{"id":189333,"date":"2023-04-25T12:45:00","date_gmt":"2023-04-25T16:45:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=189333"},"modified":"2023-04-25T13:40:02","modified_gmt":"2023-04-25T17:40:02","slug":"consumer-expectations-dive-as-earnings-paint-mixed-picture-apr-25-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/consumer-expectations-dive-as-earnings-paint-mixed-picture-apr-25-2023\/","title":{"rendered":"Consumer Expectations Dive as Earnings Paint Mixed Picture: Apr. 25, 2023"},"content":{"rendered":"\n

Markets are tilting toward recession mode this morning with equities seeking to pierce important support levels and yields falling simultaneously. On a heavy news day concerning company earnings calls and economic data, corporate earnings didn\u2019t disappoint, but in some instances, lackluster guidance for future quarters weakened investor sentiment. Consumer expectations further weighed on investor sentiment, as weakness concerning business prospects, job possibilities and income opportunities drove a big miss on this morning\u2019s Consumer Confidence Index<\/a>. New Home Sales did offset some of the pain; however, rising to a 12-month high as buyers acquiesce to affordability pressures.<\/p>\n\n\n\n

This morning\u2019s Consumer Confidence read from the Conference Board took a dive, coming in at 101.3, much worse than the 104 expected and the lowest since last summer, when the Ukraine-Russia conflict drove gasoline prices to the highest levels in history. While the Present Situation component of the Index improved slightly in April on the back of modestly higher sentiments regarding business conditions and the labor market, the Expectations component, which depicts feelings about the next six months, continued deteriorating sharply. Readings of Expectations below 80 have typically preceded recessions by less than 12 months. Today\u2019s unpleasant surprise reading of 68.1 didn\u2019t bode well for the markets at a time when investors are hearing some companies report that consumers are becoming increasingly price sensitive.   <\/p>\n\n\n\n

This morning\u2019s market activity is being controlled by risk-off investors, who are concerned about future earnings at a time of slowing consumption, sticky inflation and a stubborn Federal Reserve (Fed). The S&P 500 Index is down 0.8% to 4102.75, a whisker away from an important support level at 4100. The small-cap Russel 2000 Index is down a heavy 1.7%, pulled down by regional banks as concerns of a credit crunch intensify at a time of higher debt service costs which weigh on smaller companies the most. The Nasdaq is down 1%, as investor nerves heighten immediately before the first of Big-Tech\u2019s earnings are announced this afternoon by Microsoft.<\/p>\n\n\n\n

Bond yields are falling hard at the mid- and long-end driven by a reduction in economic growth expectations. The short-end, however, is reacting less strongly, as a tighter Fed keeps short-term borrowing costs high while debt ceiling concerns mount. Debt ceiling worries are driving a massive variance between yields on the 1-month and 2- to 6-month Treasury Bills of up to 167 basis points, as investors feel safe holding short-term Treasuries for 1 month, but not for 2, 3, 4 or 6 months. The Dollar Index is up 0.5% to 101.84 while WTI crude oil is down 2.5% to $76.78 per barrel as economic uncertainty and Fed rate hike expectations weigh on oil prices but propel the dollar.<\/p>\n\n\n\n

New Home Sales in March offered some relief, however, coming in at 683,000 seasonally adjusted annualized units, a 9.6% rise from February. This morning\u2019s Census Bureau report was a 12-month high and elegantly beat expectations looking for 630,000 units and a 1.1% increase. The Northeast and Western regions drove much of the increase, up 170.8% and 29.8% during the period while the Midwest came in at 6%. The South was the only regional laggard with sales dropping 5.4%.<\/p>\n\n\n\n

Demand for Goods Continues to Weaken<\/strong><\/h2>\n\n\n\n
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With the first-quarter earnings season in full swing, companies are reporting that spending for home entertainment and furnishings is continuing to weaken, but in a familiar theme and in similarly delicious soft-drink taste, Coca-Cola and Pepsi are benefiting from an increase in Americans eating out.<\/strong><\/p>\n<\/blockquote>\n\n\n\n

With the first-quarter earnings season in full swing, companies are reporting that spending for home entertainment and furnishings is continuing to weaken, but in a familiar theme and in similarly delicious soft-drink taste, Coca-Cola and Pepsi are benefiting from an increase in Americans eating out. Also, this morning, GM reported strong sales in North America and various other markets.<\/p>\n\n\n\n

The following companies issued disappointing results:<\/p>\n\n\n\n