The stock market showed slight gains on Friday while the U.S. yield curve extended its recent flattening, after another strong employment report signaled that the Federal Reserve is likely to raise rates at least six more times this year. Investors appeared to largely shake off a recession signal from the bond market that was triggered when the two-year and 10-year Treasury yields inverted for the first time since 2019. Crude oil posted its biggest weekly loss in more than 10 years after the Biden administration ordered an unprecedented release of U.S. strategic reserves in an effort to tame surging prices at the gas stations. For the week, the S&P 500 squeaked out a slight gain (+0.06%) while the Dow Jones edged slightly lower (-0.12%) and the Nasdaq gained 0.65%, after the three benchmarks indexes closed the first negative quarter for stocks in two years. 
 

Top news last week:

  • Tesla – Another Megacap decides to split: Apple (AAPL), Alphabet (GOOGL) and Amazon (AMZN) did it… Now, Tesla (TSLA) is doing it (again). Just two years after the electric vehicle maker divided its stock in a 5-for-1 split, it’s seeking board and shareholder approval for a similar resolution. This time around, Tesla hopes to increase the number of authorized shares in order to enable a stock split, though it didn’t disclose the ratio or potential timing (GameStop also tried to get in on the action this week). Splitting a stock does not affect underlying fundamentals, but it could attract more investors by making shares more affordable for retail investors or those that don’t want such a holding to be a large portion of their portfolios. In fact, BofA Global Research notes that splits are “historically bullish” for companies, with their shares marking average returns of 25% one year later versus 9% for the overall market. Tesla surged 8% on Monday, adding over $100B to its market cap, and is up more than 130% since the split in 2020, which boosted its valuation above the $1T level. Tesla picked up general momentum recently with the opening of plants in Austin and Berlin, which are expected to put it on a path for an annualized production run rate of 2M vehicles by the end of the year. The company has also not seen the same level of supply chain disruption as some peers as it navigates its journey in the post-pandemic world. Meanwhile, Hertz (HTZ) has added Tesla’s Model Y SUV to its electric vehicle rental fleet last week, according to a posting on the car rental firm’s website.
  • Robinhood aims for Trading 24/7: Shares of Robinhood (HOOD) spiked 24% on Tuesday as the company increased its extended trading session by four hours. Two hours were added to each side of its prior trading window, meaning customers will now be able to trade from 7:00 a.m. to 8:00 p.m. ET. The effort is part of Robinhood’s vision to enable 24/7 investing, and will likely mean more trading volumes (and profits) for the company. It can also be advantageous to traders that employ momentum strategies or catalyst-driven trading. For example, outsized price movements during earnings season are typically seen before the opening bell or right after the close, when companies disclose their quarterly results. “Our customers often tell us they’re working or preoccupied during regular market hours, limiting their ability to invest on their own schedule or evaluate and react to important market news,” Robinhood wrote in a blog post. “In fact, we’ve seen a community of Robinhood early birds and night owls who log in exclusively outside of regular market hours.” Crypto trades around the clock, and futures almost do as well, but when it comes to the U.S. stock market, many have felt that better price discovery happens when most Americans are awake. A shift to 24/7 trading would also make the lives of market makers, exchanges, brokers and financial professionals more complicated, and in many ways, they dictate the resources in the current trading environment. However, Robinhood has disrupted the market once before with commission-free trading, and it may now have the opportunity to do so again.
  • US is Tapping more oil reserves: The White House on Thursday announced plans to release around 180M barrels of oil from the Strategic Petroleum Reserve, in what be the largest release from stockpile since it was created in 1975. WTI crude futures (CL1:COM) tumbled under $100 for its biggest weekly loss in two years, while Brent futures (CO1:COM) fell under $105 on the news. The SPR decision would see 1M barrels released daily over the course of six months, but analysts are still debating the benefits and whether it would put a dent in the inflationary forces seen in the current environment. Washington has released oil from the SPR roughly two dozen times, but most of them have been on a small scale (around 1M barrels) and in the wake of local disasters or emergencies. Over the past six months, however, the Biden administration has coordinated two mega releases of 30M and 50M barrels, while the latest 180M would be a third. Prior to these, big drawdowns from the SPR were a rare event, only coming after supply disruptions during the Libyan civil war in 2011 and Hurricane Katrina in 2005. The SPR currently holds 568.3M barrels of oil, its lowest level since May 2002. This latest move from the white house emphasizes the seriousness of the oil and gas dependence of Western countries on US and few other countries. At the same time this releasing oil reserves is only temporary solution. In the long run countries would need to find alternative sources of Energy, and Investors are positioning themselves for that already: iShares Global Clean Energy ETF (ICLN) has added 10.6% during the last month. US liquefied gas producers, companies like Tellurian Inc (+88% YTD) , Southwestern Energy Company (+56% YTD), also continue to show stellar results for investors.

Top S&P 500 sectors last week:

  • Real estate sector + 4.42% (ETF: XLRE) 
  • Utilities sector + 3.71% (ETF: XLU)
  • Consumer staples sector + 2.33% (ETF: XLP)
     


Calendar:
The week ahead features the release of the minutes from the last Federal Reserve report. Economists will be watching for nuances around the discussion on the size of future hikes to the target of the federal funds rate, especially from St. Louis President James Bullard and other members of the hawkish side. UBS thinks the minutes will fail to reveal any consensus on the size of the May rate hike, but could tip off more openness for a 50-point move than anticipated. The discussion around the pace and structure of the balance sheet runoff will also be closely watched.
 

Earnings:

Tuesday, April 5 Lindsay Corporation (LNN) and Acuity Brands (AYI).

Wednesday, April 6 Greenbrier (GBX), Tilray (TLRY) and Levi Strauss (LEVI).

Thursday, April 7 Constellation Brands (STZ), ConAgra Brands (CAG), Lamb Weston (LW) and PriceSmart (PSMT).