Oct 21, 2022
VOT Research Desk
Market Insights, Considerations & Analytics
The S&P 500, Dow, and Nasdaq100 tremble amid robust third-quarter corporate reports. US STOCK MARKET KEY POINTS
Amid hawkish comments from Fed officials, US Treasury yields reached levels not seen since 2007. Apple, Alphabet, and Amazon will report results the following week.
Investors weighed positive corporate earnings against indications that the U.S. economy is rapidly slowing amid tightening financial conditions on Thursday, causing the major U.S. stock indices to stumble. Despite previous concerns that inflation and rising interest rates would have a negative impact on financial results, the reporting period for the third quarter is off to a good start.
Banks, airlines, and a few tech companies have all delivered healthy performances, with the majority of businesses announcing numbers that were higher than anticipated.
In most cases, earnings and forward guidance have been positive, but obstacles remain. On this front, the hawkish re-pricing of FOMC policy has continued to drive up U.S.
Treasury yields in recent days. In fact, after Fed officials said that interest rates will rise “well above” 4% this year due to stubbornly elevated core inflation and tight labor markets, the 10-year note rose to 4.23 percent this afternoon, its highest level since 2008.
Despite the fact that a number of important businesses defied the trend, the Dow and S&P 500 ended with losses of 0.30 percent and 0.80 percent, respectively. After announcing impressive third-quarter results, for instance, AT&T and IBM staged a robust rally. At the end, AT&T gained 7.72 percent, while IBM gained 4.72%.
The news that Tesla will miss its target for vehicle deliveries this year also had a negative impact on the Nasdaq’s tech-heavy index yesterday. The index fell 0.51 percent and Tesla lost 6.64 percent at the close.
TECHNICAL VIEW: From a technical perspective, the S&P 500 opened on Thursday with a gap to the downside, but it gained ground at the open as a result of events taking place outside of the United States. Yields briefly fell after the resignation of British Prime Minister Truss, providing some support to a skeptical market.
Despite these changes during the session, Stocks remain bearish on the underlying picture because risk assets should face a hostile environment if interest rates rise. On the daily chart, the October high and the 38.2% Fibonacci retracement of the 2022 sell-off define the region of initial resistance around 3,805.On the downside, 3590-3600 could serve as support; If the closure falls below this range, the bears might have more control.
FactSet predicts that next week, 165 of the 500 S&P 500 companies will release earnings reports. This list includes Amazon, Apple, and Alphabet. In a similar vein, a current assessment of the state of the American economy will be provided by the advanced GDP price index, durable goods orders, core PCE, flash PMI, and consumer confidence.
