CPI Data & Q2 Earnings Drive US Market In July.
In my Mon, 10 July post - Which Company Q2 Earning Will Save US Market? I mentioned that US market performance (this week), would be driven largely by Q2 earnings reports released progressively.
Market closed marginally higher (see below), as there wasn’t any “popular” company reporting their earnings yesterday.
DJIA : +0.62% (+209.52 to 33,944.40). Best performing index of the day.
S&P 500: +0.24% (+10.58 to 4,409.53).
Nasdaq: +0.18% (+24.76 to 13,685.48).
Will it remain status quo on Tue, 11 July since there are no major Market Cap companies reporting earnings today either?
If we look at the composite indexes’ Moving Averages (ma), it paints a different picture.
DJIA: 10 July closed lower than its 20day-ma.
S&P 500: 10 July closed above the 3 benchmark ma.
Nasdaq : 10 July closed above the 3 benchmark ma.
Note:
RSI below “30” is considered oversold.
RSI above “70” is considered overbought.
Seemingly, Wall Street is equally interested in the Consumer Price Index (CPI) data due Wed, 12 July 2023 as well.
Recap CPI - May 2023
CPI has been trending lower with each reporting.
However, the quantum has not been “consistent” and “wide”; as per Fed’s wish.
Wall Street’s expectation for June 2023 data is a further -22.5% decline to 3.1%.
Recap Recent PCE - June 2023.
This is the 2% inflation index that the Fed wants to bring under control.
Core PCE that the Fed’s rely on has an inconsistent behaviour.
It did not trend downwards at each monthly reporting.
Without a doubt, the Fed hopes this parameter will register a lower reading at end July.
Q2 2023 Earnings Analysts Forecast
Second quarter earnings is expected to be bleak - declining for a third straight quarter.
According to UBS analysts, amongst the S&P 500 companies, consensus estimates a -7% decline in earnings per share.
Of the 11 sectors, only 2 are expected to see “higher” Q2 earnings growth.
They are:
Consumer discretionary - $Home Depot(HD)$, $Tesla Motors(TSLA)$.
Communications Services - $Alphabet(GOOG)$, $Meta Platforms, Inc.(META)$.
For the Mega Cap tech stocks that have a “runaway” success since the start of 2023 (see above), thanks to their association with artificial intelligence (AI), its crunch time now.
This means, Wall Street will be looking further to see if those AI promises are starting to turn into meaningful profits — and when that can be expected.
Do you think June CPI will fall “lower”?
Do you think Wall Street analysts are “realistic” to expect profits from AI-related stocks?
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July rate hike is widely expected, but the market remains uncertain about the possibility of two rate hikes this year - the chances of another rate hike in September, or November is 22% and 34%, respectively.
All these mini rug pulls eventually add up to one big one.
will cpi data change the whole market trend?
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Time to buy U.S. Treasury. Recent big drop in U.S. Treasury rate. Signal to buy. Trust me. 🕶️
Great ariticle, would you like to share it?
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