S&P Fails At The 50 DMA, AMZN SBUX SMCI Earnings
The consensus narrative is that the correction over the last month has ended as the S&P has bounced starting last Monday. But the S&P has still failed to surmount its 50 DMA – and was rejected hard there in Tuesday’s session. As I’ve written and tweeted, I consider the bounce over the last week to be a “bull trap” and that the current range (4950 – 5250) will ultimately resolve lower, ending the bull market or bear market rally of the last 18 months (whatever you want to call it). Until the larger range is resolved to the downside, I won’t declare victory. But Tuesday was a win for the bears.
A bunch of notable stocks reported after the market close Tuesday, the most important being Amazon (AMZN). Revenue was +13% and Operating Income a record $15.3 billion. Clearly AMZN has decided to prioritize profitablity the last three quarters – and investors have loved that. Amazon Web Services (AWS) grew 17% and EPS was 98 cents. All in all, it was an excellent quarter, but with the stock +15% YTD alot of good news is already priced in. AMZN is currently up less than 2% in premarket.
One of the hottest stocks in the market Super Micro Computer (SMCI) – which just got added to the S&P – also reported after close Tuesday. Revenue of $3.85 billion came in right in the middle of guidance of $3.7-$4.1 billion. They marginally raised full year revene guidance to $14.7-$15.1 billion from $14.3-$14.7 billion and initiated full year EPS guidance of $23.29-$24.09. So the stock was trading at 36x at Tuesday’s close. It was a very good report – but that doesn’t seem to be enough given what’s priced in at current levels. Shares are -10% in the premarket.
Last, I want to mention Starbucks (SBUX) earnings because they were bad. Global comps plummetted to -4% and SBUX lowered full year guidance on this measure from +4% to +6% to a low single digit decline to flat. In other word, sales slowed dramatically at SBUX last quarter and given the discretionary status of its products that may very well be a tell that the consumer is starting to feel pinched. SBUX shares are currently -13% in the premarket.
Looking ahead, there is the Fed Decision at 2:00pm EST today (Wednesday). It’s hard to imagine Powell giving the market much it likes on the rate cut front given current data – but we’ll see. On Thursday afternoon, Apple (AAPL) will report earnings in perhaps the weeks most important data point. On Friday at 8:30am EST the BLS will release the April Jobs Report.