Shares of Lululemon are rallying in the premarket after strong earnings. (Photo by Raymond Boyd / Getty) , [+]
key takeaways
- Lululemon beats on earnings
- Alibaba is breaking up into 6 different companies
- VIX below 20
Tuesday was a slow day and shares remained largely unchanged. The Nasdaq fell less than 0.5% while the S&P 500 lost just 0.2%. Despite being relatively quiet this week, stocks have rallied significantly since hitting recent lows in the wake of the banking crisis just a few weeks ago. The S&P 500 is up 4% and the Nasdaq Composite is up nearly 7%.
The market scenario is quite interesting at the moment. Outside the banking sector, stocks appear to be on a solid footing. I have discussed the S&P 500 in the 3800 – 4200 range in the past. We still seem to be in that range but with the end of the quarter and earnings season still a few weeks away, I’m curious if we can somehow break out of that range. In the banking sector itself, we have seen a lot of business opportunities. Now, I’m looking for signs of less trading and more long-term investing out there, which may indicate that concerns have subsided.
Looking at the market as a whole, the VIX has fallen below 20. Oil is comfortably above $70/barrel. The yield on the 10-year benchmark is just above 3.5%, which is a long way from its peak. In many ways, asset prices are stabilizing and feeling calm after the banking crisis and before that, concerns about interest rate hikes. The only caveat to this may be in metals, where gold and silver, the two traditional hedges against inflation, are trading near their 6-month highs.
Speaking of interest rates, without much economic data on the calendar this week, expectations of what the Fed will do at its next meeting in May are a bit inconclusive. As of this morning, there is a 64% chance that interest rates will be left alone at the next meeting. I’ll be watching to see if that number starts to bounce around after Friday’s personal consumption expenditure (PCE) release. Then next week, despite the markets being closed for Good Friday, the jobs report is due out.
Taking a look at individual stocks, Lululemon released earnings after the close on Tuesday and provided an upbeat outlook. Shares of the high-end apparel maker are indicated 16% higher in the premarket. In the technical field, Micron Technology
Mu
Yesterday, the company announced that it intends to split into six separate companies. There will be new companies for: cloud computing; ecommerce; digital mapping; food delivery; Logistics; and media entertainment. This could be a way for the company to diversify its risk and launch six different IPOs. Alibaba shares jumped 14% on Tuesday on that news.
Later this morning, we’ll take a look at pending home sales. We are getting into the time of year where people start to move in but with rates significantly higher than a year ago, it will be interesting to see if this affects sales. I’m keeping an eye out for any end to quarter window dressings. There is always a possibility of volatility at the end of a quarter as fund managers want to end on a high note. As always, I will keep up with your investment plan and long term objectives. have a nice day.
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