How Do You Spell Relief? This Morning, It’s AMZN and INTC

Much was riding on Amazon’s (AMZN) earnings after the close yesterday.  Markets had been buffeted this week after poor reactions to reports from Alphabet (GOOG, GOOGL) and Meta Platforms (META).  It was therefore quite reasonable to believe that there was a bit of a make-or break importance placed upon AMZN.  There was also some negative sentiment in the semiconductor space after Texas Instruments (TXN) reported disappointing results after Tuesday’s close.  A solid report from Intel (INTC) yesterday is offsetting that prior gloom. 

Economic reports that were generally in-line, including University of Michigan Consumer Sentiment, and the Fed’s preferred inflation measure, the Core PCE Deflator, certainly aided the general feeling of relief today. 

Thanks to AMZN and its mega-cap tech peers, we see dramatic outperformance by the NASDAQ 100 (NDX) vis-à-vis the S&P 500 (SPX).  As I write this around midday, SPX is up about +0.15% while NDX is up about +1.2%.  We’ve noted extensively how top-heavy the “Magnificent Seven” makes NDX, with those seven companies comprising over 40% of the index, so a turnaround in those names along with positive sentiment in various semiconductor stock certainly explains the solid jump in NDX today.

But it doesn’t explain why SPX is mired just above unchanged levels.  Those same stocks comprise over a quarter of SPX, so something else must be dragging down the non-tech components of the broader index.  Energy is a culprit, with disappointing earnings from Exxon Mobil (XOM) and Chevron (CVX) as key factors.  We also see weakness in real estate-related stocks, along with retailers that benefit from a robust housing cycle.  We see Best Buy (BBY), Home Depot (HD) and Lowe’s (LOW) among the non-AMZN retailers trading near their lows for the year. 

The bifurcated nature of today’s moves is probably why we have only seen modest declines in VIX (Cboe Volatility Index) and VXN (Cboe NDX Volatility Index) are only down modestly today.  It is understandable that both would be lower today with a busy earnings week behind us.  But we still have a raft of key earnings next week – including Apple (AAPL)  – and, oh yeah, there is an FOMC meeting.  Market expectations are for no change in the Fed Funds target, but we have seen that volatility can ensue even when rates remain unchanged.

As for the rest of today, we can see this playing out one of several ways.  We can muddle into the close, satisfied that for the most part, we can finish a wild week with few fireworks.  We can sell off, with people nervous about taking home long positions ahead of the weekend.  Or, we can see afternoon run-ups in today’s best performing stocks and ETFs as options traders attempt to ramp expiring weekly options.  Quite frankly, all of the above can prove to be true today – the winners can get an options-led bump, the losers can get more investors bailing out ahead of the weekend, and the rest are just saying TGIF.