Equities report: Apple in the EU Commission’s crosshairs once again

The S&P 500 and NASDAQ 100 formed new all-time high figures last week. Yet the Dow Jones appears to be moving in a relatively sideways motion. In this report, we are to discuss Nvidia, Apple’s recent woes with the EU, the upcoming US financial releases and finish off the report with a technical analysis of NASDAQ’s daily chart.

Apple (#AAPL) in breach of EU Competition rules.

The EU Commission announced in a statement on Monday that it has informed Apple that its App store rules “are in breach of the Digital Markets Act”, as they prevent app developers from freely steering consumers to alternative channels for offers and content. The preliminary findings by the Commission could spell trouble for Apple’s future revenue from its App store should it be forced to change its business practices, which in turn may weigh on the company’s stock price. On the flip side, the Commission does state that Apple now has the “possibility to exercise its rights of defence”, where should it be successful the aforementioned concerns would be irrelevant. However, the headache for Apple (#AAPL) may be the third non-compliance investigation into Apple’s new contractual terms, which was announced by the Commission in its press release. The continued investigations by the EU Commission into Apple’s alleged violations of the Digital Markets Act, may lead to changes in its business practices which in turn could weigh on the company’s future revenue. Even further, should Apple be found guilty of breaching the EU’s DMA, it could lead to fines being imposed on the company. Overall, the implications of a possible fine and a reduction in future revenue, could in turn weigh on the company’s stock price.

Nvidia sheds $500bn off its market cap in a single week

Nvidia (#NVIDIA) briefly overtook Microsoft (#MSFT) last week and became temporarily the world’s most valuable company, after the company reached a market capitalization of over $3.33 trillion dollars. However, after reaching this new milestone the company’s stock price plummeted by more than 10%, which was essentially a loss of $500bn from its market cap in just a week. The decline has been attributed by market analysts as a result of “profit taking”. Essentially, the sharp decline in the company’s stock price appears to have been attributed to investors taking profits by either closing positions or selling their stock holdings, rather than a conclusion to the recent “AI rally”. Nonetheless, we would not be surprised to see the company’s stock price move lower in the coming week before attempting to reclaim once again the number one spot as the world’s most valuable company.

US Financial releases

The US Core PCE rate for May which is the Fed’s favourite tool for measuring inflationary pressures in the US economy is set to be released on Friday. The current expectation by economists is for the Core PCE rate to come in at 2.6% which would be lower than the prior rate of 2.8%. Such a scenario would imply that inflationary pressures in the US economy may be easing and as such, may increase pressure on the Fed to ease its monetary policy stance. In turn this could provide support for US Equities. However, should the Core PCE rate unexpectedly accelerate and thus imply an acceleration of inflationary pressures in the US economy, it may provide support for the dollar, whilst potentially weighing on the US Equities markets.

技术分析

US100 Daily Chart

• Support: 19490 (S1), 18475 (S2), 17000 (S3)
• Resistance: 20111 (R1), 21125 (R2), 22140 (R3)

US100 formed a new all-time high figure last week. We opt for a bullish outlook for the index and supporting our case is the RSI indicator below our chart which is currently near the 70 figure, implying a bullish market sentiment, in addition to the upwards moving trendline which was incepted on the 19th of April. However, we would like to note that despite the RSI Indicator still remaining near the 70 figure, it could also imply that the bullish sentiment may be fading away as the indicator was near the figure of 80 which it has since retreated from. Nonetheless, for our bullish outlook to continue, we would require a break above the 20111 (R1) resistance line with the next possible target for the bulls being the 21125 (R2) resistance level. On the flip side for a bearish outlook we would require a clear break below the 19490 (S1) support line with the next possible target for the bears being the 18475 (S2) support level. Lastly, for a sideways bias, we would require the index to remain confined within the sideways moving channel defined by the 19490 (S1) support line and the 20111 (R1) resistance level.

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