Amazon Overbought And Overloved After Historic Rally

Amazon.Com Inc. (AMZN) emerged as the one of the first quarter’s biggest winners, increasing market share after traditional retailers and shopping malls shut down as a result of the COVID-19 pandemic. However, the e-commerce giant experienced growing pains as a result of the buying surge, limiting some products and delaying shipments. These roadblocks negatively impacted Q1 2020 profits, with $5.01 earnings-per-share (EPS) missing estimates by more than $1.00, despite a 26% jump in revenues.

The company has been pumping capital into infrastructure expansion in the second quarter, forcing CEO Jeff Bezos to warn about operating income. That hasn’t stopped investors from scooping up shares at a rapid pace, lifting the stock above $2,900. A string of Wall Street upgrades continues to stoke the upside despite overbought technical readings, but the lopsided reward-to-risk profile may now be too extreme for most investors.

Amazon Bullish View

RBC Capital analyst Mark Mahaney summed up the bullish view on Amazon in June, lifting his price target by 22% to $3300. He declared the company was a “structural winner” in the pandemic following an annual survey, noting that “results clearly support the idea they are likely the best global play off online retail”.  He notes that Prime subscriptions are adding to the upside as well, stating that “penetration surged to 67% vs. 59% in 2019. We see Amazon rapidly approaching 200 million Prime subs worldwide, up from 150 million in January.”

Wall Street And Technical Outlook

Wall Street consensus has priced Amazon for perfection, with an astounding 39 ‘Buy’ ratings and 2 ‘Hold’ ratings. Just one of the 42 polled analysts advises that investors sell the stock at this time.  Price targets currently range from a low of $1987 to a street-high $3500 while it’s currently trading about $150 above the median $2841 target. These numbers continue to tick higher with price, indicating it can trade even higher as long as the company fires on all cylinders.

Amazon is tough to buy from a technical perspective because relative strength readings have reached extremely overbought levels that have triggered multiple reversals since 2003.  In addition, the rally has stretched to three standard deviations above the 20-month moving average, also indicating the upside may be unsustainable in coming weeks. Sidelined investors are rooting for that to happen because it could set up a low-risk buying opportunity at much lower prices.

Concerned on Parts of Tech Sector, But Sees Continued Growth Tied to Two Megatrends: Fidelity

The recent recovery in stock markets has been at odds with economists maintaining a gloomier global economic outlook. The rally is largely driven by the optimism of economic recovery and a much stronger recovery in the technology sector.

The S&P 500 information technology sector has returned about 10% in 2020, including reinvested dividends. Although during the tech bubble of 1990s the sector has never booked over 14% of the S&P 500’s earnings, its profit contribution surged to more than 20% of S&P 500 net income in recent years.

It is likely that technology will play a significant role across different countries and cultures in future, generating better returns in the long run for these tech companies.

“I remain concerned about the impact of recession on parts of the tech sector, but I see continued growth driven by 2 megatrends: the shift to digital experiences and the shift to cloud computing,” wrote Nidhi Gupta, information technology sector leader and portfolio manager of Fidelity Select Technology Portfolio.

Gupta said she believes in companies that are moving traditional offline experiences online, and firms that are helping these companies to make better business decisions with their data, Fidelity added.

Socialising online and doing some of the things, like watching a movie and shopping with friends, virtually is a long-term megatrend that is expected to remain for years, regardless of global economic conditions amid the COVID-19 crisis. That’s why companies like Netflix, Facebook, Amazon.com, and Latin American e-commerce provider MercadoLibre are favoured.

“A related megatrend is that digital businesses with this treasure trove of data are increasingly looking to cloud computing to draw data-driven insights to improve their businesses. This is happening, via cloud services being offered at all levels of the information technology stack—infrastructure, platform, and software,” the American multinational financial services corporation added.

“Many companies are shedding their hardware and becoming software-led in every way,” Gupta adds. Companies that provide the cloud services to help their customers make better business decisions, which include HubSpot, Microsoft, Salesforce.com, Elastic, and MongoDB – all overweighted fund positions as of May 31.

According to Tipranks’ analyst consensus by sector, 148 technology stocks out of 595 were rated “Strong Buy”, 306 were rated “Moderate Buy”, 122 were rated “Hold”, 19 were rated “Moderate Sell” while none were rated “Strong Sell”.

Amazon.com Announces to Buy Autonomous Driving Startup Zoox

Amazon.com, an American multinational technology company based in Seattle, has announced that it will acquire an autonomous vehicle company Zoox Inc in a deal worth reported to be over a billion dollars, helping in bringing their vision of autonomous ride-hailing to reality.

One of the Big Four technology company, Amazon, has extended its investment in the automobile sector, raising more than $530 million in a funding push for Aurora Innovation last year. However, both the companies did not completely disclose the deal and financial terms; the world’s largest online retailer has acknowledged to pay more than $1 billion to Zoox, a source told The Wall Street Journal.

“Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience,” Jeff Wilke, Amazon’s CEO said in a statement. “Like Amazon, Zoox is passionate about innovation and about its customers, and we’re excited to help the talented Zoox team to bring their vision to reality in the years ahead.”

“This acquisition solidifies Zoox’s impact on the autonomous driving industry,” Aicha Evans, CEO of Zoox said in a statement. “We have made great strides with our purpose-built approach to safe, autonomous mobility, and our exceptionally talented team working every day to realize that vision. We now have an even greater opportunity to realize a fully autonomous future.”

However, completion of this transaction is subject to customary closing conditions.

Amazon.com outlook and price target

Forty-two analysts forecast the average price in 12 months at $2,790.75 with a high of $3,400.00 and a low of $1,987.00. The average price target represents a 3.63% increase from Friday’s close of $2,692.87, according to Tipranks. From that 42, 39 analysts rated ‘Buy’, two rated ‘Hold’ and one rated ‘Sell’.

Morgan Stanley target price is $2,800 with a high of $3,300 under a bull scenario and $1,600 under the worst-case scenario. Last week, Suntrust Robinson raised the target price to $3,400 from $2,700, Deutsche Bank raised the target price to $3333 from $2750 and Wedbush raised the target price to $3,050 from $2,750.

It is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst comment

“Amazon’s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest. Amazon Prime membership growth drives recurring revenue and positive mix shift. Advertising serves as a key area for both further growth potential and profitability flow-through.,” wrote Brian Nowak, equity analyst at Morgan Stanley in his June 1 note.

“E-commerce is inflecting and our “shifting consumer spend” framework shows why we expect faster forward growth even if the consumer weakens. We raise estimates, now modeling 25% or 12% e-com growth in ’20/’21. We raise AMZN ests (top OW pick), remain OW WMT, and highlight e-com tailwinds to OW FB/GOOGL,” he added.

US ‘Re-Opening Stocks’ Attracting Buyers; Amazon, Facebook Hit Record Highs

The three major U.S. stock indexes posted their fourth gain in five sessions on Wednesday as investors continued to bet on a swift economic recovery from coronavirus-driven lockdowns and the potential for more stimulus measures from the Federal Reserve. The move took place despite a medical watchdog group downplaying the upbeat coronavirus results from Moderna Inc. that earlier in the week was a catalyst by a spectacular rally.

In the cash market, the benchmark S&P 500 Index settled at 2971.61, up 48.67 or +1.85%, the blue chip Dow Jones Industrial Average finished at 24575.90, up 369.04 or +1.65% and the technology-based NASDAQ Composite closed at 9375.78, up 190.68 or +2.45%.

The Internals

Gains were broad-based, with each of the 11 major S&P sectors on the plus side. The small-cap Russell 2000 Index, which usually leads gains out of a recession, outperformed the large-cap indexes, according to Reuters.

Advancing issues outnumbered declining ones on the NYSE by a 4.05-to-1 ratio; on the NASDAQ Composite, a 3.53-to-1 ratio favored advancers.

The S&P 500 posted 13 new 52-week highs and no new lows; the NASDAQ Composite recorded 74 new highs and nine new lows.

