2023/02/02 (162.025) Technical Analysis

As I Wrote Yeserday Yet,
We Stay Long In The DOW Future This Week

Dow Gives Up Gains, Nasdaq 100 Clearly Up, Today
– Microsoft, Meta, Salesforce And/Or Align Technology Enormously Strong, Merck & Co Weak

Good numbers and a convincing outlook from Meta accelerated the recovery rally in US tech stocks again on Thursday. While meta stocks surged more than a quarter at their peak, the tech-heavy Nasdaq 100 at times extended gains to more than four percent. It thus continued the significant price gains from the previous day, which were achieved as a result of the US interest rate decision. In the end, the Nasdaq 100 Index came to 12,803.14 points, an impressive plus of 3.56 percent. For the first time since August, the technology-heavy barometer made it back above the 12,800 point mark.

Investor interest in standard values suffered from the tech euphoria: the leading index Dow Jones Industrial even fell slightly by 0.11 percent to 34,053.94 points. The broad S&P 500 still rose 1.47 percent to 4,179.76 points. It was also enough for him for the highest level since August. On the Nasdaq stock exchange, the positively received signals from Meta were considered a decisive price driver. The Facebook parent company performed better than expected in the past quarter, despite another decline in sales. In addition, Facebook founder and Meta boss Mark Zuckerberg promised further cost cuts, for which he received a lot of praise.

According to Bank of America, Meta is leading an important transition process with a focus on greater efficiency. Analyst Justin Post took this as an opportunity to give the paper a fresh buy recommendation on Thursday. It seems as if the social media group has found its right medicine, analyst Benjamin Black from Deutsche Bank also commented positively on the developments. While Meta ultimately jumped 23 percent, Align Technology’s shares in the Nasdaq 100 even dwarfed this with a plus of more than 27 percent. The maker of splints for correcting misaligned teeth also exceeded analysts’ expectations with its recent business development.

Microsoft from the tech sector was at the top of the Dow with a price increase of 4.7 percent. However, the strength of the tech stocks contained there was not enough to support the leading index, because on the other hand there was the weight of falling stocks, for example from the healthcare sector. A disappointing business outlook for the pharmaceutical company Merck & Co caused its shares to slip by 3.3 percent.

Away from the tech stocks, the shares of the postal competitor FedEx increased by 6.1 percent. In doing so, they expanded their profits from the previous day, which had been initiated by cost-cutting plans. Similar to Meta, Bank of America took the new focus on efficiency as an opportunity to upgrade the paper to “buy”. After-hours figures from Apple, Amazon and Alphabet are now eagerly awaited.

US Companies Cut Most Jobs
US Factory Orders Rebounds Not Much
US Initial Jobless Claims At Over 9-Month Low
US Productivity Rises Better Than Forecast In 4Q2022
US Labor Costs Rise Less Than Marketparticpants Expected

US-based employers announced 102.943K job cuts in January of 2023, the most since September of 2020, and compared to 43.651K in December. It is also the highest January total since 2009, when 241.749K were announced, as companies are preparing for an economic slowdown, cutting workers and slowing hiring. The technology sector announced the most cuts with 41.829K, 41% of all cuts, the second highest on record. Retailers announced the second-most cuts with 13K; real estate 2.191K as housing demand and prices fall. Meanwhile, employers announced plans to hire 32.764K workers, primarily in entertainment/leisure. This is down 58% from a year earlier and 37% from December 2022.

New orders for US manufactured goods jumped 1.8% month-over-month in December of 2022, rebounding from an upwardly revised 1.9% fall in November, but below market forecasts of 2.2%. Orders for transportations surged 16.9%, pushed by a 115.5% jump in those for nondefense aircraft and parts. Also, orders for fabricated metal products edged up 0.1% and those for electrical equipment, appliances, and components increased 1.1%. On the other hand, new orders for machinery went down 1.7% and those for computers and electronics went down 0.5%. Considering full 2022, factory orders increased 11.8%.

The number of Americans filing new claims for unemployment benefits fell by 3,000 from the previous week to 183,000 on the week ending January 28th, the lowest since April and well below market expectations of 200,000. The result further consolidated evidence of a tight labor market despite elevated tech layoffs and the Federal Reserve’s aggressive tightening path. The 4-week moving average, which removes week-to-week volatility, fell by 6,000 to 191,500, the lowest since early May. On a non-seasonally adjusted basis, initial claims fell by 872 to 224,356, with significant decreases noted in Kentucky (-3,387) and California (-1,923) offsetting the jumps in Georgia (+1,885) and New York (+1,195).

