US GDP, Gilead, Fed
Today was a busy day for traders. After last night Alphabet earnings (Google's parent company) cam in below expectations for earnings per share, but beat expectations for revenue, US equities resumed their push up above 2900. Earlier today, US GDP data was released which drew an ugly picture of the virus impacted economy. Preliminary US GDP (QoQ) (Q1) came in at -4.8% vs the expected -4%.
Still this didn't cause panic, as traders were expecting the outcome. The euphoria of potential reopening of economies has so far shown resilience. Something else which contributed to a big day for risk assets, was a significant drawdown in Gasoline inventories. Analysts were expecting a build of 2.527m, but we saw the unexpected -3.669m number. Thus, a potential indication that demand for gasoline is back, resulted in a green day for WTI as well.
Then came the positive news for a corona virus drug which is being developed by Gilead. Remdesivir was found to show significant positive effect in speeding up the recovery of Covid 19 patients. These headlines come after last week a different study claimed the drug wasn't effective in treatment of the virus. As more and more studies are done and peer reviewed, we will get a better picture.
Finally the Fed meeting, the central bank pledged to keep rates near zero and to support the economy until it achieves maximum employment and price stability. It also warned that the current virus crisis is posing risks to the economic outlook in the medium term.
SP500 Cash Daily Chart
So, as discussed earlier in the week, the technical break above 2894.40 set us up for a potential move higher, which has so far materialised. It was backed by some fundamentals from energy, tech and drug sectors.
Will we hit 3000 soon? - Overnight there is manufacturing data coming from China in the form of Manufacturing PMI for April. Tomorrow the ECB is holding a meeting on interest rates with a press conference. We also have US Initial Jobless Claims. In terms of company earnings it will also be a busy day with Amazon and Apple both reporting after the close.
The potential continuation of the rally, could be dependent on the outcomes of the above.
Any opinions, news, research, analyses, prices or other information contained in this post is provided as general market commentary and does not constitute investment advice.