Money Moving into Growth, ‘Re-Opening Stocks’

Since the markets bottomed in late March, technology sector growth stocks have been the catalysts leading the rally. We are now seeing demand for the stocks of companies expected to benefit from the economy re-opening.

Amazon rose 1.98% to hit an all-time high to lead the market higher. Facebook gained 6.04% and reached record levels as well. Stocks that would benefit from the economy reopening also advanced Wednesday. MGM Resorts closed 8.84 higher while United Airlines rose 5.19%.

As states across the country begin to loosen restrictions, hopes for an economic rebound have grown. The NYSE Arca airlines index jumped 5.35% as Delta Air Lines Inc.’s chief executive officer said he was confident travel will return in the next 12 to 18 months.

Moderna Responds to Criticism of Its Coronavirus Results

Moderna would never put out data on its potential vaccine for the coronavirus that was different from “reality,” the biotech firm’s chairman told CNBC on Wednesday.

The comment came a day after health-care publication STAT News reported that some vaccine experts were skeptical of Moderna’s new vaccine data, saying it did not provide critical information to assess its effectiveness. The report sent Moderna’’ stock and the broader U.S. market lower.

Stock Pick Update: May 20 – May 26, 2020

The broad stock market has extended its short-term consolidation in the last five trading days (May 13 – May 19). Almost two months ago on March 23, the S&P 500 index sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value. Then we saw huge come-back rally, as the index got back above 2,900 mark. Recently the S&P 500 index has been trying to break above the resistance level of around 2,950.

The S&P 500 index has gained 1.99% since last Wednesday’s open. In the same period of time our five long and five short stock picks have lost 0.17%. So stock picks were relatively weaker than the broad stock market. However, our long stock picks have gained 2.14% and they have outperformed the index. Short stock picks have resulted in a loss of 2.48%. The overall results remain relatively better than the S&P 500 index over last months.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • May 19, 2020
    Long Picks (May 13 open – May 19 close % change): SLB (+1.42%), CSCO (+2.74%), NWSA (+6.12%), CCI (-1.04%), CB (+1.46%)
    Short Picks (May 13 open – May 19 close % change): AVB (+2.72%), C (+5.79%), AEP (-0.45%), COP (+4.02%), AAPL (+0.32%)

    Average long result: +2.14%, average short result: -2.48%
    Total profit (average): -0.17%

  • May 12, 2020
    Long Picks (May 6 open – May 12 close % change): SLB (+5.17%), WYNN (-2.24%), MLM (-7.68%), MKC (+4.97%), GE (-3.22%)
    Short Picks (May 6 open – May 12 close % change): SYY (-3.33%), CAT (-4.81%), XEL (-7.15%), COG (-6.68%), AMZN (+1.18%)

    Average long result: -0.60%, average short result: +4.16%
    Total profit (average): +1.78%

  • May 5, 2020
    Long Picks (Apr 29 open – May 5 close % change): MPC (+4.50%), GILD (-5.75%), LIN (-3.19%), GE (-7.19%), HIG (-13.29%)
    Short Picks (Apr 29 open – May 5 close % change): UPS (-3.53%), SPGI (-2.59%), SO (-6.06%), COG (-1.16%), AMGN (-1.06%)

    Average long result: -4.98%, average short result: +2.88%
    Total profit (average): -1.05%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, May 20 – Tuesday, May 26 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (May 20) and sold or bought back on the closing of the next Tuesday’s trading session (May 26).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Energy, 1 x Communication Services, 1 x Technology
  • sells: 1 x Real Estate, 1 x Utilities, 1 x Consumer Staples

Contrarian approach (betting against the recent trend):

  • buys: 1 x Real Estate, 1 x Utilities
  • sells: 1 x Energy, 1 x Communication Services

Trend-following approach

Top 3 Buy Candidates

SLB Schlumberger Ltd. – Energy

  • Stock remains within a consolidation following April’s rebound
  • The resistance level of $19
  • Initial upside profit target level of $22-24

TWTR Twitter, Inc. – Communication Services

  • Potential uptrend resuming following breaking above bull flag pattern
  • Upside profit target levels of $31 and $35
  • The support level remains at $27

CSCO Cisco Systems, Inc. – Technology

  • The market broke above its recent consolidation (bull flag pattern)
  • The resistance levels of $45.50 and $48.00 (upside profit target levels)
  • The support level of $43.00

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Energy, Communication Services and Technology sectors were relatively the strongest in the last 30 days. And they all have gained much more than the S&P 500 index in the same period. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

US Open – Risk, Earnings, Oil, Gold, Bitcoin

The FTSE 100 took a hammering on Friday while many of the bourses were closed which is why it’s not coming under such heavy fire today. There’s some catch-up going on across much of the continent in the aftermath of Trump’s comments on potential Chinese tariffs. The last thing we need right now is a resumption of the trade war.

Earnings ended last week on a sour note, with Amazon and Apple adding a bit of gloom to a season that has, to that point, been given a bit of a free pass. Perhaps this is more of a timing issue than an earnings one but it appears to have contributed to the sea of red we’re now seeing. More earnings to come this week but we are past the peak.

Thankfully, the same appears to be true of the coronavirus itself. Boris Johnson emphasized this last week, even as the UK is on course to overtake Italy with the second-highest number of reported fatalities, behind the US. We should learn a lot more about the lockdown easing process over the coming weeks, although I imagine it’s going to be very flexible as we see what impact it has on the data and healthcare system.

Oil slips as risk appetite dwindle

Oil prices appear to be mirroring sentiment in the markets today, with WTI down 7% on the June contract. A little over two weeks until expiry, we’ll soon see just how at ease traders have become with storage capacity. US production is now around one million barrels a day off its peak but falling very gradually in the last month, only 100,000 barrels per week.

The same isn’t true of rig numbers, which have been plunging so I imagine this will catch up with the production figures and alleviate the storage pressures in time. Whether that will come in time for the June expiry I’m not sure. Should be a fascinating couple of weeks.

Is gold a safe haven again?

Gold has enjoyed a nice bump these last couple of trading sessions. It technically remains range-bound but the move has come alongside stock market declines. I’m not going to speculate just yet about whether its normal relationship with risk has restored, I’ve done that enough over the last couple of months only for it to revert. Whatever is giving it a boost today, only a break of $1,750 will be meaningful, although $1,740 – the most recent peak – will be interesting a could create some excitement.

Bitcoin needs hype to sustain move above $10,000

Bitcoin is holding above $8,500 after peaking around $9,500 last week. It’s often difficult to attribute the moves in bitcoin to anything in particular but the proximity to the halving event seems logical, from the perspective that it gives it exposure rather than anything more fundamental. You would think that anything significant would be priced in by now.

Whether the exposure can see it through $10,000 is one thing, whether it can sustain it is another. We’ve seen it before, the mere act of it rising fast creates the stories which generates the exposure. If that doesn’t happen, any rally may quickly fizzle out and we could find ourselves back at the early April levels.

Economic Calendar

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

U.S. Stocks Set To Open Lower As Trump Threatens New Tarrifs On China

Donald Trump Wants To Punish China For Failure To Contain Coronavirus

U.S. has signed the first phase of a trade deal with China back in January, and tariffs are still applied to many Chinese imports. However, the coronavirus pandemic, which originated in China, may lead to another wave of tariffs.

The desire to hold China to account is growing around the world, but the timing of the additional tariff proposals could not have been worse as the world tries to gradually reopen following the acute phase of the coronavirus crisis.

In addition, China is the only major economy which is mostly back on track after the epidemic, so hurting it would push the world economy deeper into the red zone.

Not surprisingly, the market is nervous about the tariff idea, and S&P 500 futures are down more than 2% in premarket trading.

Apple And Amazon Are Down In Premarket Trading

Apple and Amazon, which are the U.S. market’s second and third companies by market capitalization, have reported their earnings yesterday after the market close.

Both stocks have done well during the current crisis (especially Amazon) and the market’s expectations were very high. The reports were decent but it looks like the market wanted to see a better guidance for the upcoming quarter.

