Schlumberger Limited Share News (SLB.US)

April 22 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

BACK-TO-BACK BRUISING (1605 EDT/2005 GMT)

In the wake of Thursday's post-Powell pout, all three of Wall Street's benchmarks suffered a second-straight day of sharp losses. This, in a week which saw whipsaw moves caused by surprise earnings news and increased certainty around aggressive near-term interest rate rises.

Thursday and Friday's 4.2% fall in the S&P 500 marked that index's biggest two-day slide since a 4.3% swoon in early September 2020.

Regarding Friday's slide, David Carter, managing director at Wealthspire Advisors, said:

“The stock market is coming to grips with the reality that the Fed is serious about raising rates this time. It now expects large and quick increases and is having a difficult time digesting that.”

Late on Friday, the indexes did see some fleeting strength after Cleveland Federal Reserve Bank President Loretta Mester pushed back against using the "shock" of a 75 basis point interest rate hike to help bring down inflation, saying she prefers a deliberate, methodical approach, which includes a half-point hike in May.

The last hour push, however, quickly evaporated into the close.

For the week, the DJI lost 1.9%, the S&P 500 fell 2.8%, and the Nasdaq Composite slid 3.8%.

Here is Friday's closing snapshot:

(Terence Gabriel, Stephen Culp)

INDIVIDUAL INVESTORS SHOW AFFINITY FOR COMMODITIES (1345 EDT/1745 GMT)

As part of the most recent American Association of Individual Investors (AAII) Sentiment Survey, AAII asked its members to share their thoughts on which industries, or sectors, they think are attractive buying opportunities in the current market environment. Many members responded with more than one sector or industry.

AAII reported that slightly less than one out of four (22%) of the respondents view the commodities sector — including oil, gas and metals — as an "attractive buying opportunity." In addition, 17% of all responses favored the energy sector.

Roughly 10% like industrials and defense sectors right now.

Around 9% of respondents said that the financial industry has "good investment potential." The technology sector was cited by 8% of respondents, while 7% are looking to health care. The consumer staples and utilities industries were listed by 6% of respondents each. The real estate sector was named by 5%.

Here are a couple of quotes from investors on the matter:

“Companies that benefit from inflation and defensive companies with solid earnings/dividends: energy, health care, consumer staples, real estate.”

“I don’t believe any particular industry or sector is categorically more attractive than any other. There may be attractive individual securities in any industry or sector.”

PROFIT GROWTH FORECAST RISES, BUT BIG NAMES STILL TO COME (1315 EDT/1715 GMT)

Estimated S&P 500 profit growth for the first quarter vs a year ago jumped to 7.3% on Friday from 6.3% at the start of the week, but results from some of the biggest companies in the index are still to come.

To be sure, without the energy sector and its estimated year-over-year earnings growth of 249%, the growth rate for the S&P 500 would be 1.6%, according to IBES data from Refinitiv.

The current forecast of 7.3% growth is based on results that are in from 99 of the S&P 500 companies and estimates for the rest.

Next week, 178 S&P 500 companies are due to report quarterly earnings, including Alphabet, Apple, Microsoft, Meta Platforms, and Amazon.com , as well as a slew of other big names like Coca-Cola , Caterpillar and Boeing.

The S&P 500 index is on track to post a more than 1% decline for the week, and investor concerns have largely centered on interest rate worries, with Federal Reserve Chair Jerome Powell on Thursday supporting moving more quickly to combat inflation and saying a 50 basis point increase would be "on the table" when the Fed meets in May.

Still, Netflix took center stage this week and its shares sold off after it reported a loss of subscribers for the first time in more than a decade and predicted deeper losses ahead. On the flip side, IBM said it expects to hit the top end of its revenue growth forecast for 2022.

(Caroline Valetkevitch)

INFLATION IS HIGH SO BUY STOCKS! (1200 EDT/1600 GMT)

With soaring inflation causing market pandemonium, Leuthold's Jim Paulsen advice stands out. He says the most important issue isn't how high exactly or how long inflation exceeds the Federal Reserve's target, but rather whether inflation is near a peak.

Even if it stays high for a while, if inflation is near a top, "the stock market has historically produced satisfying results" writes Paulsen.

Paulsen argues that with "inflation this extreme (and probably close to topping out), it’s time to buy!" So if inflation is near an inflection and poised to contract "not only is the environment for stocks probably not treacherous, but it will likely prove to be very rewarding."

Of course the caveat is that if the current inflation rate accelerates toward 10% (or worse) for the balance of the year, "the stock market will face a rough road."

But Paulsen doesn't expect this, and he lists a bunch of arguments for a peak. He cites freight rates rolling over, ISM Manufacturing and Services price surveys, still high but not increasing, and a March Core CPI below expectations.

He also pointed to annual wage inflation trending sideways since October, and a stalling of the increase in inflation expectations in the bond market (breakeven rates) in the last couple of months. While commodity prices have been volatile since the Russia, Ukraine invasion, he notes some stabilization since early March.

Onto this, he adds a declining trend in real retail sales, a flattening in many housing-related measures and "demand destruction" as well as supply improvements.

So Paulsen sees a probable decline in inflation to under 6% (and perhaps closer to 4%) by year-end and therefore tells investors the opportunity to buy stocks may be fleeting.

In support of Paulsen's confidence on Friday was U.S. Treasury Secretary Janet Yellen's comment that the U.S. economy is being very resilient in the face of a set of shocks and that inflation may have peaked.

