Market Talk: What’s up today? | Swissquote

US equities rallied on Thursday, boosted by a decent rally in Tesla and Chevron stocks, and a better-than-expected GDP read in the US.

But be careful! The US growth number was good, but not necessarily for good reasons.

The US will reveal another gauge of inflation, the PCE data, that is closely watched by the Federal Reserve (Fed). A slower than expected core PCE would be a cherry on top for closing a week where the S&P500 rallied past its 2022 bearish trend top, and which could soon confirm a cup and handle pattern above the 4100 mark.

But beware, Intel slumped 10% in the afterhours trading after revealing a worse-than-expected quarterly loss due to a steeper than expected fall in PC chip sales, and giving a weaker-than-expected forecast for the current quarter.

In the FX, the US dollar is better bid on the back of a strong GDP report, while gold is down from the $1950 resistance. The EURUSD is again below the 1.09 mark, while Cable consolidates below 1.24, with a clear resistance forming into the 1.2450 mark. The AUDUSD on the other hand extends gains above 71 cents level as the heated inflation report this week boosted the Reserve Bank of Australia (RBA) hawks. The market remains strongly short the Aussie, meaning that if the Aussie gains further momentum to the upside, we could see a short covering that could further emphasize the bullish trend.

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The S&P500 was flat yesterday, as investors tried to make sense of the deluge of company earnings that hit the fan before, during and after the session. Microsoft didn’t gain on better-than-expected earnings, and Tesla announced record profits, but the share price jumped only 5% in the afterhours.

Latest positive price action in stocks – which is now fading, and the positive price action in bonds suggest that the recession odds became less for stock traders, and more for bond traders since the start of this year. And that’s a risk for stock gains, besides earnings.

In central banks, Bank of Canada (BoC) hiked its bank rate by 25bp yesterday and announced to pause. The BoC decision spurred the expectation that the Federal Reserve (Fed) could do the same: hike by 25bp next week then pause.

For the Bank of England (BoE), investors are almost sure that the year will end with a 25bp hike due to the slowing economy.

But in Australia, the surprise rebound in Australian inflation, spurred the Reserve Bank of Australia (RBA) hawks yesterday.

In summary, investors’ hearts will continue to swing between slowing economy and easing inflation, and the bumps in inflation along the way.

But the data will tell who is right and who is wrong. All eyes are on US GDP today!

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Trading in the US was eventless, except for the wild moves that marked the opening bell at the NYSE.

The S&P500 swung around the 4000, without any major moves up or down, as investors remained undecided faced with mixed company earnings, and mixed economic data.

Microsoft announced better-than-expected results yesterday, but the 5% rally in the afterhours trading rapidly faded. Tesla is due to announce its earnings today.

In the FX, the US dollar remains under the pressure of soft data, and worryingly softening Fed expectations.

The EURUSD is testing the 1.09 resistance on encouraging PMI data, while sterling is softer on growing slowdown worries.

In Canada, the Bank of Canada (BoC) is preparing to announce its final 25bp hike. The dollar-CAD puts increasing weight into clearing the 1.3350 support, but crude oil is not helping, as the price of a barrel of American crude continues bumping its head against the solid $82pb wall, the 100-DMA, without being able to break it to the upside.

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The week started with more news of layoffs, and further gains in the S&P500.

The S&P500 traded above the 200-DMA, yet again. Earnings will decide whether the latest gains will be sustainable.

All eyes are on Microsoft – not only because it will release Q4 earnings after the bell, but also because it’s been making a great buzz since the start of the year thanks to its bet on ChatGPT.

The company confirmed yesterday that is putting $10 billion into the now-very-famous ChatGPT.

On the macro front, PMI data released this morning showed that the manufacturing activity in Japan didn’t improve in January, while Australia’s manufacturing PMI slipped below 50, into the contraction zone for the first time in 32 months, but business confidence improved to a three-month high, on China’s reopening.

Elsewhere, the EURUSD couldn’t consolidate gains above the 1.09 mark yesterday. But today’s PMI data could help give another boost to the single currency. And, if not, the message from the European Central Bank (ECB) is crystal clear: the rate hikes will continue and that’s positive for the euro.

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US stocks, and Bitcoin rallied on Friday, boosted by gains in tech stocks on surprisingly strong Netflix results, Google’s job cut announcement and dovish hints from Federal Reserve (Fed) members.

This week, the quiet period for Federal Reserve (Fed) officials will help us digest what has been said over the past weeks and focus on earnings!

