S&P 500 (SPY) Dives To 3635 As Initial Jobless Claims Decline

Key Insights

  • S&P 500 found itself under pressure after the release of Initial Jobless Claims report.
  • Auto stocks are losing ground as traders react to the disappointing report from CarMax. 
  • A move below the support at 3635 will open the way to the test of the next support level at 3600.

Traders Worry About Hawkish Fed

S&P 500 is down by more than 2% in today’s trading session as traders react to the better-than-expected Initial Jobless Claims report.

The report indicated that 193,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 215,000. The Fed has previously stated that job market remained too tight. The report confirmed that the job market was in good shape. This is bearish for stocks as the Fed is forced to raise rates aggressively to cool demand and fight inflation.

Auto stocks found themselves under pressure after CarMax report missed analyst estimates on both earnings and revenue. The stock is down by 23% in today’s trading session. Tesla, General Motors, and Ford are down by 5-6% as traders fear that rising loan rates have started to put pressure on demand for vehicles.

Tech stocks have also moved lower today, which is not surprising as the market prepares for higher interest rates. AMD, NVIDIA, and Apple were among the biggest losers in this market segment today.

The current sell-off is broad, and even energy stocks are under pressure despite the rebound in oil markets. The market views Fed’s actions as the biggest danger for stocks, so any news that signal that Fed will continue to raise rates aggressively lead to a sell-off.

S&P 500 Tests Support At 3635

S&P 500

S&P 500 continues its attempts to settle below the support level at 3635. RSI is close to the oversold territory, but there is enough room to gain additional downside momentum in case the right catalysts emerge.

If S&P 500 settles below 3635, it will move towards the next support level at 3600. A successful test of this level will push S&P 500 towards the support at 3580.

On the upside, the previous support at 3660 will serve as the first resistance level for S&P 500. In case S&P 500 climbs back above this level, it will head towards the next resistance at 3700. A move above 3700 will open the way to the test of the resistance at 3725.

For a look at all of today’s economic events, check out our economic calendar.

UPDATE: Is the Worst Really Over for US Stocks?

Last month, we posed the question: “Is the worst over for US stocks?”

Answer: apparently not.

A week after that August 10th article, the S&P 500 did climb higher, only to be resisted by its 200-day simple moving average.

The blue-chip stock index even closed above the 50% Fibonacci retracement level, which was the key criteria for suggesting that the worst is over for the 2022 rout in US stocks.

As cited in the August article, according to data by the CFRA and S&P Global, in 18 of the 19 ‘bear markets’ seen since World War II, the S&P 500 then went on to a fresh bull run after closing above its 50% Fib retracement line.

But as the saying goes across financial markets “Past performance is no guarantee of future results.”

And that track record (stated above) now needs to be updated to “18 out of the past 20 bear markets …”.

Since that August article, the S&P 500 has unwound all of its summer gains, even printing intraday prices not seen since end-November 2020.

In essence, we have seen “worse” levels this week for the S&P 500 compared to those June lows.

Why Did the S&P 500 Erase Its Summer Gains?

Recall the premise for the S&P 500’s summer rally, as stated in last month’s article:

“Arguably, the primary reason is that markets believe that the Fed has done the largest chunks of its rate hikes already.”

Additionally, the S&P 500’s summer gains was based on the idea of a “dovish pivot” by the Fed.

That’s to say that markets had expected the Fed to be less courageous about sending US interest rates higher, for fear of triggering an economic recession.

But now we know better.

Since then, we have seen the US inflation data stubbornly printing near its highest levels in around 40 years.

Hence, many Fed officials, including Fed Chair Jerome Powell himself, have since sent a strong message to the markets:

The US central bank is hell bent on taming multi-decade high inflation by sending US interest rates even higher, and is willing to tolerate economic pain along the way.

Markets duly paid heed and raised their forecasted peak for this ongoing Fed rate hike cycle by about 90 basis points!

  • Back in August, markets expected that US rates won’t go higher than 3.6% in March 2023.
  • Today, that forecasted peak is now expected to reach nearly 4.5% by March.

What Do Higher Us Interest Rates Mean for the Us Economy?

