Equities report: Are US Equities in trouble?

US stock markets seem to be edging higher since our last report also possibly supported by the improved market sentiment. In today’s report, we would like to address what fundamentally seems to be driving them, yet also have a look at Apple and Tesla regarding their problems and prospects. We conclude our report with a technical analysis of Nasdaq’s daily chart.

Fundamentals and Financial releases

US stock markets as noted before maintained an upward mobility since the start of the week. The easing of market worries for the Middle East tended to allow for a more risk-oriented market approach. Yet the elephant in the room tends to remain the sticky inflation in the US economy and the Fed’s intentions. It should be noted that we have entered a period where a moratorium of statements is imposed on Fed policymakers ahead of the bank’s meeting on the 1^st of May. We see the case for the persistence of inflationary pressures to add more pressure on the Fed to keep rates high for longer and such a scenario may weigh on US stock markets as the tight financial environment is to be maintained, and thus less of opportunities for growth of US companies may emerge. Given that the US employment report and the CPI rates for March have allready been released we note the release of the Core PCE price index for March, on Friday as the next big test. Should the rates fail to substantially slow down, we may see market worries for the Fed intensifying and thus weighing on US stock markets. Also we highlight the release of the preliminary US GDP advance rate for Q1 on Thursday as a possible market mover for US equities.    

Tesla’s ongoing problems

We are forced to discuss Tesla once again after last week’s report, as the problems for Tesla seem to be multiplying. We make a start with reports mentioning that China’s BYD overtook Tesla as the world’s largest EV manufacturer. Our worry tends to focus on two elements, namely that the Chinese company is getting subsidies and thus can present much cheaper cars to the public, which highlights also its prospects and the second is that BYD seems to be more stable as a company if compared to all of Tesla’s drama. Given the opportunity we also note that headlines stressed the gutting of Tesla’s newly formed marketing team in a possible reversal of the marketing strategy of the company, despite investors reportedly asking for more focus on distribution. Overall, the issue tends to highlight the instability within Tesla, yet we have to note that such reversals tend to be the norm. Furthermore, we also note that Tesla’s earnings report was even worse than expected, with earnings per share and the revenue figures coming in lower than expectations, the previous quarter and the respective quarter of last year. Yet Elon Musk highlighted the potential of the company focusing on AI and the prospect of driverless cars to be produced in the future. The company also intends to present cars with lower cost and the talk of new offerings on a faster timeline supported Tesla’s shares, with their price getting substantial support.

Apple loses out in China?

Apple’s share price got a boost yesterday as the company announced a spring event for May 7 . It was not mentioned what the event is to be about, yet media highlight the possibility that Apple may present new iPads. Rumours tend to mention the possibility of OLED screens and a movement of the front camera to the side. Also the possibility of a new Apple Pencil and updated Magic Keyboard accessories that would give iPad Pro owners a more laptop-like feel, according to The Verge. The event tends to boost the optimism of Apple share holders yet we tend to maintain some worries for the phone maker. There is intense competition in China and Bloomberg yesterday reported that China’s iPhone sales dived 19% in the worst Quarter Since 2020. The article also mentions that the company is losing market share in the critical market of China to local competitors, among which Huawei is being mentioned. The issue is further highlighted as the period mentioned is the period of the New Lunar year festivities, a period of heightened consumption. Overall we tend to worry for Apple losing ground as that may limit revenue for the company further given China’s critical mass.    

기술적 분석

#US100 Cash Daily Chart

Support: 17160 (S1), 16300 (S2), 15690 (S3)

Resistance: 17800 (R1), 18500 (R2), 19100 (R3)

Nasdaq failed to clearly break the 17160 (S1) support line on Friday and on Monday moved decisively higher. We note the upward movement of the index, yet for the time being we are still not convinced for a full bullish outlook of Nasdaq. We also tend to note that the RSI indicator bounced on the reading of 30 and is currently moving towards the reading of 50, which in turn may imply that the market’s bearishness is fading away yet, no bullish sentiment has started building up yet. Furthermore, we also note that the 20 moving average which is also the median of the Bollinger bands and most the sensitive moving average on our chart, is still pointing downwards, also contradicting the possibility of a bullish outlook for the index. Should a sideways motion prevail, we may see the index confining its price action between the 17800 (R1) resistance line and the 17160 (S1) support line. For a bullish outlook, we would require the index to clearly break the 17800 (R1) resistance line and continue higher setting its sights on the 18500 (R2) resistance barrier, that is also a record-high level for Nasdaq. Should the bears take over, we may see the index breaking the 17160 (S1) support line and aiming for the 16300 (S2) support level.   

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