Overview

Banking concerns look largely played out in the short term, along with price swings from the Shanghai-Capella update. Equity and crypto markets are thus seeing concurrent pauses in price action as they wait for direction. Big earnings in tech megacaps will likely determine where NASDAQ heads in the next couple of days before attention turns to the FOMC meeting on the 2 and 3 May. In the background, concerns over the US debt ceiling have sent short-term US Treasury rates higher.

Equity

With tech giants Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN) and Meta (META) reporting earnings this week, the NASDAQ and S&P500 have seen their rallies paused. Currently, there is significant potential for downside if earnings fail to impress. The indices are already under pressure as enthusiasm from bank earnings fade and with Tesla (TSLA) facing a major sell-off following its earnings release on 19 April. TSMC (TSMC) has similarly disappointed on revenue and has projected further headwinds ahead. The sensitivity is especially great given that much of the stock market rally since the start of the year are particularly concentrated in these megacaps. Nvidia (NVDA) and AMD (AMD) have similarly rallied off AI hype but earning numbers may prove sobering in the short term given their backwards looking nature even if the hype pans out in the coming months/years.

Debt Ceiling

At this point, partisan brinksmanship over the debt ceiling is nothing new. The story is largely similar to the last time a Democrat president sat in the White House and the Republicans held the Capitol. Since then, political dysfunction in the US has noticeably worsened, with Trump’s election in 2016 emboldening and empowering those most likely to play fast and loose with the US’ credit. Bond markets are starting to show early signs of discomfort, especially with tax revenue being weaker than expected. With Congress not especially known for moving fast, there is a risk, albeit a small one, where those standing on the brink may misjudge and end up falling off.

Upcoming Calendar Events

• Earnings season
  • Tech: Microsoft (25 Apr), Alphabet (25 Apr), Meta (26 Apr), Amazon (27 Apr), Intel (27 Apr)
  • Commodities: Exxon Mobil (28 Apr), Chevron (28 Apr)
• FOMC Meeting (2–3 May)

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