Daily Market Update – April 8, 2015 (8:45 AM)
Yesterday’s late sell-off prevented a repeat of two consecutive higher closes, so they continue to remain elusive in 2015, but at least this morning isn’t an assured loser, as the futures are trading flatly to begin the day.
Also on the bright side is that the close yesterday gives the market a chance to digest Monday’s unexpectedly large gains following the turnaround from the morning’s sell-off.
Otherwise, there isn’t too much news for the rest of the week, although the minutes from last month’s FOMC meeting will be released and you can be certain that each and every word will be dissected by lots of people with very different lenses.
There shouldn’t be anything shocking in there, although it could offer some insight into just how concerned the FOMC may be about the strengthening US Dollar and how that may be acting to slow the growth of the economy.
They may also be caught discussing how the drop in energy prices hasn’t yet seem to materialize into the kind of increased consumer activity that just about every economist projected and resulted in a significant upward change to the projected 2015 GDP.
All of that comes on the day that earnings season begins after today’s market close.
The only question as we head into the second quarter of earnings, the one in which we were all expecting to hear about increased consumer driven revenues and decreased energy related prices, is how much have we prepared ourselves for currency related issues.
For companies that have lots of exports it may be difficult to deal with the stronger dollar that ends up making those goods more expensive to overseas buyers. However, for those companies that make lots of sales from their direct activities abroad the strengthening US dollar’s impact may only be as much as their currency hedging activities failed to offset.
Companies like Apple, Microsoft and others likely will report decreased earnings from currency shifts, but likely to a much lesser degree because of their hedges, just as some airliines hedged the price of fuel for years to their advantage.
There will still be earnings surprises, but we may be better prepared for the upcoming quarter than expected, as the expectation for currency related charges has now been in the air for quite some time.
However the season begins this afternoon, it will be an interesting few weeks.
For a while it has been hard to identify a possible upside catalyst. Earnings, even if below analysts expectations, may end up being that surprise catalyst.
For the rest of the week I think it will just be a case of sitting back and waiting, while hoping for those opportunities to sell options, rollover or cash out of positions may come along.