Blame Elon Musk for the sour mood that’s shaping up for Thursday, as Tesla earnings gloom (see more below) appears to be having a pinball effect across several asset classes.
Of course, the day is young, with lots more data and earnings to come, including some regional banks after the sector’s turmoil last month.
Assets moving in tandem is the theme of our call of the day, from TheoTrade’s chief market technician, Jeff Bierman, who sees dark clouds gathering for markets due to “asset auto correlation overload.”
Bierman, an adjunct instructor at Loyola University’s business school, explains that bitcoin BTCUSD,
“There’s nowhere to hide, no diversification in this type of market. This is a black swan event. It’s a bubble that can be burst at any time by an exogenous cataclysmic risk event or any number of factors,” Bierman tells client in a new note, adding that it’s “highly likely” this will mark the beginning of the end of the 2023 stock market rally.
“The market is technically overbought, fundamentally overpriced, has virtually no risk priced in (the VIX is at 17), and is sitting on a mountain of complacency. This is a witch’s brew for the pain trade to the downside,” he said.
The VIX, or the Cboe Volatility Index VIX,
Read: The VIX is telling stock-market investors it’s dangerous to bet on Fed interest-rate cuts this year
Bierman notes that almost every stock outside of financials has rallied to the point of being priced for perfection and beyond, with expectations also too high. Morgan Stanley’s Mike Wilson warned earlier this week that lofty earnings forecasts are at risk of a sudden, sharp turnabout.
Bierman, who has more than 30 years under his belt as a stock analyst, hedge-fund manager and financial educator, admits he’s probably early on this call. But while market trends are still intact, “momentum generally turns before the trend and bullish momentum has been completely sucked out of the SPX,” he said.
And he thinks the market has already squeezed in so much good news, there’s scant upside left, while there’s a ton of wide open space to the downside.
He suggests investors should pay heed to one of the few realists out there right now, JPMorgan CEO Jamie Dimon “had the integrity and the gumption to admit that we are in an earnings recession and that investor expectations are out of whack.”
In short, don’t let those algos fool you, he says.
Stock futures ES00,
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Tesla shares TSLA,
Opinion: Don’t fall for Elon Musk’s full automation fantasies
U.S.-listed shares of Nokia NOK,
Weekly jobless claims and the Philly Fed manufacturing survey are due at 8:30 a.m., with existing home sales and leading indicators at 10 a.m. It’s a busy day for Fed appearances, with Fed. Gov. Christopher Waller at 12 noon, Cleveland Fed President Loretta Mester at 12:20 p.m., then Dallas Fed President Lorie Logan and Fed Gov. Michelle Bowman at 3 p.m. and Atlanta Fed President Raphael Bostic at 5 p.m.
Treasury Secretary Janet Yellen has accused China of acting illegally in a bid to “dominate foreign competitors,” and says the U.S. will give priority to national security interests.
In San Francisco, the value of a former WeWork office building has been slashed by 66%.
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“Agriculture futures have lost three important pillars of support,” says Dave Whitcomb, founder of Peak Trading Research, in a note to clients. Those pillars: crude oil, down 3.7% this week, the Brazilian real (top origin currency), down 3.2% this week and the Chinese yuan (top importer currency) down 0.5% this week.
“That’s a steep hill to climb, even for markets with fundamental stories (Cattle, Sugar, Coffee). Watch if Crude Oil continues to give up its OPEC production cut gains and the direction of the U.S. dollar. Bigger macro catalysts coming in May,” he says.
Read: Orange-juice futures are near a record. Sugar is at an 11-year high. And coffee is peaking too. What’s going on?
These were the top-searched tickers on MarketWatch as of 6 a.m.:
||Bed Bath & Beyond|
||Taiwan Semiconductor Manufacturing|
||First Republic Bank|
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