As a result, both stocks are under pressure during the premarket trading session, and their dynamics will have a material impact on the whole market today because of their huge market capitalization.

More Economic Data Ahead

U.S ISM Manufacturing PMI for April is set to be released today soon after the market open. Analysts expect that PMI will come at 36.9 compared to the previous reading of 49.1.

All upcoming economic reports will highlight a huge blow to the economy which was dealt by virus containment measures. The key question is whether the market will continue to shrug off bad data and maintain its current upside trend or if grim economic reports will lead to a pullback.

May is historically not the easiest month for markets, and this fact may also play a role, especially after the major rebound that took S&P 500 from 2200 to above 2900 in a very short period of time.

U.S. Stocks To Watch Today

Gilead Sciences

Gilead‘s remdesivir showed some success as anti-COVID-19 drug in early studies so the company attracts a lot of attention these days.

Gilead has reported its first-quarter results and held its earnings call on April 30 after the market close. The company reported GAAP earnings of $1.22 per share, missing analyst estimates. Revenue of $5.55 billion was higher than analysts expected.

During the earnings call, the company stated that it decided to donate 1.5 million doses of redesivir and that it was too early too talk about the potential pricing of the drug in case additional studies prove that it is effective against coronavirus.

The company’s shares lost some ground in the after hours trading session, but recent trading in Gilead stock has been so volatile that things may change very quickly.

Amazon

Amazon was the leader of the market rebound from mid-March lows, and the stock has just broken to all-time highs as investors and traders viewed the shares as an ideal safe haven asset during the current crisis.

Expectations were sky-high. Amazon reported its first-quarter results on April 30 after the market close. The company’s earnings of $5.01 per share missed analyst estimates by $1.10, while revenue of $75.5 billion was higher than expected.

Amazon stated that coronavirus-related costs will increase as the company has to spend heavily to ensure worker safety. In addition to safety costs, Amazon also  increased wages for frontline workers which will also put pressure on second-quarter results.

It remains to be seen whether the company’s stock will continue its rally after the release of the report but investors and traders can be sure that Amazon’s share price dynamics will heavily impact the direction of S&P 500 today.

Apple

Apple, which is currently the second biggest company by market capitalization in S&P 500, has also presented its quarterly results on April 30 after the market close.

Apple easily beat analyst estimates on both earnings and revenue. In addition, Apple has increased its quarterly dividend from $0.77 per share to $0.82 per share.

However, the company did not present its guidance for the next quarter as the coronavirus pandemic made it hard to estimate demand and shipments.

Apple shares have fully recovered from the downside they experienced during the current crisis so expectations were high. Due to this, the good report has so far failed to provide an additional boost to the company’s shares, and Apple stock was down more than 2% in the after-hours trading session.

The Lockdown, The Fallout and the RoadMap to Recovery

Global Lockdown

In an abrupt and unprecedented manner, the world witnessed a mass halt to global activities due to the pandemic. Governments and central banks rushed in to intervene and support the global economy with unconventional measures to cushion the impact of the coronavirus on their economies and ease market strains.

As the virus spread quickly across the globe, the world forcing employers and employees to work remotely and rethink how to operate in a new ‘virtual reality’. Similarly, investors are faced with a new normal and are at an inflection point where there is a pressing need to reshape their investing strategies.

Oil Crash

The oil price war is over for now and the OPEC+ group has also agreed to a historic production cut in early April; though . Aa little too late considering how the situation unfolded during the month. Oil demand took the biggest hit seen in years at a time where production was reaching new highs.

The world is running out of spare room to store the fast-expanding glut that the pandemic has created. The damage initially caused by the price war was irreversible during such pandemic. The lack of storage capacity triggered a big plunge in crude oil prices.

Crude oil futures markets were in chaos, triggered by the inability of investors or traders to take on physical deliveries of oil barrels. The storage problem is so dire that investors or traders holding oil contracts are willing to sell their contracts at a loss, causing crude oil futures to turn negative for the first time in history.

A situation of more sellers than buyers.

On April 2020, WTI futures for May delivery traded at around negative 37 for the first time ever, reflecting the urgency of sellers to offload their contracts to avoid taking physical deliveries given the pandemic-induced circumstances.

Source: Bloomberg

What to expect in the coming months?

There is no quick fix for rebalancing the oil market. In such volatile markets, it is hard to predict what will happen with the June contract as the storage capacity will remain a primary source of concern.

Oil future prices took another blow when one of the largest oil funds, the United States Oil (USO), filed an SEC filing and revised its investment in oil future contracts to concentrate on contracts that are further out in the future.

Crude oil prices have remained under heavy selling pressure throughout the month. The near-term outlook for the oil market remains grim but investors are hopeful some recovery will take place when:

  • Production cuts will slow down the speed at which storage tanks are being filled; and
  • Major economies will ease lockdowns and activities will gradually pick up.

In the last few days, WTI for June delivery lost more than 15% and is trading at $14.26 a barrel while Brent recovered from earlier losses for June settlement and is trading at $21.42 a barrel.

GDP Contraction

The International Monetary Fund (IMF) has predicted in its 2020 World Economic Outlook that the economic impact of the COVID-19 pandemic might result in the “worst recession since the Great Depression”. The IMF expects the world economy to contract by 3% in 2020 due to the magnitude and speed of the collapse in activity following the various forms of lockdown seen across the globe.

Attention was on the GDP figures of the world’s two largest economies!

Earlier this month, China reported a deep contraction of 6.8% in GDP in the first quarter. It was not surprising given that China exercised strict lockdown measures and put a halt to activities throughout most of the quarter.

China has slowly resumed activities since the beginning of the month as the worst of the pandemic appears to be over. Manufacturing and trade data has been more upbeat which has risen expectations of a gradual return to normal if China avoids another wave of the virus.

Investors will be ending the month with the US GDP report that will show the first wave of the impact of the pandemic. After more than a decade of expansion, the US economy was expected to contract by 4% with a steeper contraction in the second quarter.

As of writing, the preliminary figures show a worse-than-expected contraction of 4.8%, which is the first sharpest decline since the Great Recession.

The figures echoed the IMF warnings!

Earnings Season

Earnings results were widely expected to highlight the pain inflicted by the coronavirus-induced crisis. Even though investors were expecting a tough earnings season with withdrawn forecasts, confusion and uncertainties about the 2020 outlook, the quarterly results are also meant to reveal how certain industries are affected by the virus and how those insulated from the virus are managing the pandemic.

Everything about the pandemic is unpredictable and therefore, companies in every sector are facing the challenges to communicate their guidance. Companies within certain sectors will perform worse than others.

Financials

The earnings season kickstarted with major US banks. As widely expected, banks like JP Morgan, Wells Fargo, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley all reported a significant drop in profits. Overall, the banks made significant provisions for credit losses and saw major declines in asset management revenues.

Banks like Goldman Sachs and Morgan Stanley have flared better and their share price is currently up by 15% or more.

Communication Services

Our attention move to the big tech giants like Alphabet, Facebook and Netflix which have been reclassified to the communications sector in the last few years.

Netflix was among the first few to report its quarterly results. The company reported a $5.8B in revenue with a year-on-year growth of 27.6%. The number of subscribers came above estimates and more than double its target with 15.77 million paid subscribers. The substantial growth came in March when the lockdown and social distancing measures forced many more households to join the TV and movie-streaming service.

However, the company warned that revenue and growth might decline mostly due to probable lift of the confinement measures, a stronger US dollar that is impacting international revenue growth and the lack of high-quality content following the pause in production. Its share price reached a high of around $440, but as of writing, it is currently trading at $411.

Alphabet, Google’s parent company, issued its quarterly results after the bell on Tuesday. The company reported an increase of 13% in revenue for Q1 2020, compared to a 17% increase for the same quarter a year ago and earnings of $9.87 per share. Based on expectations, it was a miss on earnings. However, the company has performed well given the challenges and is cautiously optimistic tones for the second quarter. Alphabet’s share price rose by almost 9% on Wednesday.