Essentially, the Fed wants to see some “demand destruction”.

Policymakers want to see less money in an economy chasing after scarce goods and services.

That should, in theory, discourage businesses from ramping up their selling prices, hopefully resulting in slower inflation.

However, more economic pain could also bring about a shrinking economy i.e. a recession.

What Do Higher US Interest Rates Mean for the US Economy?

More downside likely.

With the US unemployment rate forecasted by the Fed to rise to 4.4% by end-2023, significantly higher from the 3.7% figure from last month, more jobless Americans should translate into less demand/spending in the US economy, which should also mean less earnings for companies.

Lower earnings due to such “economic pain” should also lead to lower share prices, with such a narrative already dragging on the S&P 500.

Tech Not Spared

Also, higher interest rates mean its tougher for so-called “growth companies” to continue borrowing cheap loans to fund its expansion plans while forsaking profitability.

Hence, as higher interest rates chock some of the potential growth (and earnings potential) for these growth companies, that has led to lower stock valuations as well.

Keep in mind that, with many of these growth stocks concentrated in the tech sector, no surprise then that the tech-heavy Nasdaq 100 has a year-to-date decline of almost 30%, falling deeper than the S&P 500’s 22% year-to-date decline.

However, the Nasdaq 100 is still managing to not surpass its June lows … for now.

Also, note that tech-led declines would only exert more downward pressure on the S&P 500.

This is because IT stocks (think Apple, Microsoft, Nvidia, etc.) account for over a quarter (26.6%) of the S&P 500.

So, if you couple the S&P 500’s exposure to tech stocks with the weightage of consumer discretionary stocks (e.g. Amazon, Tesla, McDonald’s, etc. – which tend to take an earnings hit when customers have less disposable income during times of economic pain), then a US recession that’s triggered by higher US rates would only exert more downward pressure on the S&P 500.

NOTE: The S&P 500 index is widely used as the benchmark to gauge how overall US stocks are performing.

So What’s Next for the S&P 500?

Brace for the low-3000s.

In market fears surrounding a US recession continue ramping up, that may send the S&P 500 to as low as:

  • 3400: around the pre-pandemic peak set in Feb 2020
  • 3200: double-bottom from Sept/Oct 2020

Though for more immediate consideration, the S&P 500 is testing a crucial support level – its 200-week simple moving average.

This technical indicator has supported the S&P 500 in recent years, with such an episode last occurring at end-2018.

Athough the Fed was also busy raising interest rates back in 2018, those benchmark rates today have already surpassed those levels and are now standing at its highest since 2008 at 3.25%.

And US inflation is still around its highest levels since the early 1980s.

So if this 200-week SMA doesn’t hold, the S&P 500 is likely to then set course for the low-3000 region, dragged down by heightened  fears over a potential US recession and higher-for-longer US interest rates.

For more information visit FXTM.

S&P 500 (SPY) Remains Under Pressure At The Start Of The Week

Key Insights

  • The stock market is falling as traders sell riskier assets amid recession worries.
  • Strong dollar and rising Treasury yields serve as additional bearish catalysts for stocks. 
  • The pullback is broad, and all market segments are under pressure. 

S&P 500 Retreats As U.S. Dollar Tests New Highs

S&P 500 continues its attempts to settle below the support level at 3660 as traders move out of riskier assets.

Treasury yields are testing new highs. Currently, the yield of 10-year Treasuries is trying to settle above the 3.85% level. At the start of August, 10-year Treasuries yielded just 2.60%, so the recent upside move was huge.

Higher Treasury yields put significant pressure on REITs. Kimco Realty, Ventas, Prologis, and Vornado Realty are among the biggest losers in the S&P 500 today.

Energy stocks have also found themselves under pressure as WTI oil tested new lows. Baker Hughes, Hess, and Halliburton are down by more than 3% in today’s trading session.

Some tech stocks, like Apple and Amazon, are trying to rebound today. Other tech stocks, which have been weak in recent weeks, continue to move lower. Meta and NVIDIA are testing new lows.

