2023/02/01 (161.024) Technical Analysis

We Stay Long
In The DOW Future, This Week

Tech Values Step On The Gas After US Interest Rate Decision,
Intel, Salesforce, Microsoft, AMD, Nvidia And/Or Tesla Extremely Strong, Amgen & Electronic Arts Under Pressure – Today On WallStreet

The New York stock markets rose significantly on Wednesday after the US Federal Reserve’s interest rate decision. Especially on the Nasdaq tech exchange, investors burned off a small price firework: The Nasdaq 100 selection index jumped up by up to almost three percent and ended up claiming a plus of 2.16 percent to 12,363.10 points. In the market-wide S&P 500, it was ultimately enough for an increase of 1.05 percent to 4,119.21 points. In contrast, the leading index Dow Jones Industrial lagged behind – as it has been since the beginning of the year: It closed 0.02 percent higher at 34,092.96 points after having previously lost almost one and a half percent.

According to VP Bank, investors can hope for an early end to the interest rate hike cycle, although the monetary watchdogs had raised their key interest rate by 0.25 percentage points as expected and also held out the prospect of further tightening of monetary policy. “While the Fed is talking about ‘several’ interest rate hikes, futures contracts on the money markets only predict one further rate hike,” commented VP chief economist Thomas Gitzel. “(The Fed President) Jerome Powell only referred to the different assessments in this regard, but meanwhile did not try to dismiss the market view as wrong.” The experts at Commerzbank also see the Fed “not too far from the interest rate peak”.

Top gainers in the Dow were Intel, Salesforce and Microsoft. Amgen shares, on the other hand, were the second-weakest in the Dow Jones, down 2.4 percent. The biotech group suffered a slight setback in the final quarter of 2022. The bottom line was that profits fell by around 15 percent, and sales were practically stationary. There was a course firework at AMD. With an increase of 12.6 percent, the paper was the strongest value of the day in the Nasdaq 100. In a weak PC market, the chip company benefited from strong business with data centers and the aviation and automotive industries. Growth in these areas more than offset the slump in personal computer processor business in the past quarter.

The fact that FedEx continues to turn the screw on costs and wants to reduce the number of management positions by more than ten percent was also well received by the market: the shares of Deutsche Post’s competitor gained 4.3 percent, climbing to their highest level since mid-September , Nvidia with plus 6.7 percent and Tesla with plus 4.7 percent were also among the strongest stocks in the Nasdaq 100. Electronic Arts, on the other hand, went massively down against the trend. With a minus of 9.3 percent, the paper was by far the weakest value of the day in the Nasdaq 100. The video game manufacturer had disappointed with its outlook for the current quarter. The highly anticipated next StarWars game is delayed by a few weeks.

ADP US Private Employment Growth Disappoints And/Or US Job Openings Rise More Than Expected
While ISM US Factory Activity Shrinks For 3rd Month Today – Ahead Of FED Decission, Before Opening Bell

US Private businesses created 106K jobs in January of 2023, well below an upwardly revised 253K in December and market forecasts of 178K. It is the lowest reading since January of 2021 when businesses shed 69K jobs. ADP noted that employment was soft during the January 12 reference week as the US was hit with extreme weather. Hiring was stronger during other weeks of the month, in line with the strength seen late last year. The services sector added 109K jobs, led by leisure and hospitality (95K), financial activities (30K), education/health services (12K), professional/business (8K) and information (5K) while trade/transportations and utilities lost 41K jobs. Meanwhile, goods-producing industry lost 3K jobs to construction while the manufacturing sector added 23K.

The number of job openings in the United States increased to 11.0 million in December of 2022, the most in 5 months and above market expectations of 10.25 million. Over the month, the largest increases were in accommodation and food services (+409,000), retail trade (+134,000), and construction (+82,000). On the other hand, the number of available positions decreased in information (-107,000). Meanwhile, the number of hires and total separations changed little at 6.2 million and 5.9 million, respectively. Within separations, quits (4.1 million) and layoffs and discharges (1.5 million) changed little. The ratio of openings to unemployed people rose to a near record-high 1.9 from 1.7 a month earlier and compared to 1.2 before the pandemic.

