Stocks React To Biden Tax Plans While Bitcoin Trades Sub $50,000

Okay, very good morning. Hope you're doing well. Happy Friday, April 23rd. Before I begin the normal briefing, don't forget to check out the Market Watch podcast, Amplify Live, and just search Market Watch Amplify Live on any of the major podcast platforms like Apple Podcasts or Spotify, and you'll be able to find it. Don't forget to follow, and then you'll get an immediate notification whenever the new episode goes out. We which is every Friday morning. The latest one's going to be recorded in just an hour or so between myself and head of trading Piers, and where we cover the hottest topics from this week and our thoughts on that matter. But otherwise, look, let's get straight into the briefing. And first things first, going to talk about really two major things. For one, the Biden tax plan, which obviously impacted US equity markets yesterday. And then we're also going to talk about members of the CDC's advisory Committee on Immunization Practices. The reason why they're important for today specifically is they're due scheduled to give an update on the Johnson Johnson vaccine, which has obviously been paused awaiting then further data analysis to see whether or not that they, um, have any type of resumption or any types of restrictions on who, in terms of age demographic or gender, who might be able to get this shot going forward given the risks associated with blood clots and so on. First things first though, let's just talk about a couple of things. How we finished yesterday. So in the major 3 indices, we finished down about 0.9% in the, in the case of the S&P 500 and the Dow. We were down about 1.25% for the NASDAQ 100. So you can see that here, NASDAQ center, S&P center right. US stocks had the biggest slide in 5 weeks, and of course this came after that Biden news, which we can look at, um, right now. So let's just discuss exactly what happened to get everyone up to speed. I know a lot of you were in the market yesterday evening, but for those who weren't, this is what the headlines are. Those earning basically a million dollars or more, the new top rate coupled with the existing surtax on investment income means that federal tax rates for rich investors could be as high as 43.4%, according to the latest Biden proposal. Actually, total tax rates for New Yorkers and Californians could top 50%. I believe the latter actually getting towards 60%. And so speculation arising then very quickly that traders may sell shares before any change is made to capture, uh, that lower rate. And so just having a look at the S&P and how that behaved when that headline came out, You can see this, this, this kind of area here of aggressive selling pressure at the moment of which that news broke, and we came back down to test, um, technically an area that's been in play for, for a bit of time here, which has been that low on the, the 14th, and then the, the low of the week really. We have bounced and we've stabilized. We've, we've reversed perhaps like a third proportion of that move on the sell-off from yesterday. For me, there's a, there's a couple of things here. From a news perspective, the plan is still yet to be finalized. Biden is expected to release the proposal next week as part of the tax increases to fund the social spending in the forthcoming, what's called the American Families Plan. So for me, I feel a little bit, um, indecisive at this point about how I feel technically about the success or not of this proposal in its current form. I haven't really read too much in the way of real detailed research, um, but my overall feelings here was I'm a little bit reluctant to pass judgment yet that this is an overtly negative scenario or one that should just be purely ignored until I kind of get a bit more facts in to make a more informed decision. The one thing is, if you look at the S&P on a daily chart here, this bar here is that, that kind of one we've been watching throughout the entire week really, which is encapsulating some of the initial downside volatility that was seen. Remember, the first 2 days of trading of this week was, was quite negative, and then we had the recovery pretty solid on Wednesday, and we sold off yesterday on the Biden news. But if you actually look at where we are, where we are at the moment, I mean, for me, this is consolidation. I don't necessarily think that this is negative. And actually stepping out of the crosshairs of the intraday noise, um, I think the equity markets have been— there's this big upward surge we've had with the breakout from the March highs that's really been initiated through the month of April. I think we were pricing in perfection to a certain degree. And you get the kind of confirmation, the earnings come out, okay, fine, they're great in terms of some of the numbers. Then you layer in the fact that global COVID is causing a little bit of lingering concerns, particularly the kind of the impact that the emerging markets spread, like what we've seen in India, could mean for the global economy and overall demand, and the risk of spillover into then new COVID cases emerging elsewhere in other areas, more kind of significant as far as markets are concerned on a global level, like in the US. And then you've got this latest tax plan. When you actually look at it here, I don't know, I mean, the other side of me feels like perhaps this is a healthy situation to have the market kind of consolidate, to rein in some of that kind of runaway train of optimism for that priced imperfection that I was referring to. And perhaps that's what's needed then for us to kick on and start pushing higher