It should be noted that strong dollar also serves as a negative catalyst for U.S. stocks by making them more expensive for foreign investors. Today, the U.S. Dollar Index tested highs that were last seen back in 2002. Dollar’s strength highlights the global flight to safety, which is bearish for riskier assets like stocks.

S&P 500 Tries To Settle Below The Support Level At 3660

S&P 500

From a technical point of view, RSI has recently entered into the oversold territory, so the risks of a rebound are increasing. This year, RSI has been at current levels in late January, after the strong pullback.

This time, the panic looks strong, so RSI may move to lower levels without a rebound. It remains to be seen whether the market is ready for a flash sell-off, which happened during the coronavirus crisis. However, the current pullback is broad, and the recent moves in currency markets show that investors are very nervous.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Retreats As Recession Fears Grow

Key Insights

  • S&P 500 is under strong pressure ahead of the weekend as traders sell riskier assets. 
  • The pullback is broad, and there are no safe-havens in the stock market. 
  • Energy stocks retreat as WTI oil tests multi-month lows. 

The Sell-Off Continues

S&P 500 is under strong pressure amid global market sell-off. Today, traders are selling everything and buying U.S. dollar, which is testing multi-decade highs.

Not surprisingly, all market segments are under strong pressure today. Energy stocks suffered a strong sell-off as WTI oil moved below the $80 level on recession worries. APA Corporation, Marathon Oil, Halliburton, and Schlumberger are down by more than 10% in today’s trading session.

Basic materials stocks have also been hit hard. The leading copper producer Freeport-McMoRan is down by 7% today. Fertilizer producers CF Industries and Mosaic are losing 6% in today’s trading session. Gold stocks, like Newmont Corporation, are also under pressure as gold tests new lows.

Among leading tech stocks, Meta, NVIDIA, Microsoft, and Alphabet are testing yearly lows. Treasury yields keep moving higher, which is bearish for tech stocks.

From a big picture point of view, the current sell-off is close to a real panic. Traders are moving out of various asset classes and transfer their funds into the U.S. dollar.

It should be noted that S&P 500 has lost more than 10% of its value in less than two weeks, so speculative traders will likely try to search for bargains. Even if the market is headed lower, sell-offs rarely go in a straight line, so traders should expect that the market will stay extremely volatile.

S&P 500 Tests Support At 3660

S&P 500

S&P 500 settled below the 3700 level and tested support at 3660. In case S&P 500 manages to settle below 3660, it will head towards the next support level, which is located at 3635. A move below this level will open the way to the test of the support at 3600.

On the upside, the previous support at 3700 will serve as the first resistance level for S&P 500. RSI is in the oversold territory, so the chances for a rebound are increasing. In case S&P 500 manages to climb back above 3700, it will head towards the resistance at 3725. A successful test of this level will push S&P 500 towards the resistance at 3750.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Retreats As Treasury Yields Test New Highs

Key Insights

  • Stocks remain under pressure as Treasury yields keep moving higher. 
  • Traders stay focused on the hawkish Fed. 
  • A move below 3750 will push S&P 500 towards the support level at 3725.

Consumer Cyclical Stocks Decline Amid Recession Fears

S&P 500 remains under pressure as traders stay focused on hawkish Fed. Today’s Initial Jobless Claims report, which indicated that 213,000 Americans filed for unemployment benefits in a week, served as an additional negative catalyst for stocks. The job market remains tight, which pushes Fed to raise rates aggressively as it wants to cool demand.

Consumer cyclical stocks, which were among yesterday’s losers, are under strong pressure today. Caesars Entertainment, Expedia, Etsy are down by 5-8% in today’s trading session. The market prepares for a recession when consumers cut “unnecessary” purchases.

Treasury yields keep moving higher, which is bearish for tech stocks. Currently, the yield of 10-year Treasuries is trying to settle above the 3.70% level. Such yields were last seen back in 2011.

AMD and NVIDIA are among the biggest losers in the tech segment. Traders fear that weakening PC demand will hurt their results.

Energy stocks are gaining some ground today. Leaders include refining stocks like Valero Energy, Phillips 66, and Marathon Petroleum.