Facebook – The social networking giant reported earnings of $4.9B or $17.10 per share for Q1 2020 compared to earnings of $2.43B or $0.85 per share in Q1 2019. The company doubled its earnings. Similarly to its peers, Facebook warned of the unprecedented uncertainty and withdrew its revenue guidance for the rest of the year. Its share price jumped by 6% to trade at $194.20.

Both Google and Facebook have seen a significant reduction in demand for advertising, but the companies still managed to stay massively profitable and adapt in a coronavirus-fueled environment.

Tech Sector

Microsoft released strong results in the third quarter of its fiscal year 2020. Overall, COVID-19 has had a minimal net impact on total revenue. As people around the world shifted to work and learn from home, there was a significant increased in demand for Microsft’s Cloud business to support remote works and learning scenarios. Compared to the corresponding period of last fiscal year:

  • Revenue was $35.0 billion and increased 15%
  • Operating income was $13.0 billion and increased 25%
  • Net income was $10.8 billion and increased 22%
  • Diluted earnings per share were $1.40 and increased 23%

Microsoft did not only top revised COVID-19 estimates but also the earnings that were expected back in January before the coronavirus crisis.

All eyes will be on Apple Inc. which will report earnings on Thursday, April 30, 2020 after market close. Apple’s conference call to discuss second-quarter results will be held on the same say at 2:00 p.m. PT / 5:00 p.m. ET.

Consumer Discretionary

Unlike the consumer staples sector which includes companies that produce or sell essential products, consumer discretionary stocks are mostly companies that do not manufacture or sell essentials. The various forms of lockdowns have left many people without employment. For example, the US economy lost around 20 million jobs over the last few months. It took the US like a decade to add those jobs in the economy.

Amazon.com Inc has always stood out from the lot because of its status as a leading e-commerce retailer. Investors will closely watch its earnings reports for guidance. The company Amazon.com, Inc. will hold a conference call to discuss its first quarter 2020 financial results on April 30, 2020 at 2:30 p.m. PT/5:30 p.m. ET.

Stock Market

Worldwide sharp contractions in the manufacturing sectors, warnings of economic contraction and fears of a recession in the month of April have created panic and volatility in the financial markets.

A look at the All-Country World Index shows that global equities are poised for their biggest monthly gain since the Great Recession. The biggest driver is the unprecedented and unconventional actions by central banks combined with massive fiscal stimulus.

Global equities are surging even though economic data is painting a different picture.

Towards the end of the month, some positive developments on the novel coronavirus cases and the possibilities of earlier opening plans of certain major economies has driven markets higher. Mega-cap stocks like Microsoft, Amazon, Facebook and Google have also contributed to lifting sentiment and drove the rally while smaller-cap companies are bearing the brunt of the pandemic.

The Reopening Plans

There is still hope for the economy despite the tough circumstances. V-shaped or U-Shaped Recovery? New infections have slowed down but there is still no vaccine and economies are at risk of a new wave of infection.

A vaccine could have increased expectations of a swift recovery like a V-shaped immediate recovery in the third quarter or a U-shaped recovery with stability more towards the second half of the year.

However, at the moment, governments are easing lockdown restrictions and investors will be back to a New Normal to replace the current “normal”. The economy is trapped in an unusual type of recession created by the novel coronavirus.

The roadmap to recovery will be progressive and dependent on the governments approaches towards easing lockdowns. It will be different across the globe depending on how governments feel about the situation and the risk of a second wave of the virus.

The path to recovery will be a learning process given the unknown territory!

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Deepta Bolaky, Market Analyst at GO Markets.

Read Our GO Markets Review

About GO Markets

GO Markets was established in Australia in 2006 as a provider of online CFD trading services. For over a decade we have positioned ourselves as a firmly trusted and leading global regulated CFD provider. Traders can access more than 250 tradeable CFD instruments including Forex, Shares, Indices and Commodities.


Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice

The Great Markets Debates

This is likely reflecting the fact that S&P500 and Nasdaq 100 futures are up 0.8% and 1.1% respectively. Asian markets are responding in kind.

Spot gold is down smalls, although gold futures are modestly higher, but the daily chart of spot gold looks bullish and we are watching for the upside closing break of 1738 for a future move into 1800.

Two important market debates

The two big debates that have been most prevalent through the weekend, or at least that I found most interesting, remain the disconnect between the real economy and asset values. And, where to for the USD. There has also been increased focus on the moral hazard argument, where at a simplistic level the Fed incentivised business to over-lever their balance sheet, and now the Fed is bailing them out or supporting them indirectly. We can also look at the number of countries that are opening their economies, gradually, and the market is eyeing the risk of a second wave, which is another factor that makes it hard to chase risk.

Italy has announced they will start to ease lockdown restrictions on 4 May, joining Spain who will ease movement restrictions on 2 May. France will detail a plan to the world tomorrow to end lockdown next month, while Belgium is due to open shops on 1 May. In the US, a number of states are easing restrictions, and we hope this is the start of more normal times ahead, although the post-virus world throws up many challenges and one focal-point that immediately springs to mind is the blame game and the US (and the world’s) ongoing relationship with China.

The disconnect between economics and asset values will be the focal point this week though.

The data and event risk rolls in and I know investors have written off 2020 as a shocker and are looking more intently into the landscape in 2021, but this argument will be seen case in point this week. On the micro-side of considerations, this week we get to hear from some big-name corporations – Amazon, Tesla, Microsoft, Apple, Boeing, FB, Alphabet, McDonald’s, and Exxon, to name but a few. Earnings expectations have come down and FY20 and FY21 consensus stand at $131 and $165, respectively, but it still means we are going into this week with investors paying 21.6x for 2020 earnings – the highest since December 2001. But they are also paying 17.1x 2021 which is still lofty given the challenges ahead.

At this juncture though, in the battle of liquidity vs earnings, liquidity is winning but these are some big names dropping this week, representing a catalyst for index traders. The NAS100 is the strongest market if looking for a vehicle to express a risk-on bias this week (in index land). However, I think the set-up on the US500 needs attention. On the upside we have downtrend resistance, the 6 March gap and 61.8% fibo to clear and a break here needs to be respected, especially when we’re hearing that the systematic funds will be ramping up outright longs on a break of 3007.

However, on the downside we see price has broken the wedge and the head and shoulder neckline kicks in around 2726. A break here will see buying in the USD, JPY and US Treasuries. I am watching inflation expectations (breakevens) extremely closely, as where they go will underpin where equities and gold go.

On the data docket this week we get:

BoJ meeting – we saw the BoJ meeting and as expected they removed the cap and reverted to unlimited JGB buying. There has been limited reaction in the JPY. I continue to like the JPN225 on a break of 19,886 and will wait for price to compel and the structure to suggest the index is ready to trend.

USDJPY is interesting because it is just so dull – there is literally no range and it feels like it will break hard soon. At this juncture, the market feels this is fair value, but I am watching for a change here.

US – Q1 GDP (consensus at -3.9%), jobless claims (3.5m), FOMC meeting, ISM manufacturing (36.1). I would expect no reaction to Q1 GDP, as Q1 is but a relic in time and we are looking at Q2 and beyond. The FOMC meeting is the main game in town this week and after two emergency meetings, we look at the first scheduled meeting that could move markets.

We should see the Fed tweak the interest it pays banks on excess reserves by 5bp, although, the market is going some way to discounting that and it shouldn’t cause much of a move in the USD. We should also hear more about the targeted level of US Treasury and mortgage buying, with the monthly run-rate closer to $150b, but they will retain an element of flexibility towards this.

As mentioned, the debate as to where the USD is headed is key, and I will put out a note tomorrow on this as it is important. For now, the DXY (or USDX) tracks the regression channel and is not going lower despite USD funding costs (blue – 3m FRA-OIS, yellow – EUR cross-currency basis swaps) falling heavily as a result of the Fed’s swap lines, massive balance sheet expansion and excess liquidity.

Next week we get NFPs and consensus currently sits at 20m jobs lost, with the unemployment rate at 15.1%.