again. Um, again, even if we do break down in price, I don't think I'd even begin to start to feel bearish unless we got below 4,000, which is this, this kind of lower down key level which was the previous rejection of the all-time high. It's the psychological level, um, horizontally now a good level as well around the similar price point of 4,000, 3,991.5 in the S&P futures. So at the moment I think we're in a bit of consolidation, and I don't necessarily feel overtly spooked by the tax news. Again, I want to see a little bit more about, um, the validity of actually this being pushed through in its current form, because a proposal is one thing, implementation and passage through Congress is another. And another thing to be aware of is we, we did have the, the GOP come out yesterday and they've made a counteroffer basically to the in excess of $2 trillion infrastructure package that Biden had tabled as the next form of stimulus. And the GOP counterproposal comes in at $568 billion, which is obviously woefully short of the $2.25 trillion that Trump had priced— or Trump— that Biden had tabled. So this is another thing I think requires a little bit of just monitoring. And again, this could be another bit of ammunition for the bears who are calling the top, because, you know, if the market has been prepped up for another big sizable stimulus package And if you think about the negotiating posts, yeah, the point being is, is that the, this GOP counteroffer is obviously gonna be way off the mark to get any type of negotiation, uh, to the point of, uh, of a compromise. But you can kind of see how far apart that they are. And the further apart that they are, generally the longer that it takes. And I would say the more lower the kind of median sweet spot is where they meet each other, and that's gonna be further away from the sizable number of which the markets were pricing in before about this kind of another enormous stimulus package coming from the US. So, uh, that could be another negative factor if you wanted to look at it that way. So there's a couple of things there that I think you really need to chew over. Um, as I say, I don't really have, um, a view short-term about this tax thing until I think over the weekend you'll get more talking heads Bank research will come out. I think you can make a bit more of a definitive call about the actual impact that that could have in terms of quantifying this speculation about people basically selling shares before being able to capture the current existing capital gains tax rate before then the new one comes in. Um, so I'm kind of a little bit reluctant to really commit to a view on that, but as I said, on that S&P higher time frame I still think that if we come lower, uh, we've got to come quite a bit lower, sub-4,000, and we're currently trading 130 points above that in the S&P, uh, before I think for now I'll become a little bit more bearish. Otherwise, a few other things. We did have Bitcoin continue to fall. You've probably read, you've probably seen, because I know There's plenty of people with vested interest in Bitcoin at the moment. But here's a, here's a look at the Bitcoin chart, the futures Bitcoin price on a daily continuation. So a couple of things here that people are looking at. Um, obviously we had that big gap down, uh, going through the weekend, recommencement of, of trade for the week. Uh, this was coming off the all-time high levels. Obviously we had the kind of euphoria going into the Coinbase direct listing. Then from that point, things have kind of soured to a certain degree. So that was almost like the short-term kind of peak, if you like. Prices then come off. There's been a couple of different things. So we're down actually from where we're at at the moment, from that high, is in excess of a 25% pullback, so back into technically bear market territory for, for the price of Bitcoin. But I think I would use that terminology very loosely given the, the size swings that this particular asset tends to see. But other things people are looking at— US investors in the digital asset already facing a capital gains tax if they sell the cryptocurrency after holding it for more than a year. So a contemplation there for those that have been riding the move, obviously, up. And then negative sentiment short term in the wake of the false report from anonymous Twitter account that the US Treasury was cracking down on crypto money laundering. And then a few people looking technically at this, this 50 DMA, this moving average here that was holding up price generally when it was flirting with it. We had a failed attempt to break through it going back to what was Tuesday session. We bounced off it on Monday session. We failed to break it on Wednesday session, um, and then we just smashed through it yesterday, and then we're down again today, which is probably just added a little bit of technical weight. And then I think with Bitcoin, there's a lot of short-term momentum spec traders just hitting it as well. Again, if we come lower down, I think that it's a buying opportunity. So, you know, just looking at it pure and simple from a technical perspective, once we start coming down to that kind of zone around 45, um, so perhaps there's still a little bit of room for downside to— we start seeing— well, let's have a look on a, on a percentage basis. Yeah, once we start seeing a 30% type pullback I think you'll get a pretty nice bounce from there and probably an aggressive bounce, um, at that point in time. So definitely worth keeping an eye on today given the, the way of which that kind of chart has been shaping up of late and the fundamentals that have been pinned