Equities report: Equity traders await for CPI print

US stock markets managed to successfully pare their early 2023 losses this week and found support on the back of a weaker dollar. The greenback slipped to 7-month lows earlier this week, pressured by increasing speculations from the markets who see the Fed being forced to cut rates in 2023 in order to avoid tipping the economy into a recession. Nevertheless, the next big test for equities will be the CPI print expected in tomorrow’s session and it will be a defining factor for the future direction of US stock markets. In this report we aim to present the recent fundamental and economic news releases that impacted the US stock markets, look ahead at the upcoming events that could affect their performance and conclude with a technical analysis.

Apple aims to reduce reliance from its tech partners

Apple Inc., (#AAPL) the information technology giant, famous for its iPhone series, iPad and iMac devices was in the greens yesterday, closing the day near the $130 mark. So far this year   share price managed to rise by more than 4.5%, however on a year-on-year basis it shed more than -24% of its value, reflecting the overall pain the US tech sector has faced in 2022. Last week a news report from Bloomberg pointed out that the company reportedly plans to swap out Broadcom chips from its devices by 2025 and instead seeks to create its own, in-house components in an attempt to reduce its heavy reliance from its suppliers, cut costs and possibly shelter itself from unforeseen supply chain disruptions. Furthermore, the company is said to be already working on a follow-up version that will combine cellular modem, Wi-Fi and Bluetooth capabilities into a single component, essentially moving away from Qualcomm’s modem supply also, yet the transition may take years. Last week, analysts also added into the mix the decision from Apple to cut MacBook and Apple Watch production levels for the first quarter of the year, citing diminishing demand levels for those products. Overall, MacBook and Apple watches account for roughly one third of the company’s sales and analysts see Apple allocating more weight on its flagship iPhone production lines to fill in the gap. That being said, the push for internally designing and manufacturing their own components and gradually moving away from overdependence from suppliers could be perceived as positive news, yet on the other hand the possible lack of experience in the production of such components may prove to be a considerable risk that the company is currently taking.

Inflation print the main event

Tomorrow, the equity traders’ will be sitting at the edge of their seats awaiting patiently for the release of the December’s CPI print which is expected to showcase the trend progression of the inflation burden across the US. According to estimates, the December’s year on year CPI rate is expected to decelerate to 6.5% from the last month’s 7.1%. Furthermore, the year-on-year Core CPI rate, which excludes volatile food and energy prices, also for the same month, is set to ease to 5.7% from the 6.0% recorded in the previous month. Should the actual rates meet the expectations, that would imply that inflationary pressures are abiding and may intensify speculations that the Fed will consider slowing down its monetary policy tightening efforts. Thus as a result we may see the dollar plunge lower and in retrospect we may see the US stock markets receive support and move higher. Yesterday, Fed Chair Powell at the Riksbank Symposium in Stockholm did not provide further clarifications as to how the central bank may proceed with its monetary policy path, yet he stated that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy”, echoing the same message several other FOMC policymakers have been broadcasting over the past week.

技术分析

#US100 4HChart

Support: 10940 (S1), 10670 (S2), 10430 (S3)

Resistance: 11270 (R1), 11575 (R2), 11900 (R3)

Looking at #US100 4-hour chart we observe the index rising to higher ground since the start of the year as indicated by the ascending trendline, yet it currently faces fierce resistance at the $11270 level, ahead of tomorrow’s crucial CPI print. We hold a bullish outlook bias for the index and supporting our case is the RSI indicator below our 4-hour chart which currently registers a value of 87 showcasing bullish sentiment in favor of the index. Furthermore, break above the 100-day moving average but also the attempt of the price action to break above the 200MA also adds more credit for a possible move to the upside. However, we have to note that the results of tomorrow’s inflation print could force us to switch our assessment should there be an uptick of inflation. Should the bulls reign over, we may see the price rise and break above the 11270 (R1) resistance level and move closer to the 11575 (R2) resistance line. Should on the other hand, the bears take over we may see the price action breaking below the 10940 (S1) support level and head lower towards the 10670 (S2) support base.

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