Eurozone – The ECB meeting is the highlight, especially given the recent widening of interbank credit metrics, notably the Euribor-OIS spread (see below), which has pushed into 30bp. The ECB will need to do more and granted the PEPP program (Pandemic Emergency Purchase Program) has been seen as a solid step forward from the bank, this program is going to need to be increased from its current E750B size – although, whether it plays out at this meeting is unlikely. We should see some tweaks to what can be offered as collateral to access PEPP funds, and similar to the Fed the ECB may accept bonds that were downgraded to junk since the start of COVID-19 the so-called ‘fallen angels’.

Whether this Thursday’s ECB meeting (21:45aest) proves to be a vol event is yet to be seen, and we see EURUSD 1-week implied volatility at 9.17%, which implies a move (higher or lower) on the week of 116p.

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I am looking at the EURAUD short idea and watching price action very closely. I do not see the ECB meeting being a huge vol event, but I am loath to hold EUR exposures over this meeting.

China – Manufacturing PMI (30 April- 11am) – consensus at 51.0 (from 52.0). I am sceptical this will be a vol event but may get some headlines.

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Chris Weston, Head of Global Research at Pepperstone.

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U.S. Stocks Set To Open Sharply Lower On Virus Worries

Focus Shifts From Monetary Stimulus To Coronavirus

S&P 500 futures are losing more than 3% in premarket trading as the situation with coronavirus continues to worsen in the U.S. and elsewhere in the world.

According to data from Johns Hopkins University, 189,633 coronavirus cases have been recorded in the U.S. The U.S. is followed by Italy with 105,792 cases and Spain with 102,136 cases.

The situation in Spain continues to deteriorate in a rapid fashion, and the country is set to have more coronavirus cases than the previous leader Italy in the next few days.

The U.S. President Donald Trump has warned Americans that the next two weeks would be very painful. Currently, U.S. health experts estimate that coronavirus could kill 100,000 – 240,000 Americans. It is not surprising that the market is worried about this potential scenario.

Oil Stocks Have Rebounded But Oil Prices Are Near Lows

Oil failed to produce any meaningful rebound on hopes that U.S. and Russia can initiate talks on potential production cuts. As a result, WTI oil continues to trade near the $20 level.

At the same time, stocks of major oil companies like Exxon Mobil, Chevron, Total, BP, Royal Dutch Shell have experienced major rebounds from lows reached in mid-March.

These stocks can find themselves under increased pressure if the general market fails to show more upside while oil stays near $20.

In addition, the month of April has just began, and most countries have implemented virus containment measures in various forms. April is set to be the worst month for oil demand in recent history, and some analysts project that world oil demand could contract by 25% compared to normal levels.

Is Amazon Bulletproof?

Amazon shares have received plenty of support from investors who believe that lockdown measures will provide a boost to Amazon’s business. As a result, the company’s stock is up about 5% year-to-date while the S&P 500 has lost roughly 20%.

However, it remains to be seen whether Amazon will continue to report solid numbers as the upcoming recession provoked by virus containment measures will put pressure on disposable incomes of most customers.

Also, Amazon shares could be used as a “fear gauge” since they have played the role of a safe haven asset in these unprecedented times. A sharp sell-off in Amazon could indicate a full-blown panic in the markets, while a positive performance may mean that investors still hope for a normal resolution of the current crisis.

Amazon in Good Position to Outperform Benchmark S&P 500 Index

First we had the FAANGs – Facebook, Apple, Amazon, Netflix, and Google. With Facebook and Netflix out of favor and Microsoft returning to good graces, we now have MAGA. Not the MAGA promoted by President Trump, but Microsoft, Apple, Google, Amazon.

Amid the broader stock market sell-off, these four tech giants aren’t doing so well, having erased $1.3 trillion in value since their February all-time closing highs.

During the current stock market rout, Microsoft has taken the biggest hit, down $405.2 billion. Apple has lost around $371.8, billion, while Alphabet (Google’s Parent) is down $311.1 billion. Amazon has dropped $239.4 billion.

Of the four tech titans, only Apple and Microsoft remain valued at over $1 trillion.

While the benchmark S&P 500 Index and blue chip Dow Jones Industrial Average have fallen more than 20% from their record highs, thereby entering a bear market, these four stocks have also made similar moves. Amazon, the best performer in the bunch, is down 20.8%. Apple is off its high by 25.4%, while Microsoft has plunged 26.9%. Alphabet (Google) is the worst performer, plummeting 29.3%.

Microsoft

Microsoft hasn’t been in the news lately, probably because it doesn’t own any stores. However, it was one of the first companies to warn about the coronavirus’ impact on its bottom-line. Three weeks ago Microsoft said it doesn’t expect the quarterly revenue guidance it previously provided for the segment that includes Windows.

Apple

Even before Microsoft disclosed trouble, Apple disclosed that it did not expect to reach its own quarterly revenue forecast because of lower iPhone supply globally and lower Chinese demand as a result of the coronavirus outbreak. On March 14, Apple said it was closing all stores outside of China until March 27 to reduce the spread of the virus.

Amazon

Amazon warned it’s experiencing Prime delivery delays and running out of stock of popular household items amid the coronavirus outbreak.

The issues are a result of a “dramatic increase in the rate that people re shopping online,” Amazon said in a blog post that was updated Saturday. Some popular brands and items in the “household staples” categories were out of stock, while Amazon said some of its “delivery promises are longer than usual.” The issue markets a rare disruption to Amazon’s signature two-day and one-day Prime delivery service.

Google

Alphabet’s Verily coronavirus site screening website for Silicon Valley residents went live on Sunday evening. By Monday it appeared to be overloaded and cannot currently offer appointments for screening, according to the website. The site, build by Google sister-company Verily, is supposed to offer people who live in San Mateo or Santa Clara counties and think they are experiencing COVID-19 symptoms a way to schedule a test.

Near-Term Outlook for MAGA

All four MAGA stocks are highly correlated with the benchmark S&P 500 Index, but given their different business models, it looks as if Amazon should outshine the rest. Consumers are still going to need products and if there are mass quarantines in the United States, these consumers will have to rely on the internet to place their orders.

Google is likely to be the worst performer in the bunch because it relies on small business advertising, which is expected to decline during the coronavirus crisis.

US Stocks: Cross-Section Against the Coronavirus

The latter, whatever its gravity will be, is inevitable, as per Mrs. Schuchat. In this context, let’s have a look at different sectors of the American stock market to see how they react to this natural disaster so far.

S&P 500

Until recently, the S&P 500 was giving quite a limited reaction to the Coronavirus. In fact, the latter never stopped the index to hit another all-time high at 3400 points on 20 February. But after that, it index slumped to 3090 points, making almost a 10% drop. As such, it is still a weak indication of something unique to the Coronavirus as the index does go into a dive from time to time even below 200-MA. That’s why let’s abstain from making conclusions at this moment, but instead, take this 10% drop as a “normal” reaction of the American stock market so far – we will measure other market sectors and stocks against this figure.

Banking

The Bank of American dropped from the recent $35.75 per share to $30.80, while JP Morgan made a slide from $141 down to $125.50. The former made a 14% decrease in value, the latter – 11%. Both results are more than 10% with the S&P 500, however, we have to take into account the “natural” volatility of each share – none of them are particularly steady in the upward direction.

Retail/e-commerce

Amazon’s share fell by 10% – it currently trades at $1954 against the recent $2190. EBay is now at $36.50, which is 7% lower than $39.25, where it was days before. That falls right into the 10% decrease of the S&P, making even an incline towards milder reaction than that of the banking industry. But on average, this sector presents no significant deviation from what’s happening in the market on the grand scale.

IT

Computers and processors seem to be hit stronger than the other sectors. Intel drops by 14%, Microsoft by 23.5%, and IBM (not shown on the chart) – 12.5%. That’s a significant difference from the 10% of S&P, and there may be reasons for that.

