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We start by noting the divergence in the movements of US stock market indexes as over the past week, Dow Jones seemed to move more decisively higher, yet Nasdaq remained relatively unchanged and the broader S&P 500 edged lower. In this report we are to discuss the financial and fundamental environment surrounding US stock markets, the earnings reports released, and conclude with a technical analysis of Dow Jones’ daily chart.
The Fed
We make a start with the Fed’s monetary policy given that currently it maintains a tight financial environment around US businesses. The market seems to solidify its view that the bank has reached its terminal rate, yet the high-interest environment seems to be maintained for a prolonged period. Yet we have to note that the stronger-than-expected retail sales rate for September tends to highlight a robust demand side for the US economy while the US labour market seems to remain rather tight. Both of the prementioned may continue feeding inflationary pressures in the US economy, or at least not allow inflation to come down at a faster pace and thus may harden the Fed’s hawkish stance. We highlight Fed Chairman Powell’s speech tomorrow at New York’s Economic Club as of particular interest that could affect the markets. Should the Fed Chairman maintain a hawkish tone we may see the market sentiment turning more cautious, a scenario that may have an adverse effect on US stockmarkets.
The position of China
Across the Pacific, Chinese data took the markets by surprise as the GDP rate for Q3, industrial production and retail sales growth rates for September did not slow down as far as expected. Yet we note that embattled property developer Country Garden, is at risk of defaulting on its entire offshore debt, following the company missing its payment deadline on Tuesday. The failure to repay its $15 million coupon, following a 30-day grace period, appears to be reflecting China’s deteriorating property sector, following the collapse of Evergrande. The issue highlights the headwinds placed by the construction sector to the recovery of the Chinese economy and a loss of confidence in its outlook could weigh on the market sentiment and thus on US stock markets as well.
Recent and upcoming earnings releases
US Equities markets yesterday tended to edge a bit lower and we note that Lockheed Martin (#LockheedMT) posted better than expected earnings, as the geopolitical tensions appear to be filling the company’s orders book. It should be noted that the Israeli conflict tended to support the arms manufacturer. At this point we would like to insert a word of caution as despite the Israeli conflict not affecting US stock markets at the beginning, it may have an adverse effect should the situation escalate further and possibly be internationalized. Goldman Sachs (#GS) on the other hand, saw its profits plunge, predominantly due to its write-down of its GreenSky fintech business and the company’s investments in real estate according to Reuters. Yet last Friday we have to note that other US banks such as JP Morgan, Wells Fargo and Citigroup released better-than-expected figures both at on earnings as well as on a revenue level, implying that the US banking sector remains resilient. We expect today the market’s attention to turn towards the releases of Morgan Stanley (#MS), Travelers (#TRV), Procter&Gamble (#PG), Tesla (#TSLA), Netflix (#NFLX) and Alcoa Corporation (#AA). Until our next report we note the release of the earnings reports of AT&T (#T) on Thursday, American Express (#AXP) on Friday, 3M (#MMM), GOOGLE (#GOOG) , General Electric (#GE), General Motors (#GM), Cola-Cola (#KO), Visa (#V), Microsoft (#MSFT) on Tuesday and Boeing (#BA), EBAY (#EBAY), IBM (#IBM), APPLE (#AAPL), META (#FB) on Wednesday the 25th of October. Hence we may see market attention shifting toward the US tech sector in the next week given the wide number of high-profile companies of the US tech sector that are due to release their earnings reports.
Análisis técnico
US 30 Daily Chart
Support: 33600 (S1), 32700 (S2), 32000 (S3)
Resistance: 34300 (R1), 35000 (R2), 35730 (R3)
Technically the bulls of Dow Jones seemed to hesitate yesterday as the index edged lower yet remained within the corridor set between the 34300 (R1) resistance line and the 33600 (S1) support line. Yet given that the upward trendline guiding the index since the 4th of October, remains intact we tend to maintain our bullish outlook. Yet as a word of caution there are some signs of stabilisation for the index as the RSI indicator runs along the reading of 50 implying a rather indecisive market. Should the bulls maintain control over the index we may see it breaking the 34300 (R1) resistance line with next possible target for the bulls being the 35000 (R2) resistance nest. Should the bears take over, we may see index breaking the prementioned upward trendline in a first signal that the upward motion has been interrupted, yet for a bearish outlook we would also require the index to break the 33600 (S1) support line and start aiming for the 32700 (S2) support base.
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