Equities report: Fed’s intentions in focus

The bullish tendencies for US stock markets of the past week were intense as optimism about market expectations for the Fed cutting rates in its coming meetings are high. It should be noted that the bullish streak of the past eight days was halted yesterday as stock market bulls took a break. All three major US stock market indexes have moved higher over the past week and are nearing all time high levels. Today we are to discuss the implications of the Fed’s intentions as expected by the release of the Fed’s July meeting minutes on Wednesday and Fed Chairman Powell’s speech at the Jackson Hole Economic Symposium, discuss developments in Tesla and NVIDIA, whilst for a rounder view finish the report with a technical analysis of the Dow Jones Daily chart.

The release of the Fed’s July meeting minutes and the Jackson Hole Symposium

The release of the Fed’s July meeting minutes and the Jackson Hole Symposium On a deeper fundamental level for the US stock markets we highlight the Feds’ intentions as a factor that could affect decisively their direction. The markets currently expect the Fed to start cutting rates in its next meeting in September and continue to deliver another rate cut in the November meeting and a double rate cut in the December meeting according currently to Fed Fund Futures. Despite the market’s expectations may be over fetched its dovish orientation is very clear. Today in the late American session, we get the minutes of the Fed’s July meeting. Should the document be characterised by a dovish tone thus verifying the market’s expectations it could provide support for US stockmarkets. Yet given the highly dovish expectations of the market, should Fed policymakers show some hesitancy on cutting rates extensively in the coming months we may see US stockmarkets losing ground. On Friday we highlight the start of the Jackson Hole Symposium and Fed Chairman Powell’s speech is expected to be closely watched by traders for any clues regarding the bank’s intentions. As with the Fed’s meeting minutes, any dovish signals from the Fed Chairman could support US stockmarkets as it would imply an easing of financial conditions in the US economy and vice versa, any comments implying a less dovish path on behalf of the bank could force the market to reposition itself adding selling pressure on US equities markets.

Tesla to benefit from EU tariff slashes

Tesla’s (#TSLA) share price has been on the rise since the 5th of August benefiting impressively around 20%, despite a correction lower yesterday. Overall the fundamentals regarding the company seem to agree with the price rise. It’s characteristic that the EU slashed tariffs on Tesla cars coming from China. The EU had hiked tariffs on all imported cars imported from China, with China made Tesla cars being hit with tariffs of nearly 21%. In general it was decided that tariffs of between 17% and 36.3% would be levied on other Chinese automakers. The new tariff slapped on Tesla cars imported from China in the EU is to be at 9%, which provides a substantial advantage to Tesla against its competitors. The importance of the EU market is enhanced given the turn of the Union towards electric vehicles and given that Europeans may have the buying power for such vehicles. Please note that the company has a giga factory, building cars in Germany, the only of its size on the continent. The company has gotten an approval to expand the factory and Tesla hopes that the expansion will allow it to increase production capacity from around 500,000 vehicles per year to one million, as per Deutsche Welle. Overall the fundamentals surrounding the company seem to be positive and could continue supporting the company’s share price.

Incoming earnings reports and NVIDIA

Incoming earnings reports and NVIDIA The earnings season is slowly drawing to a close yet in the coming week we note the release of Hewlett Packard’s (#HP) on Wednesday, yet on the same day we intend to concentrate on the release of NVIDIA’s (#NVDA) earnings report. The earnings report is due out next Wednesday and is expected to show an improvement in both the earnings and revenue figures if compared to the last report. Yet our worries for the release focus on the slowing growth rate of the revenue figure. The company remains maybe the dominant force in its sector and let’s not forget the influence of NVIDIA on the market given the AI frenzy. We expect the release to be closely watched by trader with special focus also on any forward guidance.

TECHNISCHE ANALYSE

US30 Cash Daily Chart

• Support: 40800 (S1), 40050 (S2), 39300 (S3)
• Resistance: 41435 (R1), 42200 (R2), 43000 (R3)

As for US stockmarkets on a technical level, we note that Dow Jones edged lower yesterday, with the bulls practically taking a break just above the 40800 (S1) support line. We tend to maintain a bullish outlook for the index as long as the upward trendline guiding the index since the 8th of August remains intact. Also please note that the RSI indicator remains between the reading of 50 and 70, implying the presence of a bullish market sentiment for Dow Jones. Should the bulls maintain control over the index, we may see it taking aim of the 41435 (R1) resistance line. Should the bears take over, we may see the index breaking the prementioned upward trendline, signaling an interruption of the upward movement, the 40800 (S1) support line clearly and take aim of the 40050 (S2) support level.

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

Delen: