Sometimes...it doesn't have to make sense
Short Accenture
I got a lot of questions today on the market. Why this reaction to PPI versus yesterday negative reaction to CPI and the Fed minutes? Yes, PPI came in much better but frankly all the ISM data has shown prices paid dropping for months. Yesterday, the “selling” was supposedly the Fed saying we could see a recession (negative growth for two quarters) starting in the 2nd half of the year. Having said that, rates and the rate structure haven’t budged at all in days, still expecting 25 bps, pause, then lower rates by 50-75 bps leaving 2023. Does this make any sense? Not really. Is the Fed really going to do 25 bps more based on the sticky core CPI, then the economy tanks and inflation tanks and they come to the rescue with cuts? It doesn’t seem likely and also is awful for capital markets to have the Fed manage (poorly I might add) the economic ups and downs.
Then again, today’s rally was led by AMZN 0.00%↑ up quite a bit for a Company where the CEO said on CNBC that AWS is still digesting/slowing while cost cuts likely peaked. Not exactly an up 5% type comment? But, AAPL 0.00%↑ also rallied on CS analyst Shannon Cross is confident the company can grow in the June qtr (2% revenue growth is expected). Remember earlier this week Mac sales down 40% drove the stock down? For the record, Shannon is literally a place holder analyst, following her sector for maybe a year or so. Remember earlier this week when cloud SaaS got hit on Azure downticks from the sellside analysts? The next day a generic MDB 0.00%↑ upgrade changed that narrative to focus on the long term. The market has lost its memory day to day. I am not entirely sure that changes anytime soon.
Tomorrow we get big EPS reports from the banks. $JPM, WFC 0.00%↑ C 0.00%↑ PNC 0.00%↑ and others. I could not read their earnings reports and talk to their CFOs tonight, if they allowed me to do so, and confidently tell you tomorrow what the market action will be. Bad bank reactions means sell them and keep buying mega cap tech? Good bank reactions, buy everything and rally broadens out? I can tell you that the confidence level of long “always” players is very high to just buy “good companies” and ignore valuation. In summary, sometimes…..the stock market does not have to make sense.
So, take the outsourced tech play INFY. They reported EPS this morning and the stock was down 9.2% today. Clearly, they are seeing slower demand from clients in the U.S. particularly financial services customers. Direct comp CTSH 0.00%↑ closed up today. ACN 0.00%↑ reported their February quarter before the bank drama and the stock has rallied 10% from mid March lows. Today, two headlines hit the tape on Accenture: “Accenture delays start dates for some recent hires, new grads” and “Accenture says ‘adjusting start dates’ based on business needs”.