So far we have observed banking and the e-commerce sectors. American banking will only be damaged indirectly by the Coronavirus, unless domestic chains, facilities, and personnel are hit by the Covid-19 inside of the mainland US to an extent comparable to that of China. Directly, there is little damage to American banks and their performance by the disaster in China – they are affected only on a global scale. Similar, but just slightly stronger, is the relation of the American e-commerce sector to the Chinese troubles.

Only because these troubles harm global purchase orders, sales of corporations like Amazon and eBay will be somewhat reduced. But again, to a limited extent because the portion of global e-commerce purchases originating from China is relatively moderate compared to that of the domestic sales in the US. And the latter has shown good results in the Q4-2019 thanks to the holiday season. That’s why those two sectors are only receiving damage indirectly, just so much as the global landscape is affected by the virus.

On the contrary, the American IT industry is directly affected by the happenings in China. Therefore, they receive a double impact: one which comes from the global slowdown in operations, and the second one coming from disruptions inside mainland China.

This is one of the factors peculiar specifically to IT: a large portion of supply chain and production facilities for those American companies is either located in China or has essential routes or parts originating from China. Hence, if the first two observed sectors of the US stock market just will have their global sales somewhat reduced, IT will not only see its sales reduced but also certain production and supply processes stalled. Thus, a stronger impact and lower dives occure in this market sector.

Conclusion

We could be more specific with our analysis of the US stock market to find many more correlations with the Coronavirus and its effects. This short review was done merely to show that different sectors of the US economy have different nature, and although all of them get affected by the global events such as this virus in a similar way, the extent of the reaction is unique to each and is defined by its internal configuration.

That’s why it is important to do fundamental analysis specific to each stock if you want to be precise with preparing your trade positions and tactics. From our side, we will keep you supplied with enough information to run such analysis.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 


The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

Stock Market: The Earnings of Microsoft, Amazon And More

Ford Motor

EPS forecast: $0.26

Revenue forecast: $36.73B

Ford has been going through a hard time during the past few years as the demand for its cars, particularly sedans, fell. Now one of America’s largest automakers is undertaking an $11 billion restructuring plan which implies layoffs, closing factories overseas, and building capacity to manufacture electric and driverless cars. As a result, investors will want to see what progress the company made in these areas.

The stock has been within the general downtrend since 2014. In the first half of 2019, the price tried to recover but met resistance around $10.50, formed a double top and turned lower. In October, Ford managed to show a bullish correction recovering from $8.45 to the 200-day MA at $9.30. Last week the stock closed above the 50-week MA ($9.214). All in all, if the financial results are decent enough, there’s technical potential for an extension to $9.64 (September high) and $10.00 (resistance line, 200-week MA). This area, in turn, will be a great obstacle for buyers. Support lies at $8.70 and $8.45.

Ford.png

Microsoft

EPS forecast: $1.24

Revenue forecast: $32.14B

According to analysts’ forecasts, Microsoft’s earnings will rise by 9%, while revenue will increase by 10.5% y/y. Noticed that during previous quarters, the company tended to beat expectations. Microsoft has a variety of products that generate solid income. Pay special attention to the dynamics of Azure, its cloud computing service – the figures should once again be pretty impressive as the tech giant added new capabilities to its product.

The stock has been trading sideways between $142 and $131 since the end of June. The price consolidated after a long-term uptrend. Currently, it’s in the $137 area, near the middle of the horizontal range. Its edges, mentioned earlier, are the initial targets.

Microsoft.png

Tesla

EPS forecast: $-0.45

Revenue forecast: $6.47B

Tesla is expected to show the third unprofitable quarter in a row despite selling a record number of cars. At this point, bad figures will be a surprise to no one, so investors, on the contrary, will look for glimpses of light: a forecast for future profit, a positive free cash flow, evidence that demand remains solid. If the electric vehicle maker doesn’t provide these sources of hope, the negative pressure on the stock will mount.

After the selloff in the first half of the year, Tesla bottomed in June and then managed to stabilize. Most recently, the price met the resistance of the July high ($266). On the upside, there are also obstacles at $268 and $273.6 (50- and 200-period MAs) ahead of $278 (50% Fibo retracement of the 2018-2019 decline). Support lies at $235 and $231 (daily MAs) as well as $225 (support line).

Tesla.png

eBay

EPS forecast: $0.64

Revenue forecast: $2.65B

Analysts have positive expectations about eBay’s financial results. The company’s putting a lot of effort into the technological enhancement of its core e-commerce business. On the downside, the increased investment may hurt earnings. In addition, notice that the competition with Amazon and Wal-Mart is a big challenge for eBay. Investors will also look for the news regarding the potential sale of StubHub or eBay Classifieds, a contentious issue for the company that provoked the departure of its CEO last month.

The stock has been on the rise since the end of 2018. However, at the end of September, the price slipped below $39 – this level tends to be an important border for eBay during the whole year. A return above $39.50 (100- and 50-day MAs) is needed to open the way up to $41 and 42.50 (78.6% Fibo retracement of the 2018 decline). Support is at 37.65 (200-day MA), $36.50 and $35.50.

ebay.png

Thursday, October 24

Amazon.com

EPS forecast: $4.59

Revenue forecast: $68.82B

According to Wall Street, Amazon’s adjusted earnings will decline by about 20% y/y showing the first decline in nine quarters. The company’s revenue, however, is seen increasing by 22%. During the last few months, Amazon was pressured by lower-than-expected earnings, volatile equity markets, political criticism, and antitrust allegations. In this report, investors will look at the numbers for Amazon Web Services (the company’s cloud segment), the signs that the Prime delivery speed increase is boosting sales growth in North America as well as Amazon’s guidance for the next quarter.

Although Amazon remains one of the best long-term performers among both tech and consumer goods stocks, it is behind other the other so-called FAANG stocks during the past year. In August, the stock violated the uptrend from the end of 2018. The price then started trading below $1,835/50, limited by the 100- and the 50-day MAs. The most recent attempt of the price to get higher ran into an obstacle just below $1,800, near the 200-day MA. All the mentioned levels will act as resistance. Below $1,740 support is at $1,700 and $1,670 (June low).

Amazon daily.png

Intel

EPS forecast: $1.23

Revenue forecast: $18.02B

During the previous quarter, Intel benefited from rising demand for personal computers and sales of higher-priced server chips. Investors will want to see whether the positive trend continues and what the semiconductor producer projects for the rest of the year. So far, the stock has been resilient enough despite the trade war between the United States and China, an important market for the chipmaker, although the threat of higher tariffs has obviously limited its upside.

The stock of Intel is trading within an ascending triangle. The resistance that has been keeping the price from getting higher lies at $53.20 (61.8% Fibo retracement of the April-May decline). The break above this obstacle will open the way up to $55 and $56 (78.6% Fibo). Support lies at $50 (200-day MA, support line) and $49.20/00. The loss of 48.50 will make the price vulnerable for a decline to $46.75.

Intel.png

Visa

EPS forecast: $1.43

Revenue forecast: $6.08B

For years, Visa’s stock has been slowly but surely appreciating – a reflection of the fact that digital payment is replacing cash. This tendency has all the chances to continue pushing the price higher, although there may be corrections on the way. This time, Wall Street sees Visa earnings rising by 18% y/y and revenue grows at 12%. Notice that Visa has a tendency to beat forecasts during the earnings releases.

Visa’s long-term uptrend ran in September into the resistance at $187.00. Since then, the price has consolidated around $175.00. The further resistance is at $190 and $200. On the downside, support lies at $169.00 and $163.80 (200-day MA). The fall below $160 will question the uptrend.

Visa.png

After Hours Action: Alphabet Rises on Earnings Beat, Amazon Stuggles After Earnings Miss

U.S. equity markets were quite busy after the cash market close on Thursday following the release of earnings reports from Google parent company Alphabet and Amazon. The mixed results helped soften the blow from yesterday’s sharp sell-off in the major U.S. stock indexes that was fueled by a jump in global yields after European Central Bank President Mario Draghi told reporters at a press conference the chances of a recession in the Euro Zone is still “pretty low.”