on the weakness. The other thing we had last night was, um, an earnings perspective was Intel. So just a very brief comment here on Intel. Um, they slid in aftermarket trade. I mean, the latest here, they were down about 2.2% or so. They were actually down heavier than that, more towards 3% at one point. What actually happened with Intel? They reported, um, actually not bad numbers, but overall people were more focused on the drop in data center revenues and a steep slump in their gross profit margins. As for the rationale behind the share price weakness there. A few other things I, I wanted to comment on, and for one, vaccine news. Now let me just talk about what exactly it is that's happening today, then I'll give you my view. So members of the CDC's Advisory Committee on Immunization Practices will reconvene today to decide whether they have enough data to say who should or shouldn't receive the J&J shot. The options, which I guess is the most important thing, are either a full resumption, restrictions by age or gender, or extending the pause. And obviously the spectrum of market potential impact could be then, you know, the kind of full resumption or a pause. And for a longer period, the more negative for price that might be. Context is very important though. How important is the J&J shot for the areas that matter? And I guess the area that matters the most as far as global markets are concerned is the US. And J&J shot accounts for just 6% of the 272 million doses delivered in the US according to CDC data, but its single-shot format is definitely preferred for hard-to-reach populations like the homeless or people who live in remote areas. In fact, in terms of daily vaccinations, remember in recent kind of sessions, I've been talking about the fact that the US just keeps ramping up the speed of its vaccination program. In fact, daily vaccinations in the US have declined to around 3 million. At the peak more recently, we got up to 3.4 million. This is per day, and only 75% of about 28 million doses being shipped out weekly are being used at the current pace at the moment. So what do I feel about this? Well, you know, in context, we've already had the European Drug Regulator come out earlier this week on Tuesday, and they said that the benefits, as we've heard before, is that the benefits outweigh the risks. And so I think that you're probably going to get a similar situation here. I guess the devil in the detail will be, will there be certain exemptions require in terms of age, gender, and so on and so forth that might impact then how well deployed that vaccine could be in keeping with then the current supply orders and the waiting to which each country has— well, in, in this case, the focus obviously being the US for that vaccine. And that 6%, I don't know, I think Pfizer and Moderna so much more critical to their rollout program I don't really think that this is going to cause too much of a, of any type of negative impact, to be quite honest. On a broader COVID situation, the other thing is we had the ECB yesterday. Now they, they did everything that we thought. It was really uninteresting, except there were some source comments which really pushed back against this idea of any talk about tightening or tapering and anything of that nature, which had become a little bit of an emerging kind of view amongst some of the more hawkish members, given the fact that actually at the moment the COVID situation is becoming more under control. So we're, we're a world away now from where we were in Europe. We've had a quite aggressive and positive pickup in the speed of vaccination deployment in the euro area after that very slow kind of start and the debacle with the UK and so on and so forth. And that subsequently means then that governments can start moving towards the roadmap of reopening. And on that note, the PM of France said that they will begin a cautious reopening in mid-May, preceded by gradual easing of domestic travel curbs starting on May 3rd. Italy will loosen many restrictions on Monday. Greece will follow in early May, and Germany is considering privileges for of people who have already been immunized. So I think a lot of that FX-wise has been priced in. I mean, if you look at the performance of the euro over the course of April, it's had a pretty good time of things, uh, comparative to the kind of divergence that we were seeing about performances sterling against Europe of where we were when the UK was really racing away in the vaccination kind of performance. The almost the opposite has happened because of supply constraints. The UK vaccination program has decreased substantially and it's gone flipped the other way. And so we've had a rebalancing, if you like, of euro catching up from that underperformance. So, so yeah, I mean, that's definitely a positive sign. And as we'll talk about in a moment, we do have some data coming out this morning, which I think then will be important going forward rather than so much perhaps today's data. But another thing I just wanted to mention, really twofold. One, from an oil perspective, um, you did have two OPEC+ sources come out yesterday. They said they do not expect the meeting next week— remember, there's monthly meetings now, of course, with OPEC— um, to yield any changes to the current deal. And one of the sources thinks the next meeting will just be monitoring the market. I don't think this is too much of a surprise, just wanted to put it out there so you guys are completely up to speed and informed. I think for OPEC, then there's kind of the balancing act on the global COVID situation, which is the most thing that they're monitoring with