EB Daily Market Report - Wednesday, April 20, 2022

Tom Bowley - April 20, 2022

Executive Market Summary

Futures were hit overnight, especially on the NASDAQ, after Netflix (NFLX) reported its first subscriber loss since 2011
The NFLX news has definitely added to fears within the growth stock community; growth stocks (IWF, -0.68%) are trailing value stocks (IWD, +0.97%) by a wide margin today
Walt Disney (DIS, -4.31%) and Roku (ROKU, -4.02%) are down in sympathy with NFLX
Communication services (XLC, -4.07%) is where much of the weakness is being felt; internet stocks ($DJUSNS, -3.14%) are tumbling
The 10-year treasury yield ($TNX) is down 5 basis points to 1.86%, which normally would lead to buying of growth stocks, but not today
Defensive and value stocks are clear leaders; real estate (XLRE, +1.83%), health care (XLV, +1.50%), and consumer staples (XLP, +1.26%) are showing leadership
Commodities are seeing further selling as copper ($COPPER, -1.60%) falls to 4.64, nearing its 1-month low
Tesla (TSLA, -4.20%) is on deck for quarterly earnings, which will be released after today's close

Market Outlook

I know the S&P 500 still has quite a bit of room down to its February low, but the disparity between growth stocks (IWF) and value stocks (IWD) today is sending this intermarket relationship to a near breakdown, a very bearish signal not only for growth stocks, but for the overall market. It's going to be difficult for the stock market to appreciate measurably if it remains in a "risk off" mode:

This is a BIG relative support level. A breakdown beneath this level really tilts the action in favor of the defensive, value-oriented areas of the market.

Sector/Industry Focus

I've been watching the drug retailers ($DJUSRD) for all of 2022, watching and waiting for an absolute price breakout. It looks like we're getting it today:

The DJUSRD is simply the latest example of an outperforming consumer staples industry. We've been seeing it throughout 2022 and now drug retailers are trying to join the party.

ChartLists/Strategies

On Monday, during our "Sneak Preview: Q1 Earnings" webinar, I pointed out 34 companies that would be reporting this week that belonged to what I considered to be the strongest industry groups. Several are either breaking out or pulling back (think "sell on news") since reporting great results. PLD and REXR are both attempting breakouts. One that's pulling back is GATX Corp (GATX), which has a very strong AD line. Therefore, I won't be surprised if GATX recovers by today's close. I see two key support levels for GATX and it's testing one of them today:

The AD line really improved beginning in March. GATX belongs to the commercial vehicles & trucks group ($DJUSHR) and this is a group that's been rapidly improving on a relative basis in 2022. GATX was more than 7 bucks higher earlier today. Can it hold its 50-day SMA? If it does, it could be a quick trip back to its recent high. If not, then I see a potential test of price support near 107. I should mention that GATX doesn't trade much volume and that could be a consideration for many.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Wednesday, April 20:

TSLA, PG, ASML, ABT, ANTM, CCI, CSX, LRCX, KMI, BKR, RCI, NDAQ, EFX, MTB, CVNA, STLD, AA, UAL, CMA, MKTX, THC, LAD, FR, SEIC, KNX, LSTR, VMI, RLI, SLG, GATX, UMPQ, LBRT, HCSG, SNBR

Thursday, April 21:

DHR, NEE, PM, UNP, T, ISRG, MMC, BX, FCX, ABB, SNAP, DOW, NUE, WIT, PPG, SIVB, FE, TSCO, DOV, HBAN, KEY, GPC, POOL, DGX, XM, AAL, SNA, WSO, EWBC, PNR, WAL, ALK, SNV, AN, NEP, SON, OZK, DQ, XRX, HTH, TPH

Economic Reports

March existing home sales: 5,770,000 (actual) vs. 5,860,000 (estimate)

Happy trading!

Tom