Leuthold graphic with S&P 500 performance when inflation accelerates or decelerates:

Meanwhile on Friday, Wall Street's three major indexes are lower, as are small cap indexes.

MARKIT FLASH PMI: REOPENING TAILWINDS BLOWN BACK BY INFLATION, SUPPLY CHAIN WOES (1047 EDT/1447 GMT)

U.S. business activity continues to expand in April, but as has been the case for much of the economic recovery from the global health crisis, the picture is uneven.

Global financial information firm IHS Markit released its advance "flash" takes on the manufacturing and services sectors, in the form of purchasing managers' indexes (PMIs).

While the manufacturing sector accelerated, gaining 1.1 points to a better-than-expected 59.7, services unexpectedly hit the brakes, losing 3.3 points to 54.7.

A PMI number over 50 signifies monthly expansion.

The report seems to be counterintuitive, as the last remaining COVID restrictions - burdens to the customer-facing services sector - are lifted.

But despite the loosening of these restrictions, "Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints," writes Chris Williamson, chief business economist at S&P Global.

"These headwinds, plus increased concerns over the economic outlook and tightening monetary policy, meant business confidence about the outlook slipped sharply lower in April," Williamson adds.

(Stephen Culp)

BULLS REMAIN DEPRESSED (1025 EDT/1425 GMT)

Optimism over the short-term direction of the U.S. stock market remained below 20% for the second-straight week in the latest American Association of Individual Investors Sentiment Survey (AAII). Pessimistic expectations fell, while neutral sentiment increased.

AAII reported that bullish sentiment, or expectations that stock prices will rise over the next six months, rose by 3.0 percentage points to 18.9%. "This is the first time that optimism has been below 20% on consecutive weeks since May 18 and 25, 2016. This week’s reading is also just the 33rd time in the history of the survey that bullish sentiment has been below 20%." (The survey was started in 1987.) Optimism is below its historical average of 38.0% for the 22nd-straight week and is at an "unusually low level (below 27.9%) for the 12th time out of the last 15 weeks."

Bearish sentiment, or expectations that stock prices will fall over the next six months, fell by 4.5 percentage points to 43.9%. Pessimism is above its historical average of 30.5% for the 21st time out of the last 22 weeks. Bearish sentiment is also at an "unusually high level (above 40.1%) for the 12th time out of the last 14 weeks."

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, edged up by 1.5 percentage points to 37.3%. This is the fifth consecutive week that neutral sentiment is above its historical average of 31.5%.

With these changes, the bull-bear spread narrowed to -25.0 from -32.6 last week:

AAII noted that "historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and for the bull-bear spread." This week’s bull-bear spread is also "unusually low."

AAII added that "unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500."

WALL STREET RED AS POWELL HARSHES EARNINGS BUZZ (0900 EDT/1300 GMT)

Wall Street took a few minutes to decide whether it was in the mood for a sell-off on Friday, the day after Federal Reserve Chairman Jerome Powell all but promised a 50 basis point interest rake hike next month.

But 'sell-off' it is, for now, with a sea of red covering everything but the dollar and energy stocks.

For the week, the bellwether S&P appears to be hugging the flatline, while the blue-chip Dow is on course to snap a three week losing streak. As for the Nasdaq, the tech-heavy index is on track to notch its third consecutive weekly drop.

This is consistent with what we've seen year-to-date; value stocks have taken the wheel and it's growth's turn to ride shotgun:

Earnings season has raised its spinnaker - that's a big sail, in nautical terms - and is moving along at quite a clip.

Schlumberger, Verizon and American Express where among the notables to post quarterly results before Friday's bell, each of which provided reasons to be cheerful.

Of those, only SLB was advancing at last glance.

Next week some heavy hitters are due their time at bat, including Microsoft, Boeing, Ford, Amazon.com, Apple, Exxon Mobil among others.

So far, 88 of the companies in the S&P 500 have reported, 81% of which have beaten consensus estimates, according to Refinitiv.

And while investors cruise into the weekend blissfully unencumbered by major economic data, durable goods, home prices, consumer confidence, new and pending home sales, the advance take on first-quarter GDP, personal income/expenditures and inflation numbers are all on next week's menu.

Here's your opening snapshot.

RE-OPENING STOCKS FLEX MUSCLES VS STAY-AT-HOME PLAYS (0900 EDT/1300 GMT)

Despite recent market instability, a basket of stocks that benefit from the economic reopening has been outperforming a group of "stay-at-home" plays.

This re-opening/stay-at home stock ratio is up eight out of the past nine trading days and approaching its late-February high:

As proxies for these two groups, the ratio comparing a basket of economic reopening stocks - American Airlines, Carnival, Cheesecake Factory, Live Nation Entertainment and MGM Resorts International - to a group of "stay-at-home" stocks - comprising Amazon.com , Electronic Arts, Netflix, Peloton and Zoom Video Communications bottomed in July 2020.

Since then, it has seen a choppy recovery that led a two-year high in late-February of this year.

Amid the lifting of pandemic restrictions, a transition back to the service economy, and a hawkish Fed/higher Treasury yields weighing on growth stocks, re-opening plays have been flexing their muscles vs the stay-at-home stocks.

In what may be a similar development to what occurred in mid-to-late December of last year, in April, the ratio's 20-day moving average (DMA) has now once again bowled out above the rising 100-DMA.

From that point in December, re-opening plays enjoyed another multi-month spurt vs stay-at-home stocks, which led to fresh multi-year highs in the ratio.

A ratio break of the 100-DMA, coupled with the 20-DMA following suit, can flip the picture back in favor of stay-at-home plays.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)