From a big picture point of view, the market remains bearish. Rising Treasury yields indicate that bond traders continue to prepare for aggressive rate hikes from the Fed. In case Treasury yields move to new highs, stocks may find themselves under more pressure.

S&P 500 Tests Support At 3750

S&P 500

S&P 500 is currently trying to settle below the support level at 3750. In case this attempt is successful, it will head towards the next support, which is located at 3725. A move below this level will open the way to the test of the support at 3700. If S&P 500 declines below 3700, it will head towards the support at 3660.

On the upside, the nearest resistance level for S&P 500 is located at 3780. If S&P 500 gets above this level, it will head towards the next resistance at 3800. A successful test of this level will push S&P 500 towards the resistance at 3825.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Declines Towards 3900 As Treasury Yields Rise

Key Insights

  • Higher Treasury yields put material pressure on stocks today. 
  • Energy stocks declined amid a strong sell-off in the oil and natural gas markets. 
  • A move below 3900 will push S&P 500 towards the support at 3885.

S&P 500 Is Moving Towards September Lows

S&P 500 is losing ground today as Treasury yields continue to move higher ahead of the Fed Interest Rate Decision, which will be released on September 21.

Energy stocks have found themselves under pressure amid sell-offs in the natural gas and oil markets. As a result, leading energy stocks like Exxon Mobil and Chevron are down by about 2% in today’s trading.

Leading tech stocks, including Apple, Microsoft, Alphabet, and Amazon, are also down by 1-2% today. NVIDIA is testing new lows. Higher interest rates are bearish for tech stocks.

From a big picture point of view, traders remain worried that Fed will hurt economic growth by raising rates aggressively. The FedWatch Tool indicates that there is a 60.2% probability that Fed’s target rate will reach 375-400 bps in November, up from the current 225 – 250 bps.

Aggressive rate hikes may put significant pressure on economic activity and hurt companies’ profits, so it’s not surprising to see that traders are worried about this scenario.

S&P 500 Is Ready To Test The Support Level At 3900

S&P 500

S&P 500 managed to get below the support level at 3920 and is trying to get to the test of the next support, which is located at 3900. If S&P 500 manages to settle below this level, it will head towards the support at the recent lows at 3885. A successful test of the support at 3885 will push S&P 500 towards the support at 3850.

On the upside, the previous support level at 3920 will serve as the first resistance level for S&P 500. In case S&P 500 manages to settle above this level, it will head towards the resistance at 3950. A move above the resistance at 3950 will open the way to the test of the next resistance level at 3980.

For a look at all of today’s economic events, check out our economic calendar.

Should You Invest In AI Stocks?

What Is AI?

Artificial Intelligence, or AI, is basically machine learning, or a process by which computers simulate our human intelligence through a collection of complex systems. There are many different applications of AI, including speech recognition, vision, language processing, and expert systems.

AI makes it possible for computers or machines to receive data through various means of technology – like movement or heat sensors for example – to interpret and arrange what they perceive into a somewhat logical order, solve a problem, and then act in a way that achieves the desired outcome.

On some level, the hardware that possesses AI is capable of adapting what they do to suit its environment or even ‘learn’ from previous behavior with the use of analysis and the ongoing collection of data.

The technology has been around in various primitive forms for decades, but it’s become far more complex in recent years and its use is becoming more widespread in countless industries. There are benefits to consider, such as enhanced productivity, technological advances, medical advances, and cheaper goods and services, but also concerns to take into consideration too, such as potential issues with privacy, safety, and security for example.

The public can be naturally dubious and uncertain about some applications of AI – after all, we don’t really know where the technology is headed long term.

So, is AI the way of the future for your investment strategy? How can you take advantage of this growing space and invest wisely with a secure broker like ActivTrades? Let’s take a bit of a look into the world of AI and you can decide what options might be suitable for you.

How Do Companies Use AI In Their Businesses?

There are so many industries that are being enormously affected by investment and growth in AI technology at the moment. Some include Health Care, Automotive, Travel, Marketing, E-commerce, Social Media, Law Enforcement, and Finance, but there are many others.