the greatest weight— waiting at the moment for their decision-making process. And given what's happening in large pockets of the world at the moment where COVID cases are on the rise, I don't think they can do anything other than just roll over the agreements as they stand at the moment. The other thing was what I thought was quite interesting was this. This was an article in Bloomberg this morning talking about Fidelity and Invesco looking to buy into India's virus-led stock slump. And I thought that this was quite interesting. And the basic premise— oversimplifying it, I must admit— is that the Indian stock market has fallen into close to correction territory, so 10%. And the Indian stock market has definitely been underperforming this week, which has kind of exacerbated that move given the fact that we've had really high numbers, record-breaking numbers of new COVID cases identified in India. And so Actually, what this leads to then is kind of like that, that March moment that we had for global indices in 2020, which was that you kind of look at things and, and the world is falling apart. Equities have fallen sharply in a very short period of time, but actually, you know, for a lot of reasons, this can often be the best time to buy. And, you know, these guys are of that opinion. The Indian stock market has really been hit quite badly and for good reason. Um, but that then therefore has taken off, if you like, this built-in, uh, overstretched nature of what just generally equity markets have been trading. And so actually, is this good now as an entry point to get into a market that's at peak fear on COVID when we're looking domestically at India, for then a more stable longer-term play for general upside on the recovery that will come at some point. Um, so yeah, I actually quite like the thesis behind what these guys are talking about, which is, which is basically buying into a market that's getting hammered at the moment, um, because on the longer term I think there could be some decent value there as an entry point going forward, particularly with what will come is a reinstilling of confidence in that market as then cases start to subside. And then in time, reopenings then will happen. Obviously, this is months away, but the markets are very forward-looking and now could be optimal to be able to get in at a good price. All right, a quick look then at the calendar. There's already been the UK data come out this morning, retail sales, and actually was better than expected, month on month 5.4% against expected 1.5% for UK retail sales. That was actually better than the top end of expectations, but the pound hasn't even blinked, and I think for good reason, because for me the retail sales numbers, I think they'll be more interesting the April figures. This morning were March figures, and the reason for that is that on April 12th, as we know, was a significant milestone in the roadmap to reopening in the UK when non-essential shops reopened. So much more, um, kind of opportunity then for retail sales really to fire up. And I'm more interested to see, well, what's the speed of acceleration in next month's numbers, not the backward-looking fairly restrictive old situation of the national lockdown that we were in then. It's kind of dated, so hence the reason the pound's not really reacted to that. But next month will be interesting for sure. This morning then, we've got the PMIs. The PMIs are always very important for market prices in the day trading environment, so keeping an eye on the euro, European-related assets. The overall interpretation here is that Services are struggling, manufacturing still well in expansionary territory. When it comes to France, obviously a little bit more weighted to the service sector overall, that is expected to further deteriorate in contraction territory at 46.5, previous numbers around 48.2, uh, but manufacturing still probably going to be excellent in the likes of Germany, for example. So again, overall As Per just mentioned about the European reopening plans, which are now coming to fruition, I think that this data is perhaps not quite captured that. I think then going forward, even if these numbers are weak, I don't necessarily think you'll get a negative reaction to that because signs are looking more positive about the near-term future on COVID and subsequent restrictions. So I think those down— any downside risk to today's numbers being weak would be counteracted by that. It would be my view. You also get the, the same figures coming out 9:30 from the UK for manufacturing and services as well, both expected at 59. UK— US market figures, the same data set comes out this afternoon at 2:45, and they've got new home sales at 3:00. You also have Christine Lagarde speaking, partaking in a talk about global tipping point, power of capital markets and climate change. Given the topic title, given that we had an ECB meeting yesterday, absolutely not expecting her to say anything today. But could there be ECB sources? Possibly. I don't think it's really necessary after the sources we had yesterday. Maybe something to be aware of. And then from a US earnings perspective, a couple of names to be aware of: Amex, Schlumberger, Honeywell, Kimberly-Clark— probably the bigger names. And I've shared this graphic in the community if you want to have a closer look at the technicals for each one of those stocks. All right, that is it. So remember to check out the podcast, it'll be coming out later on today. You just search for Amplify Live Market Watch and you'll find it. I'll Otherwise, have a great session, enjoy your weekend, stay safe, and we'll see you on Monday. Take care.