Equities report: US Equities markets continue moving lower

We tend to note continued decline in the S&P 500, NASDAQ 100 and DOW Jones 30 which at the time of this report have moved lower since last week’s report. In this report, we are to take a different approach than usual and focus mostly on major fundamental issues that surround the US stock markets and end the report with a technical analysis of a US stock market index for a more rounded view.

Fitch Warns it may have to downgrade US banks

Following Moody’s decision to downgrade 10 US regional banks and placing  other banks on “watch”, the Fitch credit rating agency appears to be considering following suit, with CNBC stating on Tuesday that a Fitch Ratings analyst warning that the may be forced to downgrade a number of US banks, including JPMorgan&Chase. In the event that Fitch decides to join Moody’s in downgrading US banks, it may have severe implications for the US banking sector which could be said is on a tight leash following the fallout from Silicon Valley Bank and First Republic. Therefore, should Fitch follow Moody’s actions, it may have negative implications for the US equities markets, n investors and depositors may opt to look for “safer” alternatives, thus potentially leading to an exodus of funds from a number of US banks, which could weigh on the US equities markets.

Stronger Greenback seems to weigh on the US Equities markets

The stronger than expected CPI print that was released last Thursday seems to have provided for support for the greenback, combined with a better-than-expected Core retail sales rate  released on Tuesday, seems to be indicative of a stronger than previously anticipated economic resiliency in the US economy. As such, a stronger than expected economy could potentially provide the Fed with some leeway should they decide to continue their aggressive interest rate policy or maintain a level of high interest rates for a prolonged period of time. Therefore, following the release of the financial data, the greenback seems to have reacted positively, which in turn could make the US Equities markets more expensive for oversees investors, as the greenback strengthens against its counterparts, which in turn may discourage foreign investors, as it could cost more  to convert a foreign currency to dollars and as such potentially reducing demand for US equities which are bought using the greenback. In conclusion, the US equities markets appear to be weighed down by a stronger dollar and should market participants anticipate a continued strengthening of the dollar, we may see the US equities markets being dragged to lower ground.

Home Depot beats earnings expectations

Home Depot beat earnings expectations by $0.21, with earnings per share and revenue coming in at $42.92B , beating market analysts expectations by $687.12M. Despite the positive than expected earnings for the quarter, the company reported a decrease of 2% in its sales, albeit a smaller decline that what was expected by market analysts yet still a worrying picture. With other US major home retailers expected to release their earnings later on during the week, the decline in sales could be mimicked across other big-box retailers who have yet to announce their earnings. Should the decline in sales be echoed across the retail industry, it could come as a stark contrast to the US Core retail sales which came in better than expected, with expectations of lower future sales at big retail stores potentially hinting at the beginning of a decline in consumer activity. Therefore, in conclusion, even if big-box retailers beat revenue expectations, a potential continued deterioration in future sales could potentially have long-term implications for the US economy, if consumers are gradually spending less and less, which in turn could weaken the US equities markets over the long run.

Earnings reports

In addition, stock traders may still have to navigate through earnings reports which are being released. We make a start on Tuesday with BestBuy (#BestBuy) and Baidu (#BIDU) then on Wednesday we note Nvidia’s (#NVIDIA) earnings release and lastly on Thursday we note Opera’s (#OPERA) earnings.

기술적 분석

#HD Daily Chart

Support: 325 (S1), 315 (S2), 302 (S3)

Resistance: 4595 (R1), 4730 (R2), 4820 (R3)

 Home Depot seems to have move higher on the heels of the company’s earnings release, with the stock now appearing to be aiming for the 334 (R1) resistance level. We tend to maintain a bullish outlook for the stock and supporting our case is the RSI indicator below our Daily chart which currently registers a figure near 70 , implying a bullish market sentiment. For our bullish outlook to continue we would like to see a clear break above the 334 (R1) resistance level, with the next possible target for the bulls being the 344 (R2) resistance ceiling. On the other hand, for a bearish outlook, we would like to see a clear break below the 325 (S1) support level, with the next possible target for the bears being the 315 (S2) support base.

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