⚫️ China Tariff Pivot

⚫️ Earnings Season

⚫️ Retail Sales

Wall Street got its much needed relief rally last week after a terrifying three day period - Thursday to Monday morning - that saw stocks fall over 14% in the quickest drop since the October 1987 crash.

As we begin this week, again, traders will be fixated to social media feeds and the newswires for the latest on this never ending saga of “tariffs-on, tariffs-off”. Scroll down and we will recap the crazy highlights in the week in review.

One thing the current administration has been great at is keeping market participants on their toes. I struggle to write this note as the news keeps changing. Sometimes it feels as if this administration is just making things up as they go along and using social media and market reaction to gauge if their ideas are good or not.

Let’s look at where we are before doing a deeper dive and the three things traders will be watching for this week.

Bear market averted, now what? We never hit “official bear market territory” as the S&P 500 traded down 20% on an intraday basis on Monday, but never closed down 20% from its highest close.

Technically, we got a much needed relief rally from a very oversold condition. We still have room to run, but there are two key levels of resistance to clear before feeling we are out of the woods.

Traders will be watching the 5500 level closely. It was the prior support level in March from which we broke below on April 2nd. Step one to a recovery would be a close above this mark.

Step two is that flattening 200-day moving average at 5760. That’s 7.4% higher than current levels and if the market can get back to that area expect selling pressure to pause any rally.

As for the downside, battle lines have been drawn. The S&P 500 made higher lows each day last week. 5000 seems to be a psychological level to watch, but 4950 is the key closing low to stay above if there were to be a re-test of the lows.

China Tariff Pivot. Speaking of ever changing news, Chinese tariffs have been all over the place and the focal point in the trade war. Heading into the weekend the President increased import duties on goods from China to 145% but reduced those on imports with most other countries to a baseline 10%.

Last Wednesday, the President announced a 90-day review period to negotiate better deals with most nations initially impacted by his April 2nd “Liberation Day” announcement and the market reacted quite positively with the S&P 500 ending the week higher by over 5.6%.

However the news didn't stop there. On Saturday, the Trump administration announced that smartphones and computers will be exempted from reciprocal tariffs. This move should help tech companies like Apple, which makes most of its products in China, continue to rebound in Monday’s trading.

Also announced were exclusions for other electronic devices and components which include semiconductors and devices used for storing data.

Yet on Sunday, the U.S. Commerce Secretary, Howard Lutnick, said on ABC’s This Week that recent exemptions for smartphones and other electronics from new tariffs “are temporary”.

So again, despite some positive news that could lift some beaten down sectors, confusion and uncertainty remain the theme in Washington as proven by the Commerce Secretary’s comments.

Earnings Season. The banks officially kicked off earnings season on Friday as J.P. Morgan (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) announced their results.

This week the slate of reports grows louder but one common factor may persist - lack of guidance.

Last week, during the three earnings calls of the banks mentioned above, the word or a variation of the word “uncertain” was said 40 times! Expect that surge to continue as companies struggle to deal with the constant changes when it comes to tariff policy out of Washington.

That will directly impact the analyst community covering these stocks so expect cautious outlooks going forward as we head into Q2.

Retail Sales. Analysts are looking for retail sales numbers to potentially surge as shoppers attempted to front-run the announcement of tariffs. The biggest benefactors should be imported autos and parts as prices were expected to surge by close to $5000 per vehicle.

According to Bloomberg data, despite an uptick in some big ticket items, investors may pull back on most discretionary items. Real personal spending continues to cool, but overall an uptick may be likely due to the fear of the April 2nd “Liberation Day” announcement.

Overall, reaction to the news will continue to be overshadowed by the continued headlines out of Washington. We experienced that last week positive inflationary data in the CPI figures made little impact to the market despite coming in better than expected.

Earnings. Off we go - four full days of earnings before we hit the Good Friday holiday.

Stocks in Focus

Goldman Sachs (GS) reports on the heels of JP Morgan’s (JPM) solid results that saw its shares rally by 12.3% and recapture its 200-day moving average.

Watch the trading revenue numbers as added volatility should help their bottom line exceed expectations. The implied one day move for earnings day is +/- 7.7% and if the market is moving that morning then expect a possible bigger move.

Technically, shares have been put through the ringer. Price has broken many key trendlines and support levels along the way. Maybe, just maybe, we have found a floor.

Like most stocks in this current environment, the swings have been wild. Lines in the sand have been drawn and maybe GS can follow JPM’s lead as the charts are quite similar.

Things have been extremely volatile; the range between support and resistance is wide. The $440/$450 area looks to be a strong area of support for now. However, the trend has changed and there has been much technical damage done. There are levels of resistance above, but it seems more likely that they may get tested faster to the upside than any retest of the lows.

On a rally watch the $520 level from which it broke down after breaching its 200-day moving average. If shares eclipse that, it is likely we will experience a run back to that $540 area at its 200-day. That would also take shares back to its new downtrend line and should be met with much selling pressure. 

Johnson & Johnson (JNJ) has experienced some of the wildest swings since making a new high back in early March. Shares have fallen over 16% and look to get back to its winning ways when they report on Tuesday.

Year-to-date, shares are up 5% and in one of the strongest sectors for those playing defense. Like all companies reporting, focus will be on management’s commentary on future earnings guidance and potential impacts from global economic conditions.