The ISM Manufacturing PMI fell to 47.4 in January, the lowest since May 2020 at the height of the covid pandemic and below market forecasts of 48. The reading pointed to the third consecutive contraction in factory activity as companies slowed outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year. Further declines were seen for new orders (42.5 vs 45.1), production (48 vs 48.6) and backlogs of orders (43.4 vs 41.4) while inventories (50.2 vs 52.3) slowed, the supplier deliveries index indicated faster deliveries (45.6 vs 45.1) and the price index increased (44.5 vs 39.4). At the same time, employment (50.6 vs 50.8) rose slightly less but companies are indicating that they are not going to substantially reduce headcounts as they are positive about the second half of the year.

Fed Delivers Smaller 25bps Hike

The Federal Reserve raised the target range for the fed funds rate by 25bps to 4.5%-4.75% in its February 2023 meeting, dialing back the size of the increase for a second straight meeting, but still pushing borrowing costs to the highest since 2007. The decision came in line with market expectations. Policymakers added that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%. During the regular press conference, Chair Powell reinforced the disinflation process is on an early stage and that interest rates are not yet at a sufficiently restrictive level. In determining the size of future rate increases, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

Dollar Falls 1% After Fed Decision

The dollar index lost nearly 1% to 101.1 on Wednesday as investors digest the latest FOMC decision and Chair Powell comments during the regular press conference. General market sentiment saw a more dovish tone as policymakers raised the fed funds rate by 25bps and signalled ongoing rate increases to follow but also recognized that inflation is going down while Fed Chair said that “if inflation comes down much faster, then we’ll be seeing that and it will be incorporated into our thinking about policy”. Markets considered that a rate cut this year was not ruled out by the Fed. The terminal rate for the fed funds rate is now seen under 4.9%.

US 10-Year Bond Yield Falls On Powell Comments

The yield on the 10-year US Treasury note fell to 3.39% on Wednesday, approaching low levels not seen since April last year, as investors digest the latest FOMC statement and Fed Chair comments. The Federal Reserve delivered a smaller 25bps rate hike as expected and reiterated that ongoing increases in borrowing costs would remain appropriate. However, the FOMC language appeared more dovish, as officials now see inflation has eased somewhat. At the same time, Chair Powell noted the disinflation process is underway and happening without weakening in the labor market. Markets now see the terminal rate for the fed funds rate at under 4.9%.

US Stocks Turn Positive After Powell Comments

The Dow recovered from a 400-point drop to cross into positive territory on Wednesday, while the S&P 500 and the Nasdaq 100 added 1.1% and 2.2%, respectively, as investors digested remarks from Fed Chair Jerome Powell. The shift in sentiment began when the head of the US central bank said at the news conference that he saw signs that the disinflation process has started while acknowledging that the US economy remains resilient. Still, Powell sees ongoing increases in the target range appropriate to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%. The Federal Reserve raised interest rates by 25 basis points to a range between 4.5% and 4.75%, bringing borrowing costs to their highest since 2007. On the corporate front, Snap dipped over 10% after the social-media company cautioned that sales in the current quarter would likely decline while reporting a wider-than-expected loss.

Wall Street Turns Green After Fed Decision

The Dow finished marginally higher on Wednesday, while the S&P 500 and Nasdaq 100 added 1% and 2%, respectively, and pared earlier losses after the Fed Chair Powell’s news conference. Powell was more optimistic about the outlook for inflation, saying: “We can now say for the first time that the disinflationary process has started.”, which sent stocks higher. The Federal Reserve raised the target range for the fed funds rate by 25bps to 4.5%-4.75% at today’s meeting and brought the borrowing costs to their highest since 2007. On the corporate front, Snap dipped over 10% after reporting a poor outlook and a wider-than-expected loss, while Peloton surged 26% after its net loss narrowed year over year. Advanced Micro Devices advanced 12.6% on its upbeat earning reports.