Alphabet Announces Earnings Beat, Share Repurchase

Shares of Google parent company Alphabet initially rose more than 9% after the company reported second-quarter earnings that beat estimates Thursday.

Additionally, the company’s board of directors approved a repurchase of up to an additional $25 billion of its Class C capital stock. On a call with analysts, CFO Ruth Porat said the capital would be used to support growth and acquisitions and investments.

Here are the highlights:

Earnings per share: $14.21 per share, ex-items, vs $11.30 per share expected, per Refinitiv survey of analysts.

Revenue:  $38.94 billion, vs. $38.15 billion expected, per Refinitiv

Traffic acquisition costs:  $7.24 billion, vs. $7.27 billion, according to StreetAccount

Paid clicks on Google properties from Q2 2018 to Q2 2019: +28%

Cost-per-click on Google properties from Q2 2018 to Q2 2019: -11%

Amazon Beat on Sales, Missed on Earnings

Amazon shares fell 2% after the close after reporting mixed results in its second-quarter earnings release on Thursday. The numbers failed to meet profit expectations while exceeding revenue forecasts.

The good news for investors is Amazon’s renewed investments into the company are paying off, driving sales growth at the expense of lower profit margins. On the negative side, the company gave third-quarter profit guidance that fell well-below street estimates.

Here are the highlights:

Earnings per share: $5.22 vs. $5.57, according to analysts surveyed by Refinitiv

Revenue: $63.4 billion vs. $62.5 billion, according to Refinitiv

Amazon Web Service: $8.38 billion vs $8.5 billion, according to analysts surveyed by FactSet

Amazon’s revenue jumped 20% from the year-ago period, a rebound from 16.8% in the first quarter, which was the slowest in four years.

After-Hours Performance

At 03:52 GMT, Alphabet Inc. Class A shares are trading $1225.00, up $89.06 or +7.84% and Amazon.com, Inc. shares are trading $1941.15, down $32.67 or -1.66%.

What You Need to Know About Share Trading

The equity markets provide investors will the ability to take a view on individual company shares as well as sectors and indices. Stocks are considered riskier assets, and generally outperform other assets such as bonds, currency and commodities when global economic output rise.

What is a Share?

Each public company listed on an exchange provides an opportunity to own a piece of that company. An individual share is a partial ownership of a company. Some shares even provide the owner with the right to vote on specific issues related to the company. When you sum the total outstanding shares at a company and multiply the number of shares by the price of the stock, you can calculate the total market cap of the company.

Shares can be listed on an exchange. There are major exchanges such as the NYSE and the Nasdaq as well as several minor exchanges. Each exchange as a specific criterion which allows the shares to trade on the exchange. In some cases, if the share price falls below a specific level, the stock can be delisted from the exchange.

A share also represents a portion of a company’s distribution in any profits. The two main types of shares are common shares and preferred shares. In the past shares came in the form of paper certificates which have now been replaced with an electronic recording of a certificate.

What is a dividend?

A dividend is the distribution of a company’s profits. It is distributed by the company as a reward for owning shares of the company. Dividends are decided and managed by the company’s board of directors and need to be approved by the shareholders. Dividends are generally issued as cash payments, but they also can be distributed as shares of stock. In addition, exchange traded funds as well as mutual funds distribute dividends.

The board of directors of a company can determine the distribution mechanism as well as the timing when a dividend is released. The payout rates can also change throughout a year. Dividends are generally distributed quarterly, but some shares or ETFs payout their dividend monthly or annually.

Who Pays a Dividend?

Well establish companies, that have steady earnings and predictable cash flows are good dividend payers. Start-up company’s that are attempting to get their feet on the ground and need cash due to ad-hoc cost scenarios, are not good dividend payers. When businesses are in the early stages of expansion, they may not have enough funds to issue dividends. Good dividend paying companies are attempting to generate shareholder wealth via another mechanism outside of capital gains.

Here are some key dividend dates. Dividends are announced by company management on the dividend announcement date but still must be approved by the shareholders before the dividend can be paid. The date you need to own the shares by to be eligible for a dividend is the ex-dividend date. The payment date is the date that the company issues the dividend to its shareholders.

Types of Shares

There are several ways to take a view that the share of a company will rise in value. The most popular is common stock. This provides an owner with the right to receive a portion of the profits, as well as, earnings. In addition, a common stockholder has the right to vote on company issues.

An alternative is preferred stocks. Preferred shareholders have priority over common stockholders when it comes to dividends payments. These dividends generally have a higher yield relative to common stock and can be paid monthly or quarterly. Unlike common shareholders preferred shareholders have limited rights which usually does not include voting. Preferred shareholders also have a higher claim on recouping their capital if a company elects to go into bankruptcy. Preferred shares are more like bonds that stocks and usually have a fixed rate of return.

Quality Companies that Reinvest Profits

There is no rule that says investing in dividend stocks will be the only way to generate gains. Other opportunities do exist. There are several quality companies that do not offer dividends where the companies reinvent the capital which has the potential to be made up for in stock appreciation.

Many companies generate strong cash flow, have minimal debt and report robust earnings. Tech and biotech companies can provide substantial cashflow to generate operating profits. Here are six companies that can provide robust capital appreciation.

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • Biogen (BIIB)
  • Bookings (BKNG)
  • Edwards Life Sciences (EW)
  • Facebook (FB)

Generating Capital Gains with Contracts for Differences

Common stocks are more attractive then preferred stocks if you are interested in generating capital gains. An alternative option for trading to common stocks is contract for differences (CFDs). These are financial products that track the underlying change in the value of a common stock. There are several benefits to using CFDs instead of purchasing common stocks.

A contract for differences provides investors with leverage that is beyond what is available when trading common shares. Since a contract for difference only tracks the change in the value, your broker does not need you to post the entire value of the shares. Instead they only need you to post enough margin to capture any potential loss you might experience when trading.

Leverage on CFDs on shares can reach 100-1, depending on the shares, allowing you to post only a small portion of the value of the shares. For example, if you want to trade Apple shares with a price of $200, you might only need to post $2, as opposed to $200 for each common share. One of the downsides of trading CFDs is that brokers generally do not offer dividend payments to holders of CFDs.

A CFD is a more efficient way to trade shares if your goal is specifically to capture the changes in the price of a share. There are also many brokers who offer CFDs on Exchange Traded Funds (ETFs). The instruments allow you to take a view on an entire sector such as the technology sector or the financial space. Like shares, brokers generally do not pay a dividend to owners of CFDs on ETFs.

Summary

Common stocks are the most popular way investors take ownership of a company. These shares provide an investor with voting rights as well as dividend payments. Preferred shares provide investors with a higher yield and a better claim to a company’s dividends. If your goal is to take a directional view of share prices, then contracts for difference are a more efficient way to invest in shares.

This article is brought to you by the courtesy of Skilling.

How Space Helps Stocks

In all cases, proximity to space improves the public image of companies, including for the investors, becoming the “last chance saloon” in difficult times. Boeing tests software updates, while an error could be a cause for two airplanes crashes in the previous six months in Indonesia and Ethiopia. The news helped the company to find support after a decline to $365, which is 14% below the levels preceding the March airplane crash.

A decrease of 13% can be considered as a relatively modest reaction of investors against the background of almost total suspension of the use of 737 Max – the most popular model from the company. Investors remain confident in the viability of the company because of the stable and large contracts with NASA, providing a good cash safety cushion. Moreover, the administration of the President of the United States has been taking retaliatory steps recently, attacking its key competitor – Airbus. The soft power of the United States helps the company business interests, despite a series of setbacks.

The Tesla prices were regularly supported by the news about the successful launch of the SpaceX ships. In January, the stocks of the electric vehicle manufacturer turned to growth and added 15% in the following days on the background of strengthened confidence in the management genius of Elon Musk and his ability to make technological breakthroughs. But, apparently, investors now need more good news from SpaceX, as Tesla stocks remain part of a broader trend to decline due to the company’s problems with mass production adjustment. Like Roskosmos, Elon Musk’s companies are faced with the fact that inventing the breakthrough idea and implementing it – these are completely different things that require different competencies. And it seems that investors in Tesla stocks began to separate these competencies from each other. However, it is possible that the temporary spikes of Tesla stocks on the news about SpaceX will persist in the foreseeable future.