Technically, shares are in a bit of a no-man’s land. Price action has been streaky and now they report in the middle of this recent wide range.

The bear case to be made is that shares have yet to reach oversold levels and major support so more of a downside could be reached before jumping into the stock.

The bull case at worst is a reversion back to the 200-day moving average just above current levels. The best case is that it has little tariff exposure and remains a safer haven in tough times and may run back towards old highs.

Overall, outside a safe 3.3% dividend, the case to jump in for a trade is tough to make given recent price action.

Netflix (NFLX) has given back all of its gains from its last earnings cycle and hopes it can regain those levels when they report on Thursday.

Shares are seen as a safer haven in this tariff war environment but have not been immune to the wild market swings we have been seeing. It has continued to put up solid numbers and fared better than most growth stocks during this time.

Technically, there are several more positives than negatives.

Shares had formed a head-and-shoulders top but failed to break its neckline at the $820 level and bounced. That was one positive development, but the pattern still hangs over the stock for now.

Secondly, we see a bullish divergence in its RSI when comparing that to recent price action. As price made new lows the RSI did not. That tells us something has changed and this recent sell-off was not as strong as its predecessor and that a reversal may be coming.

Lastly, we may be experiencing a bullish crossover in its MACD. We have seen this lead to a rally in price more often than not and could be telling us that we are about to see an upward move. Let’s see if we get price action to confirm this during the week.

We have a history of gaps after earnings so watch that gap and price action immediately afterwards. If we experience a gap higher and above the 50-day moving average, one can use that as a stop to manage risk. To the downside, watch to see if the $820 level holds. If it doesn’t it could lead to an accelerated move to the downside.

Economic Calendar 
 

Wednesday - U.S. Retail Sales 8:30

Thursday - Jobless Claims, Housing Starts 8:30

Friday - Market Closed - Good Friday

Last week proved to be one of the most volatile weeks ever. In fact only three weeks in my lifetime proved to be more volatile. Those weeks occurred during Covid of 2020, the Great Financial Crisis of 2008 and the week of Black Monday in 1987.

You can click the picture above or here for a video recap that I provided to the NYSE TV early Friday morning.

If you had a shopping list ready on Monday and stayed nimble you got to participate in the rip-your-face-off rally by Wednesday. Some of the best rallies occur when conditions are extremely oversold and in stocks that trade under their 200-day moving average.

The rally didn’t get back above Wednesday’s highs but we did manage to close higher by 5.7% as volatility remains constant and at extreme levels.

Economic data was wildly ignored as a tsunami of tariff news gripped the markets. The CPI numbers were better than anticipated but no one seemed to care. It was the bond market and the rise in the 10-year yield that dictated things this week.

As equity markets found a near term bouncing location, it was the bond market that caught the attention of traders. Yields in long term treasuries spiked as foreign investors retreated from American assets. The stress of yields rising, CEO’s vocally criticizing and markets fading caused the administration to pivot and delay any immediate tariffs.

All of the Magnificent 7 names snapped weekly losing streaks and, as seen above, the market had its best day since October of 2008.

Delta Airlines (DAL) was in the spotlight this week as the airline reported a strong first-quarter profit of $240 million, but announced it was pulling back its 2025 performance forecast due to rising global uncertainty, including a trade war and tariff pressures. CEO Ed Bastian directly criticized the Trump administration’s tariff approach, saying it created instability that's already impacting travel demand.

Delta announced they were cutting back on its flight schedule and suspending planned capacity growth. These changes reflect a more cautious stance amid global economic headwinds. Shares managed to rally despite the lack of clear guidance thanks to a change in the Trump tariff policy and gained 9.7% for the week.

Levi’s (LEVI) grabbed attention by beating quarterly earnings expectations and reaffirming its annual forecast, which was seen as a vote of confidence despite global economic pressures. The company reported strong denim demand and a resilient global supply chain, which helped it weather inflation and tariff concerns better than competitors.

Shares surged over 7% in after-hours trading following the earnings release and finished the week up 8.3%. CEO Michelle Gass emphasized steady consumer demand and cost controls, which reassured investors about the brand's durability in uncertain times.

Heat Map. The mega caps experienced a much needed rally as the semiconductor stocks finally rallied. Nvidia (up 17.6%) and Broadcom (up 24.4%) led the charge.

The Healthcare space was a mixed bag as drug manufacturers may be facing potential tariff issues of their own, while healthcare plan stocks continued to be a safe haven for investors.

Large cap and tech names rebounded to have their best week since November of 2023. The Nasdaq 100 gained an impressive 7.4%, but still remains lower for the month by -3% as the relief rally couldn’t make back all of its recent losses.

The small caps failed to claw back as much as their large cap peers. The Russell 2000 gained “only” 1.7% and remains lower by -16.7% year-to-date.

Ten of eleven sectors managed to finish positive for the week with the biggest winner being the beaten down Technology (XLK) sector. The worst performing sector year-to-date finally rebounded as it gained an amazing 8.7% for the week.

The other leaders gaining over 5% for the week included Industrials (XLI) and Financials (XLF). The laggards included Real Estate (XLRE) and Energy (XLE) which remained relatively flat for the week.