- The SNP500 declines for three consecutive days despite the market entering earnings season.
- The Federal Reserve Chairman indicates less confidence and higher for longer for interest rates.
- This week Tesla and Apple continue to witness the largest declines within the stock market. However, the stock market trades higher in pre-trading hours.
- Can stocks fight off a further decline while yields and the Dollar point to a lower risk appetite?
USA500 – The Federal Reserve to Remain Hawkish for The Upcoming Weeks!
The price of the USA500 trades 0.42% higher during today’s pre-trading hours but is trading at yesterday’s resistance level. Yesterday’s tug-of-war price action indicates that the market is unsure of how to price the index considering the geopolitical tension, expanding US economy and restrictive interest rates.
The US Dollar and US Bond Yields trade lower so far and indices from other regions perform well. These factors indicate that the index may also end the day higher and break through the resistance level at $5,080.77. However, investors should note that the gains may be limited considering the long-term performance of the Dollar and Yield continues to point to a pressured stock market. Therefore, these gains may be limited if earnings do not accelerate demand.
The latest development continues to lower the risk appetite of the market including the higher inflation data from the US and UK, geopolitical tension as well as hawkishness from the Federal Reserve. Earlier today, the Fed Chairman said the recent inflation data have clearly not given greater confidence, and instead indicate that it’s likely to take longer to achieve that confidence. In addition to this, the FOMC members are advising they feel less confident than they previously did. According to the CM Fedwatch tool, there is little chance of an interest rate hike before September. Therefore, fundamental indications and support are not likely to come from monetary policy.
For this reason, investors will give greater importance to the quarterly earnings data for the first quarter of 2024. When comparing the previous quarter to the expectations for the current quarter, the earnings and revenue are not promising. Below are the most influential companies and their expectations for this quarter compared to the previous.
- Apple (-22%)
- NVIDIA (+6)
- Alphabet (-8% expected)
- Meta (-18% expected)
- Microsoft (-3% expected)
- Amazon (-18% expected)
Investors should be mindful that while lower Wall Street expectations may indicate potential market pressure, higher-than-anticipated final figures could sustain demand potential.
Technical analysis indicates signals will materialize in favor of a bearish market if the price trades below $5,052.66. if the price trades above $5,080.99, signals may point towards a correction to the trendline. Trendlines currently point towards a potential bearish bias while the RSI remains at a “neutral” signal. Currently, the top 11 most influential stocks are trading higher indicating strong sentiment at the current price.
Michalis Efthymiou
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.