s CEO defended tooth and nail his company’s commitment to his platform’s users, apologizing in no uncertain words, Facebook’s stock rising 4.5%, Zuckerberg adding on $3 billion to his net worth to boot.

All-in-all, only 2 of the sectors on the S&P 500 ended down. Real estate stocks shed 0.71%, utilities, 0.72%. There were some huge winners, though. Energy shares surged 3.32%, IT soared 2.48%, and telecom, 2.31%. We’ve seen volatility this year that has totally deviated from what came last year. Last year, on the S&P 500, we saw only eight days with moves of greater than 1%. So far this year, we’ve seen 27. Weighing in on the phenomenon, GuideStone Capital Management President, David Spika, commented, “This is a more normal environment. It doesn’t feel normal because we’re not used to it.”

As for Facebook, Zuckerberg was grilled for 5 hours, pressed with questions, at times invasive and at others, accusatory. He held his head up high, though, rebuffing certain questions, appearing apologetic, yet making no concessions as to his willingness to accept greater regulation. Cambridge Analytica’s data misuse at the heart of the testimony, Zuckerberg only went so far as to say about the failure to notify the FTC, “We considered it a closed case.” The congressional hearing was titled, “Facebook, Social Media Privacy, and the Use and Abuse of Data.” Whereas yesterday the social media stock rocketed higher, we are yet to see if any regulation is implemented, if Facebook will be fined, if Zuckerberg will remain at the company’s helm, and whether social media users – and especially the 2 billion currently using Facebook – will continue using the company’s services to the same extent. In social media, tides can turn quickly, a firm quick to gain favor or fall out of favor depending on social trends, celebrity, cliques and the like.

One senator, Sen. John Neely Kennedy (R-La.), laid on the punches in a most forceful way,  “There’s some impurities in the Facebook punch bowl,” he said. “I don’t want to have to vote to regulate Facebook. But by god, I will. That depends on you. … Your user agreement sucks.” Now what remains to be seen is what the U.S. Congress decides behind closed doors. With that said, Facebook had its best day yesterday in 2 years.

Two of the biggest winners yesterday on the Dow were Boeing and Caterpillar. Boeing (BA) rose 3.83%, Caterpillar (CAT) climbing 3.5%. Industrial stocks, the two received a boost after fears of a trade war attenuated.

Other companies that saw very nice gains yesterday included automakers, eagerly expecting and hopeful of the loosening of Chinese tariffs. Ford (F) took off 1.8%, GM and Tesla (TSLA) shooting up 3.3% and 5.2% respectively. Fiat Chrysler (FCAU) edged up 2%.

Crude broke up past the $65 barrel level, with gains of over 3% on the day, and making the energy sector the strongest sector of the day on the S&P 500. The Energy Select Sector SPDR fund (XLE) climbed 3.3% on the day, making it the ETF’s strongest gains since November 30, 2016.

In after-hours trading, Analogic (ALOG) toppled 12%, the healthcare and security company, on Tuesday afternoon, approving a $1.1 billion takeover by Altaris Capital. Analogic, resultantly, will be taken private.

Today’s Economic Calendar: The March CPI is due out 8:30 Eastern Time, coupled with core prices. The Federal budget will be released at 14:00, the Fed minutes expected for the same time. The minutes have the potential to move markets and will give an indicator into how many rate hikes to expect this year. As of now, the going assumption is 3, but any sign that 4 are forthcoming could on the one hand give banks a bounce – but could cause other sectors to see a backlash, capital costs presumably becoming higher.

Be primed for the earnings reports of 11 different companies today, though things will be heating up a lot more tomorrow and on Friday.

Today’s reporters include: BBBY, BSPM, JRJC, FAST, HQCL, LEDS, TAYD, WAFD, and YGE.

Bed Bath and Beyond (BBBY) will give an indicator into the strength of brick and mortar retailers, in the face of Amazon’s onslaught. Analysts’ projections are earnings of $1.40 per share on quarterly revenue of $3.69 billion. BBBY will be reporting after the market closes. The stock was up 1.97% in yesterday’s trading.

Wall Street expects Fastenal (FAST) to report quarterly earnings of $0.61 per share on top line revenues of $1.18 billion. Yesterday, in after-hour trading, FAST was up $0.50.

There are a few key things to remember:

  1. The market can be vicious with the slightest miss.
  2. The market isn’t always predictable; a company can beat the consensus on both the top and bottom line and tumble if its forecasts don’t find favor with investors.
  3. Likewise, a firm can miss revenue and earnings forecasts and still take off, if future forecasts are solid and to the market’s liking.
  4. Sometimes earnings can miss, revenues beating – or the opposite – and depending on what key officials or CEOs say along with the reports, investors and traders can alternatively put more emphasis on revenues or earnings, given the circumstances.

Market Summary: The blue chip Dow surged 1.79%, the S&P 500 climbing 1.67%. The NASDAQ took the pot with gains of 2.07%.

Wednesday’s Hot Stocks: FB, FOXA, ALOG, GM, F

Have a great trading day!