It is possible that the ambitions of Amazon founder Jeff Bezos, who also founded Blue Space, could have been dictated by the desire to inspire investors. So far, he’s doing well. Amazon’s capitalization exceeded a trillion dollars, making Bezos the richest man on the planet. However, in the last letter for investors, they marked a slowdown in sales of goods, from which the company’s business began. But it seems that it is becoming more crowded on Earth for Amazon. The company gradually switched to the “cloud”: cloud storage and computing power businesses bring the greatest profit. But Bezos aims higher. The launch of the New Glenn rocket is already scheduled for 2020. As in the case of Tesla, the good news from this front is able to create a positive impetus for stocks and, possibly, to keep them from declining, as is the case with Tesla and Boeing.

This article was written by FxPro

US Stock Market Overview – Energy Shares Outperform, Boeing Weighs on Dow Industrials

US stocks continued to rally on Monday, as the global stock rally continued to perpetuate. Stocks in Asia were higher led by a robust 2.47% rally in the Shanghai. The Heng Sang and the Nikkei were also higher which spilled over into Europe. The Dow Jones Industrial started the session in the red, and but rallied into positive territory despite pressure from headwinds generated by Boeing.  Federal US prosecutors are scrutinizing the developments with regard to the black box on the Boeing 737 that recently crashed in Ethiopia. FANG stocks were mixed, but a breakout in Amazon shares should help the broader market especially the discretionary sector.

Sectors were mixed on Monday with Energy and Financials leading the S&P 500 higher, while real-estate and Utilities were the worst performers. Facebook was downgraded on Monday and dropped 3.3%, as the digital advertising platform is changing as their platform has been diluted. The company is trying to figure out how to monetize there other platforms including Instagram and Whatsapp.

Energy Shares Continue to Rally Buoyed by Crude Oil

Energy shares were the best performing sector on Monday, led by a 1% rise in crude oil prices. WTI closed above $59 per barrel on Monday for the first time since November of 2018. Oil prices were buoyed by news that OPEC would hold off on changing their output until June. OPEC officials have been signaling that they would consider a change in April but now it appears to be too early to assess the actual impact of the sanctions on Venezuela and the U.S. policy on the waivers for Iranian oil customers after the current waivers expire in early May.

Boeing Continues to Face Negative Headlines

Federal prosecutors and Department of Transportation officials are investigating the development of Boeing 737 MAX jetliners. A grand jury in Washington, D.C., issued a broad subpoena dated March 11 to at least one person involved in the 737 MAX’s development. The subpoena, with a prosecutor from the Justice Department’s criminal division listed as a contact, sought documents to be handed over later this month.

Facebook Was Downgraded by Needham

Facebook dropped Monday after Needham analyst Laura Martin downgraded the stock to a hold rating and warned clients that the recent departure of 11 senior managers could spark further declines in the profitability of the company. Martin wrote that Facebook’s issues with privacy and encrypted messaging, rising regulatory risk and the upload of disturbing content will accelerate the management exodus.

Amazon is Breaking Higher Eclipsing Key Levels

Amazon shares are leading the discretionary shares higher, breaking out of a range that has encapsulated the shares for all of 2019. Prices closed above the pivotal 200-day moving average for the first time in nearly 5-months which helped the entire discretionary sector gain traction.

Global Stocks Drift Lower, Death Cross Looms Over S&P500, GBPUSD is Walking on Thin Ice

After the initial breakthrough on the truce in the trade wars, the U.S. and Chinese indices had lost momentum, and today are performing a moderate decline. On Tuesday morning, Futures on S&P500 are around 2775, cutting 1.8% gains from Friday down to 0.4%. Shanghai’s China A50 is 1% below peak levels at the start of the Monday’s session.

The Initial optimism is slowly dissipating, and markets are waiting for the further signals. Today no important data publications are expected, so, players’ attention will switch to technical analysis.

It is interesting that the rebound in stocks on American exchanges was led by fast-growing IT-companies (FAANG), which underwent the most serious corrections in October and November. That may be a signal for a full return of risk appetite from the market participants.

Despite the impressive increase in heavyweights, such as Apple (+3.5%) and Amazon (4.9%), S&P500 yesterday failed to develop its rebound above the previous local highs. The growth of the index above the 2815 level has fast reversed to decline, which could be a harbinger of a new index drawdown to the October-November lows. The Sell signal, according to the technical analysis, can additionally strengthen the S&P500 below 2660 by the end of the day. In this case, we will see the return under the key levels of 200- and 50-day averages, and the so-called “Death Cross”, when MA (50) crosses the MA (200) line from top to bottom.

An equally interesting situation in the GBPUSD pair. In the previous three months, its rebounds were lower: 1.33, 1.3250, 1.3170. Then it has returned to support at 1.27, from where the pair rebounded in August and November. Also, this level was an important watershed in 2017, which increases its importance. Falling under this mark can start the movement up to 1.20: local lows after Brexit. Keeping the above can be seen as a signal that investors believe in smoothly Brexit. The pair’s behavior near the key level can be influenced by the Bank of England Governor Mark Carney’s speech at the Special Treasury Committee about the UK independence.

This article was written by FxPro

Global Market Slide, Tech Wreck Drives Losses, US Market De-FAANGed

Asian Down On Global Woe

Asian markets closed down across the board on Tuesday as mounting global woe rocked the market. The Chinese ShangHai and Hong Kong Heng Seng led with losses greater than -2.0% while others in the region fared better. The Japanese Nikkei was down a more modest -1.10% despite growing weakness in the automotive sector while in Korea and Australia losses were well below -01.0%.

The Nissan board has issued a statement saying that Carlos Ghosn and another board member had been under-reporting their compensation “over many years”. The misrepresentation is material to their disclosure requirements and a violation of Japanese financial regulations, a breach that resulted in Ghosn’s arrest on Tuesday. With his arrest comes the natural question, because he’s the CEO of multiple car companies several countries have done the same thing elsewhere?

Europe Down As Tech-Wreck, Banks Lead Losses

The European market was broadly lower at mid-day on Tuesday on weakness in tech and banks. The banks were down on a combination of factors that include Brexit uncertainty, the Italian budget stand-off, slowing domestic growth, slowing global growth, and trade concerns. The sector sank despite positive results from UK lemder Cybg. The UK lender says pretax profits rose 13% in the last year, it also says management has “planned for a period of uncertainty” and sent shares down more than -10%.

Shares of Renault fell another -2.5% in early trading as the Carlos Ghosn scandal ripples through the market. Ghosn, also CEO of Renault, is likely to be ousted from his position at Renault as a result of his arrest. He may also have under-reported his compensation in France.

Tech-Wreck De-FAANG’s US Market

Tech led the global decline and was felt nowhere more strongly than among the FAANG stocks. Facebook, Amazon, Apple, Netflix, and Google all shed at least -2.0% on Monday, most shedding more than -4.0%, as fear of slowing growth hit the sector.

A report that Apple had cut orders for one of its iPhone X models sent a shockwave through the market that affected the entire supply chain and all technology related to mobile. Shares of FAANG continued their slide on Tuesday adding at least -1.0% to individual losses and plunging the group deeper into bear-market territory.

Downward pressure in retail also had the market moving lower on Tuesday morning. Misses from Target and Kohl’s had shares of those stocks down more than -10% despite positive reports from both companies.

The tech-heavy NASDAQ Composite led the major indices lower in pre-market futures trading. The index was looking at a loss of -1.58% followed by -1.10% declines for the both the S&P 500 and Dow Jones Industrial Average. Trading volume is going to be light on Tuesday, Wednesday, and Friday because of the Thursday holiday. Traders should beware of volatility, exaggerated market movements, and whipsaws.