Equities report: Earnings season continues

Fed Interest rate decision due next week

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. Following the release of the US Preliminary S&P PMI figures, we may see the case being made for a more aggressive stance to the banks monetary policy. The better-than-expected figures may imply that the US economy is still resilient, in spite of all the odds and may warrant further tightening. In our opinion, the resilience of the US economy presents a challenge to the Fed, as the financial indicators may imply that inflationary pressures may not be going away in the near future. As such, we believe that the Fed may opt to hike by 25 basis points in their next meeting, with the accompanying statement appearing to be predominantly dovish in order to offset the market reaction. However, we must stress that the majority of market participants are anticipating the Fed to remain on hold with FFF currently implying an 98% probability for the Fed to remain on hold. In conclusion, the predominant opinion is for the Fed to remain on hold, which could weaken the dollar and as such, may provide support to the US Equities markets. However, should the Fed take the markets by complete surprise and hike, we may see a stronger greenback could weigh on the US Equities markets.

Alphabet disappoints long term cloud expectations

Alphabet the parent company of Google (#GOOG) posted in earnings report for Q3 yesterday. The company posted better than expected earnings results, with Revenue coming in at $76.69 billion versus the $75.96 billion expected figure, and earnings per share of $1.55 versus the expected $1.45 dollars per share. However, despite the better-than-expected results, Google’s stock price reacted unfavourably following the earnings release. The negative impact on the company’s stock price, appears to have been attributed to the company’s lower than expected cloud-computing sales, which may have weighed on the company’s stock. Overall, the company’s stock may be weighed down for the near future, but given its better than expected earnings report, it may find support in the long run.

Microsoft (#MSFT)

Microsoft released their earnings report for Q3 yesterday, with the company according to FT, posting an jump of 19% in revenue from its Intelligent Cloud Unit, which has been attributed to the company’s collaboration with Oracle. Furthermore, the company announced that is free cash flow rose by 22% to $21bn in the company’s last quarter, which may have been aided to the company’s decision to invest in AI start-up OpenAI, the creators of ChatGPT. The continued growth experienced by the company, could provide support for its stock price in the long run and we anticipate that to be the case. However, in the event that the company’s revenues take a hit, it may weigh on the stock price in the future.

Upcoming earnings releases

We expect today the market’s attention to turn towards the releases of McDonalds (#MCD) next Monday, Pfizer (#PFE) on Tuesday, Paypal (#PYPL) and AirBnB (#ABNB) on Wednesday and Ferrari (#RACE), Starbucks (#SBUX), and Coinbase (#COIN) on Thursday. We would like to highlight the earnings by McDonalds (#MCD) and AirBnB (#ABNB), which may provide insight into the spending habits of consumers and as such may be of interest. Hence, we may see market attention shifting toward the US tech sector in the next week given the high-profile companies of the US equities sector that are due to release their earnings reports.

Análisis técnico

US500 Daily Chart

Support:4180 (S1), 3960 (S2), 3750 (S3)

Resistance: 4380 (R1), 4600 (R2), 4800 (R3)

US500Cash, appears to be moving in a slightly downwards fashion, despite meeting resistance near the support level of 4180 (S1). We maintain a bearish outlook for the index and supporting our case is the downwards moving trendline, which was incepted on the 13th of September. However, we do not the narrowing of the Bollinger bands in combination with the RSI remaining near the 50 level, which imply low volatility and a neutral market sentiment, respectively. For our bearish outlook to continue, we would like to see a clear break below the 4180 (S1) support level, with the next possible target for the bears being the 3960 (S2) support base. On the other hand, for a bullish outlook, we would like to see a clear break above the 4380 (R1) resistance level, with the next possible target for the bulls being the 4600 (R2) resistance ceiling. Lastly for a neutral outlook ,we would like to see the index remaining confined between the 4180 (S1) and the 4380 (R1) support and resistance levels respectively.

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