Jeff Gundlach says this could trigger a summer slide for stocks

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It’s hump day, and for the stock-market, that means waiting to see if investors can move past disappointing results from the world’s biggest tech company.

Last night, Apple revealed that it sold fewer iPhones and took in less revenue than expected, and its forecasts for the current quarter were another disappointment. That may make it much tougher for the Nasdaq to nab a third-straight record close today, given how things are going so far.

Some Federal Reserve distraction is en route though, with a policy announcement and statement due this afternoon. There’s no presser with Chairwoman Janet Yellen, but many will be watching for minor tweaks to the statement. Here’s a handy guide from ING, laying out how nuances in the language could affect a variety of assets:

On to our call of the day from Jeff Gundlach, who says that if the yield on 10-year U.S. government bond












TMUBMUSD10Y, +0.59%










 stays at around 2.25%, stocks shouldn’t come under any big selling pressure.

However, should those Treasury yields start spiking higher, that could trigger a summer selloff for equities, DoubleLine Capital’s chief executive warned in a webcast late Tuesday.

The thinking seems to be that investors may get more and more confident in the U.S. economy. They’d then back away from safe assets such as bonds — driving up those yields — and pile into stocks.

“I think it’s more likely that equities drop when yields are rising,” said Gundlach, in response to a question on that webcast. The yield on the 10-year note was hovering Wednesday at 2.297%, while the S&P 500 is up 1.2% year to date.

On the plus side, the hedge-fund manager said there’s no “recession in sight” and growth tends to bounce back in the second quarter.

“So far, the Nasdaq has been more right about the economy than the 10-year, which I think has been rallying more on technicals,” he said, according to CNBC.

What else was on the DoubleLine chief’s mind? The dollar, down 3% on a year-to-date basis as per the ICE U.S. Dollar Index












DXY, +0.12%










should keep weakening, he said.

“The trend is your friend. The dollar went up 30-plus% from lows in 2011. That’s a big vote for a currency. Plus, President Trump does not want a stronger dollar,” Gundlach told Reuters in a follow-up interview after the webcast.

Oh, and here’s a bone for you gold












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 bugs. Gundlach says now is not a time to give up on gold, as he predicts “another leg up” for prices.

Check out: Wall Street’s ‘fear gauge’ is falling, bonds and the stock market are soaring—something’s gotta give

Key market gauges

Futures for the Dow












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 and the S&P












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 are dipping, while Nasdaq-100 futures












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are off about 0.3%. Oil












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 is rebounding from Tuesday’s beatdown, ahead of fresh U.S. supply data later. Outside of a second-straight closing record for the Nasdaq Composite












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 , stocks were barely positive Tuesday.

See the Market Snapshot column for the latest action.

The buzz

All eyes on Apple












AAPL, +0.63%










 after the tech giant reported lower-than-expected revenue and iPhone unit sales, triggering a 2% drop for shares in late trading. CEO Tim Cook blamed the dip in sales on people delaying purchases in favor of waiting for new iPhone models to arrive.

Read: iPhone sales slip, and Apple may be in trouble

And check out: Apple’s ‘pause’ in iPhone sales? Bullish analysts say it’s a good thing

Etsy












ETSY, +2.98%










 is off 17% premarket on news of a loss, missed forecasts and the departure of its CEO. Heading the other way, FireEye












FIRE, +0.80%










 is up 18% early after beating on earnings and guidance.

Wednesday’s earnings lineup includes Reynolds












RAI, +0.76%










 , Time Warner












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 , Molson Coors












TAP, +0.10%










   and Yum! Brands












YUM, +0.90%










 . After the close, Tesla












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 (see our Tesla preview
), Facebook












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 and Square












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 push out their earnings.

Twitter












TWTR, +3.99%










 is facing class-action lawsuits alleging securities violations in California. Meanwhile, Facebook












FB, +0.21%










 is disputing claims that it treated women engineers unfairly.

The chart

Risk-reward has improved for the S&P 500












SPX, +0.12%










 , say Dubravko Lakos-Bujas and the strategy team at J.P. Morgan.

They see potential progress from the Trump administration in its pro-growth policy as just one source of upside for stocks, and investors are underpricing that right now, they say in a note to clients Wednesday. The strategists have a year-end target of 2,400 for the S&P 500.

Here’s their chart, which shows how stocks linked to the so-called reflation trade have been underperforming:



More pluses for stocks? Global growth is intact, first-quarter earnings so far confirm the view that U.S. fundamentals remain solid, and investors aren’t looking so stretched when it comes to how much they’re investing in stocks, says the J.P. Morgan team.

The economy

ADP employment for April is due at 8:15 a.m. Eastern Time, followed by the final Markit services PMI for April at 9:45 a.m., then the ISM nonmanufacturing survey at 10 a.m.

The Fed announcement and policy statement are expected at 2 p.m., but no presser with Janet Yellen. Read:Six things to watch in the Fed’s policy statement

The stat
AFP/Getty Images


U.K. leader Theresa May eats chips on the campaign trail.

€100 billion — That’s how much the EU’s Brexit negotiators will be asking the U.K. to pay up front for Brexit costs, according to fresh analysis by the Financial Times, which includes more stringent demands from France and Germany.

That’s up from the estimated €60 billion charge earlier mentioned by Jean-Claude Juncker, the EU president. The response from Brexit minister David Davis? No way.

The quote

“The administration blindsided us.” — Joel Nelsen, president of the trade group California Citrus Mutual, after the Trump administration ended a 16-year import ban on Argentinian growers.

Nelson, a farmer, says the move could end up hurting jobs in the citrus industry, accusing the president of a “double standard.”

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