Microsoft, Johnson&Johnson, General Electric,Texas Instruments, Intel, Tesla Mastercard, Visa, Chevron and American Express are among companies that will go to the earnings confessional this week.

Big Tech earnings projections are down by about 5% since October.

Yet, expectations went sufficiently low that there is plenty of room for a positive surprise, as has been the case with Netflix.

In the FX, the US dollar kicked off the week under pressure. The EURUSD already hit the 1.09 mark early in the session. Cable advanced to 1.2450.

The barrel of American crude posted its second straight week of advance, though the 100-DMA hasn’t been cleared… just yet!

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Netflix added nearly 7.7 million new subscribers last quarter, versus only around 4.5 mio expected by the market. The share popped almost 10% higher in the afterhours trading.

The results have been a relief for Netflix, but it will hardly reverse the fading optimism, as the S&P500 traded lower for the third straight day, having failed to clear a very critical resistance zone, above 4000 level, where the 200-DMA, and the ceiling of the 2022 bearish trend prevented investors from extending the rally into a new, bullish era, with no major justification on the company, or macroeconomic level.

In this sense, P&G hasn’t been as lucky as Netflix. Their sales fell 6% in Q4, after they raised prices 10%. Price increases for P&G products may have hit a critical point where customers are no longer willing to pay for them.

Elsewhere, US jobless claims fell below 200’000 for the first time since last September, and the US reached its debt ceiling yesterday, and began using special measures to avoid a payments default.

In the FX, the US dollar index remains under pressure. The dollar-yen is better bid despite the data showing that inflation in Japan hit 4% in December, as expected. The EURUSD remains bid below the 1.08 level, while Cable continues flirting with the 1.24 mark.

Oil is stuck between 50 and 100-DMA, gold ticks higher despite overbought market conditions, while Bitcoin rally slows near $21.5K.

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The latest PPI data showed that the producer price inflation in the US fell way faster than expected, while retail sales fell 1.1% in December – marking the biggest monthly drop of last year.

The S&P500 didn’t like the mix of slowing economic data, and hawkish comments from Fed officials, and dived more than 1.50% yesterday.

But the dovish expectations – despite the hawkish comments from the Fed, feed well into the bond markets: the US 2-year yield is diving toward the 4% mark, while the 10-year yield hit 3.30%, the lowest level since September.

This means that the positive divergence in the sovereign space, compared with the stocks, is happening.

And the divergence could be even more visible if the stocks fall further on soft earnings. Netflix and P&G will announce their Q4 results today.

In energy, US crude advanced past the $82 mark on Chinese reopening optimism and IEA predicting that the oil demand will hit a record in 2023, before falling back below the $80 on recession pessimism.

In precious metals, gold is bid above the $1900 level, supported by lower US yields and the softer US dollar.

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The Bank of Japan (BoJ) kept its below-zero interest rate and its faltering yield curve control policy unchanged. No-action sent the Japanese 10-year yield tumbling by up to 14 bp – that’s almost a 30% plunge. The dollar-yen spiked above the 131.50 level, losing more than 2.50% against the greenback.

In equities, confusion and lack of direction best described yesterday’s sentiment in the US.

US futures were pointing at a negative start, then turned higher in early trading as we heard a lot of talk about "green shoots" and "bright spots" in the economy when Chinese Vice Premier talked in Davos yesterday saying that he expects China's economy to return to normal this year.

The S&P 500 shortly traded above the 4000 level, but reality soon hit the fan with mixed earnings from Goldman and Morgan Stanley, and brought the top sellers in.

And the top sellers kept selling into the 4000 level to the end of the session. Finally, the index closed the session 0.20% lower, spot on the 2022’s down-trending channel top and above the critical 200-DMA.

The first set of earnings doesn’t support a sustainable move above that 200-DMA level.

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European stocks kick off the week on last week’s positive vibes, adding more gains to their best ever start to a year.

The DAX extended its advance above the 15000 mark, to the fresh highs since before the war in Ukraine started.

And the French CAC40 took over the 7000 resistance, and is only around 4% below the 2022 peak.

The recovery in European stocks is impressive, yet, could it last?

On the data front, China grew 3%, well below the government’s 5.5% target last year, but the Q4 rebound was well above market expectations. Retail sales contracted significantly less than expected as well, while unemployment unexpectedly fell, giving signs that the end of Covid zero measures are feeding into the data.

In the FX, the US dollar was better bid yesterday, but price rallies could be good to sell, especially against oil and commodity currencies, that should extend rebound on Chinese reopening story.

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