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Morning Rally Stalls as Market Weighs Strong Earnings With Interest Rate Concerns

United CEO Kirby seeing the largest increase in demand he's ever seen.

Stocks have given back their morning gains on Thursday, as the market weighs strong first quarter corporate earnings against the backdrop of higher interest rates and inflation.

The S&P 500 is 0.1% lower, and the Nasdaq Composite is down 0.4%, while Dow Industrials are 0.1% better as of noon ET. Small caps have also reversed their early advance, with the Russell 2000 now down 0.6%.

Fed Chair Jerome Powell is scheduled to speak shortly at 1pm ET at the International Monetary Fund Debate on the Global Economy.

United Airlines ( UAL ) leads the S&P 500 with an 11% gain today despite missing Q1 earnings estimates. Investors focused instead on the company’s upbeat forecast for Q2 and the rest of 2022.

The world’s third largest airline sees the second quarter generating the highest revenue in its history. 

As CEO Scott Kirby said in a CNBC interview on Wednesday, “I’ve never seen in my career — and I’ve been in this industry a long time — such a hockey stick increase in demand” from both leisure and business travelers.

While fuel costs have obviously risen, United and its peers have kept pace by raising ticket prices. Don’t wait to buy your tickets for summer travel!

Tesla ( TSLA ) is pacing all Nasdaq gainers Thursday, up 6% at midday after flying past analyst estimates for the first quarter.

The electric automaker set record levels for quarterly revenues, vehicle deliveries, operating profit and operating margin.

CFO Zachary Kirkhorn told investors on the earnings conference call Wednesday that a “50% or above growth rate remains achievable for the year,” despite losing “about a month of build volume out of our factory in Shanghai due to COVID-related shutdowns.”

Here’s what we’re keeping our eye on for the rest of this week:

Thursday, 1pm ET, Fed Chair Jerome Powell to speak at IMF Debate on the Global Economy
Thursday, after the close: Earnings from Intuitive Surgical ( ISRG ) and Snap ( SNAP )
Friday, pre-market: Earnings from Verizon ( VZ ), American Express ( AXP ), SAP ( SAP ) and HCA Healthcare ( HCA )
Friday, 9:45am ET, S&P Global US Purchasing Managers’ Index

Examining options data provided by Tradier API, we note with interest that the iron condor was the third most popular strategy last week. Iron condors are most profitable in directionless markets with low volatility.

Among single stock options, Apple ( AAPL ) continues to be in the heaviest demand by bulls. After a consolidation in the first half of April that took over 7% off the stock, Apple has recovered half of those losses this week. The company is scheduled to report its fiscal Q2 earnings next Thursday, April 28, after the close.

Looking at bear names, we see continued strong demand in US Natural Gas Fund ( UNG ) options. UNG, which tracks NYMEX natural gas prices, hit a 52-week high last week. Natural gas futures continue their sharp rally, hitting 13-year highs on the back of tightening supply exacerbated by Russia’s protracted invasion of Ukraine.


Source: Equities News

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