Overnight, HSBC’s China PMI was 48.3, registering its 4th consecutive month of contraction. This led to an overnight drop in U.S. stock index futures. Before the opening bell, the Mortgage Bankers’ Association says its weekly home loan index fell 3.3%. Applications for home purchases slipped 3.0% while refinancing applications dropped 4.0%. Markit’s U.S. PMI Manufacturing Index Flash for April is 55.4, slightly below expectations but still a solid number. U.S. March new home sales plunged 14.5% from February to a seasonally adjusted annualized rate of 384,000, its lowest level since July 2013. Year-on-year, new home sales are down 13.5%. Earnings before the opening bell generally met or beat lowered expectations. U.S. stock index futures traded slightly lower all day on Wednesday ahead of Apple and Facebook earnings after the closing bell. AAPL and FB each beat their numbers and AAPL announced a 7 for 1 stock split as well as a $90 billion stock-buyback and a dividend.
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Thursday is another big day for earnings and the recent trend is for most companies to beat expectations. Of course, isn’t that what “expectations” are for? As a result, bulls may soon get what they need to rally the S&P 500 to a new all-time high. The June S&P 500 futures is just 10 points below its all-time high close of 1883. Connecting the March and April intra-day highs with a trend-line suggests the next significant resistance level could come in right around 1900. If so, the June S&P 500 could be oscillating within an expanding wedge formation. Not only does this imply expanding volatility, but it also suggests that if resistance at 1900 holds, the next wave down could take the June S&P 500 down to a test of more significant support around the 1750 level. If you are bearish, please consult your Altavest broker on how you can set a bear hedge, collect net premium and possibly benefit from market weakness. With volatility still at the lower end of its historical range, more value is currently priced into longer-dated options versus shorter-dated option spreads.
5:30 AM PT - Durable Goods Orders
5:30 AM PT - Jobless Claims
6:45 AM PT - Bloomberg Consumer Comfort Index
8:00 AM PT - Kansas City Fed Manufacturing Index
Notable Earnings: Verizon, Visa, UPS, Eli Lilly, Microsoft, Caterpillar, Altria, 3M, Amazon