Well folks, last week ended in a bang and this week is shaping up quite similarly; first up, we have Jerome Powell testifying to the senate tomorrow at 10 AM, then the US Trade Balance being reported on Wednesday and last, but most importantly, the US Employment Report for February coming out on Friday at 8:30 AM – watch the economic calendar here and read on for your daily dose of market inspiration!
Markets in Review
The first few days of the month have been largely green, with Thursday and Friday adding about 3% to the S&P and pushing the index over 4,000 points by last week’s close. Interestingly enough, this came right after US investor sentiment broke a new high for the year, clocking in at just under 45% on Wednesday. Further substantiating the fearful mindset of the North American investor base is the recent run of gold prices, which are up 4% over the last week. Seeing as how investors have recently woken up to the notion of trading gold as a safe haven asset, as well as Bitcoin, we’ll be watching both of those assets this week as Powell testifies to both the Senate and House representatives tomorrow and Wednesday.
The following will serve as a review of how the Q4 earnings season has now wrapped up as well as a preview of the most anticipated issuers to report through the week: Earnings Scorecard: For Q4 2022 (with 99% of S&P 500 companies reporting actual results), 69% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise. Earnings Growth: For Q4 2022, the blended earnings decline for the S&P 500 is -4.6%. The fourth quarter will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020 (-5.7%). Earnings Revisions: On December 31, the estimated earnings decline for Q4 2022 was -3.3%. Five sectors are reporting lower earnings today (compared to December 31) due to downward revisions to EPS estimates and negative EPS surprises. Earnings Guidance: For Q1 2023, 81 S&P 500 companies have issued negative EPS guidance and 24 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.5. This P/E ratio is below the 5-year average (18.5) but above the 10-year average (17.2).
Short: Biodesix, Inc. (BDSX-NASDAQ) | Timeline: 1 day
Biodesix, Inc. (BDSX), which operates as a data-driven diagnostic solutions company in the United States, reported Q4 and fiscal year-end 2022 results this morning before the market open. The company missed earnings and revenue estimates by 26.10% and 10.80%, respectively, as topline has substantially decreased due to less testing for Covid-19 required. (Full Story)
Turning to the chart, BDSX has had quite a volatile last 12 months, falling from highs of of around $2.90, and recovering from lows of just under the $1 mark. That said, as the stock has ridden an upwards support line (pictured above) from its low, a breakdown into a lower price channel is likely, especially as RSI points bearish after struggling to reach 70.
Over the weekend China began its annual National People’s Congress where officials laid out predictions of muted GDP growth, higher defense spending, and wider deficits. As a result of the smaller-than-expected GDP target of 5%, speculators fearful of less upcoming stimulus applied bearish pressure to the Shanghai Composite leading to a 19bps decline during Monday’s trading session. In Hong Kong, however, the opposite was the case as the index jumped 17bps. Market sentiment aside, it’s a stark break from the high growth at any cost approach taken over the last decade and marks the first appearance of Xi’s new additions to his financial cabinet. Moreover, the 7.2% increase in defense spending is a troubling sign that Beijing is still eyeing Taiwan even as the invasion of Ukraine enters another bloody month. Additionally, the predicted official deficit of 3.88T Yuan, or roughly $144.2B USD marks the fifth year of increased borrowing for the nation. Binance Bonanza
Through leaked text messages, it’s been publicly revealed that for an extended period of time Binance worked to confuse and evade US regulators as it began business in the country. The texts extend back to 2018, a time when Binance has previously admitted regulatory shortcomings. While investigations into the firm have been ongoing for over 3 years, the backlash against Binance has grown tremendously over weeks past- as evidenced by a group of bipartisan senators asking for further evidence from the CEO’s of both Binance, and BAM Trading Services, the latter of which represents Binance.US. At the same time, CZ took to Twitter to vent about the state of the previously planned Voyager acquisition, while hinting that the firm may pull out entirely.
Libor Cracks 5% for First Time Since ‘07, Spurred by Fed Outlook
The three-month London interbank offered rate for dollars, a major global lending benchmark, surpassed 5% for the first time in more than 15 years on Monday. (Full Story)
Bank of Canada expected to hold rates, but limping loonie could be wild card in months to come
The Bank of Canada is limited in how much its interest rate increases can lag the Fed’s, as the gap could weaken the Canadian dollar and fuel inflation, said Derek Holt, head of Scotiabank’s capital markets economics. (Full Story)
Weak euro zone data point to cracks in recovery as inflation lingers
The euro zone’s economic recovery is tentative and fragile, several indicators suggested on Monday, adding to signs that even if a recession may have been avoided, no upturn is in sight. (Full Story)
China’s Cautious Growth Target Limits Help to World Economy
China set a modest economic growth target of around 5% for the year, with the nation’s top leaders avoiding any large stimulus to spur a consumer-driven recovery already underway, suggesting less of a growth boost to an ailing world economy. (Full Story)
Chart of the Day: Money is flowing back into bonds again…
“The successful man will profit from his mistakes and try again in a different way.”
– Dale Carnegie