INTC, AMD, APPL, AVGO - buy the dip this week?
Back when the Fed was raising interest rates “diligently” in 2022 especially, all monthly official reports garnered a lot of attention, especially labour reports.
This is because they are direct reaction to the effects of inflation on business etc..
With a gradually cooling inflation and the Fed holding interest rates static for the past 3 FOMC meetings, the labour reports seemed to have lost its influence over the market.
Specifically, I am looking at both:
ADP Employment report.
US Non-farm payroll (December 2023).
ADP employment report (Dec 2023)
On 04 Jan 2024, US ADP Employment report indicated that 164,000 jobs were added in December 2023. (see above)
Actuals exceeded forecast of 115,000 jobs by 49,000 jobs or +42%.
A bright spark in the report is that wage growth continued to slow, a welcome sign in the fight against inflation.
This is because any risk of a wage-price spiral has been mitigated for now.
US non farm payroll report (Dec 2023).
In December 2023, 216,000 jobs were added to the labour market.
This is a +24.86% increase from November 2023 data of 173,000 jobs.
December actuals also exceeded Wall Street forecast of 170,000 job (or +27.06%).
Both job reports have made Investors nervous; as they watched over the Fed closely for signs of whether the central bank can achieve the so-called soft landing.
This would be where inflation retreats to the Fed's 2% goal without a recession. That could impact the Fed's timeline for cutting rates this year.
According to ADP chief economist Nela Richardson:
A key to the soft-landing goal is a normalization of a red-hot, pandemic era labour market.
The Fed will likely take notice of the bump-up in December 2023 job additions.
The “good” news initially led a modest rally in early trading. However, market sentiment quickly shifted shortly after 11am and gave up most of the gains.
This was likely due to the following factors:
Downward revisions to previous months' data: November's job growth was revised down by 46,000, indicating potential volatility in labour market.
Dip in labour force participation rate: The labour force participation rate (percentage of working-age adults actively seeking employment) declined to 62.5%, its lowest level in nearly three years. This raised concerns about future job growth and broader economic momentum.
Hawkish Fed expectations: The strong headline number could reinforce expectations for the Fed to maintain its higher interest rates, for longer, dampening stock market's outlook.
By the time market ended first week of trading:
DJIA: +0.07% (+23.77 to 37,466.11).
S&P 500: +0.18% (+8.56 to 4,697.24.
Nasdaq: +0.09% (+13.77 to 14,524.07).
For the coming week, US market futures indicators seemed to continue last week’s downwards trend. (see above)
In the face of further pull back, how do we:
Position ourselves for a possible “buy the dip”?
What should we be buying into?
US market heatmap - 02 Jan to 05 Jan.
The 5 stocks that consolidated the most were:
$Intel(INTC)$. fell -6.95%.
$Advanced Micro Devices(AMD)$. fell -6.84%.
$Broadcom(AVGO)$. fell -6.51%.
$Apple(AAPL)$. fell -6.41%.
$Qualcomm(QCOM)$. fell -6.26%.
My viewpoints:
This correction comes when investors are torn between the hope of interest rate cuts and the fear that a robust economy may postpone any potential monetary easing.
Secondly, I believed the pull back for Tech stocks is due to profit taking.
When investors taking profit, it also presents buy-in opportunities when a stock undergo downwards corrections.
Applying the “buy the dip” strategy, should be able to secure the dream stock at a bargain price.
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Do you think US market will continue to consolidate this week?
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