Nonfarm business sector labor productivity in the United States increased 3.0 percent in the fourth quarter of 2022, following an upwardly revised 1.4 percent advance in the previous three-month period and beating market expectations of 2.4 percent, a preliminary estimate showed. Output grew 3.5 percent (vs 3.6 percent in Q3) and hours worked were up 0.5 percent (vs 2.3 percent in Q3)..

Unit labor costs in the US nonfarm business sector increased 1 percent in the fourth quarter of 2022, below market forecasts of a 1.5 percent rise and following a downwardly revised 2 percent gain in the previous period, a preliminary release showed. It is the smallest increase in labor costs since the first quarter of 2021, reflecting a 4.1 percent increase in hourly compensation and a 3.0 percent increase in productivity.

Brazilian Real Traded Below 5
EURUSD Only Steady After ECB Meeting
GBPUSD Falls Unexceptly After BoE Decision

The US Dollar exchange rate decreased below 5 Brazilian Real in the foreign exchange interbank market.

The euro steadied near $1.09 on Thursday, remaining close to levels not seen since April last year, as investors react to central banks meetings in US, UK, and Euro Area. The Federal Reserve raised rates by 25 bps while both the BoE and the ECB hiked rates by a bigger 50 bps. Looking ahead, ECB officials hinted at another 50 bps rate hike at the March meeting and said the subsequent pace will be data-dependent. In the US and the UK, policymakers were optimistic.

The British pound fell further to $1.231 on Thursday, after rising to as high as $1.238, as markets digest the latest monetary policy decision. The Bank of England raised rates by 50 bps to 4% as expected, and said further tightening is required as inflation risks are skewed significantly to the upside. Still, the bank hinted that rates were near their peak and dropped its pledge to “respond forcefully, as necessary” to signs of further inflationary pressure, adding that inflation had probably peaked. Looking at growth, the central bank sees a shorter and shallower recession than in the November outlook.

US 10-Year Treasury Yield Hovers Near Five-Month Low As Dollar Bounces Off Nine-Month Low

The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, bottomed around 3.4%, close to levels not seen since September 2022, as investors reassessed the Federal Reserve’s plans for rate hikes. The world’s most influential central bank raised interest rates by 25 basis points to a range between 4.5% and 4.75%, a less aggressive move than before, indicating growing confidence that inflation is on a downward trajectory. However, despite Fed Chair Powell’s overall dovish tone, he still sees ongoing increases in the target range appropriate to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%. Wall Street and the Fed are again in a standoff on the future path of interest rates, with the former betting on a rate cut later this year while the latter reaffirmed its view that interest rates will stay higher for longer.

The dollar index regained ground on Thursday, recovering from a nine-month low of 100.8 to trade around the 101.4 mark as investors reassessed the outlook for monetary policy and growth. The shift in direction came as the euro and the British pound weakened against the greenback after the European Central Bank and the Bank of England offered no new surprises, with the latter adopting a more dovish tone on inflation. The ECB and the BoE hiked interest rates by a widely expected 50 basis to 3% and 4%, respectively. Stateside, the Federal Reserve delivered a smaller 25 bps rate hike in a widely expected move, while Fed Chair Jerome Powell said the disinflationary process has started. Meanwhile, the latest figures showed that US companies announced the most significant number of job cuts since September 2020 while weekly claims fell to an over 9-month low. Meanwhile, unit labor costs rose less than expected in Q4, and the Q3 figure was downwardly revised.

Wall Street Gains On Tech Rally

The Nasdaq 100 and the S&P 500 closed 3.2% and 1.5% higher, respectively, on Thursday and enjoyed a Post-Fed rally boosted by gains from the tech industry’s biggest players. Meanwhile, the Dow lost 0.1% as investors reassessed the outlook for monetary policy. On the earnings front, Meta surged 23.3% after reporting a stronger-than-expected fourth revenue and announcing a $40 billion stock buyback. Gains from Meta along with three other big-tech, Apple (3.7%), Amazon (7.4%) and Alphabet (7.3%) sent the S&P 500 and the Nasdaq 100 to their highest level since August and September. The market movement followed the Federal Reserve’s decision delivering a modest 25 bps hike on Wednesday. Fed Chair Jerome Powell said that the central bank had made progress in the battle against inflation despite warning that ongoing increases in the target range were appropriate to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2%.