Space and Galaxy light speed travel. Elements of this image furnished by NASA.

Stocks Stall on April 27, As Rates Near Monster Breakout

April 27, 2021

STOCKS – AMD, GOOGL, MSFT, TLT

MACRO – SPY

Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN GOOGL AND MSFT

It was a boring day for stocks, with the S&P 500 finishing flat at 4186. Obviously, the market has no place to go between all the earnings and the Fed meeting tomorrow. The Fed meeting is likely to be uneventful, from a policy announcement standpoint, but how markets react may be a different story.

Yields are getting ready to go, and by that, I mean higher. Every chart in Treasuries is nearly identical, all with bull flag patterns, suggesting higher yields are coming. This could be the break out that gets the 10-year finally to around 2%. (Premium Content – RTM MIDDAY- RATES ARE READY TO HAVE A MASSIVE MOVE)

iShares 20+ Year Treasury ETF (TLT)

It could also be the move that gets the TLT moving towards $130.

Again, higher rates should help compress earnings multiples and send the earnings yield in the S&P 500 higher. This will especially hurt growth stocks. It is also probably why we are starting to the IWM outperform the QQQ again and why that trend will only continue to strengthen. It doesn’t have to mean that the IWM rises and the QQQs fall. It could simply mean the IWM falls less than the Qs or vice versa.  (Premium Content – The Week Ahead – Reversion To The Mean)

AMD (AMD)

AMD is rising following better than expected results and better guidance. I’m a little concerned about the gross margins, which again failed to rise. But the guidance for 2Q showed some margin improvement but was just a little ahead of guidance. Still, the stock is rising, above $88. I had seen a lot of call buying this morning that turned my view on the stock to bullish from bearish over the weekend. Anyway, there is a gap to fill around $90 that should offer its first level of resistance. (Premium content – RTM MORNING NOTE- AMD MAY JUMP FOLLOWING RESULTS)

Microsoft (MSFT)

Microsoft is falling some after-hours; the only thing wrong I could find wrong is that Azure grew by less than 50% on a constant currency basis, and that revenue didn’t beat by a wide margin. Unfortunately, when multiples are high, and companies just beat by a little bit isn’t good enough.  There should be some solid support around $250. Longer-term not much really changes.

Alphabet (GOOGL)

Alphabet had a great quarter, too, especially their equity holdings. The company had a $4.8 billion gain on that equity portfolio; the traders are hard at work ;). Other income added $4.83 per share to their quarter. The results were still way better than expected regardless. Earnings came in at $26.29 per share versus an estimated $15.82, while revenue was $55.3 billion versus $51.7 billion. I’m not sure where the stock goes at this point; I have to work on that part.

-Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.