One of the lesser known, but fairly important users of AI, is the Agricultural industry, with the most notable example in this space being John Deere. Their technology aims to take the guesswork out of farming and to use AI to target and fix trouble areas, like weeds or dry spots, among other things. They’re using specific sensors, drones, targeted spraying, and driverless tractors to be able to increase productivity and output by significant margins.

Another prominent company that is hugely reliant on AI is retail giant JD.com, located in China. An e-commerce site that sells almost every product imaginable expects its business to be completely automated in the future. And the company already has warehouses that are completely free of employee involvement, and deliveries of products to consumers have been conducted by a network of drones for a few years already.

How To Recognize Artificial Intelligence Stocks

You may already have investments in your portfolio that expose you to AI without being aware of it as it’s become so widespread, but if you’re actively on the hunt to focus on the technology there are a few options available. You’ll just need to do a little research because there aren’t too many companies with AI at the center of their business.

The top stocks to look at are from companies that are making ongoing investments in things like infrastructure for networking, data centers, cloud-based operations, and robotics, among other things. Think big tech companies like Amazon, IBM, Alphabet, Microsoft, Nvidia, and Meta, but also lesser-known companies like Intuitive Surgical, who specialize in creating technology for minimally invasive surgical procedures with the use of robotics and AI.

How To Trade Artificial Intelligence Stocks

You might like to purchase individual shares directly for your preferred company or look into financial derivatives such as Contracts for Difference (CFD) which allow you to invest in the price movements of a company, but not actually own the underlying stock. This method also allows the trader to take advantage of leverage and potentially make magnified returns on the emerging technology of his choosing.

Some Exchange-Traded Funds also offer products specific to AI. This is called Thematic Investing, which focuses on a specific theme such as AI, communications, or clean energy, for example. Different companies from different sectors may be involved, but they are all a part of the same objective or part of a popular trend.

Generally, the products to look for are those that contain a basket of the top publicly traded AI and robotics stocks that are selected by the fund based on their preferences. ARK Autonomous Technology & Robotics ETF is one such example and includes (as of September 2022) Tesla, Deere & Co, and Trimble Inc, among a few others.

Whatever your investment strategy, whether using derivatives, ETF, or buying individual stocks, it’s vitally important to have a trading plan in place and remember that AI is an emerging sector, one with risk involved. You’ll need to do your research and have a well-established risk management and trading plan that you’re prepared to stick to – and never invest more capital than you’re comfortable losing.

S&P 500 (SPY) Rallies Ahead Of The Weekend

Key Insights

  • Leading tech stocks gained strong upside momentum, providing support to S&P 500.
  • Energy stocks moved higher as WTI oil rebounded above the $86 level. 
  • A move above 4050 will push S&P 500 towards the resistance at 4080.

S&P 500 Tests Resistance At 4050

S&P 500 is trying to settle above 4050 as stocks rally amid growing appetite for risk. The U.S. dollar pulled back from recent highs, while Treasury yields moved lower, providing support to leading tech stocks.  Tesla, Meta, NVIDIA are up by 3-4% in today’s trading session.

Energy stocks have also provided material support to S&P 500 as WTI oil rallied towards the $86 level. In general, today’s rebound was broad, and all market segments moved higher.

Not surprisingly, defensive sectors were among the worst performers as traders rushed to buy tech and energy stocks.

S&P 500

S&P 500 is currently trying to settle back above the resistance at the 50 EMA, which is located near the 4050 level. In case this attempt is successful, S&P 500 will move towards the resistance at 4080.

A move above 4080 will push S&P 500 towards the next resistance at 4100. If S&P 500 gets above this level, it will head towards the resistance at 4115.

On the support side, a move below 4050 will push S&P 500 towards the support level at 4015. In case S&P 500 declines below this level, it will head towards the next support at 4000.

DocuSign Rallies After Strong Earnings Report

DocuSign is up by 10% after the release of a strong earnings report. The company reported revenue of $622 million and adjusted earnings of $0.44 per share, beating analyst estimates on both earnings and revenue. It should be noted that DocuSign stock is down by 80% from 2021 highs, so market’s expectations were modest ahead of the report.

Coinbase is up by 8% amid a strong rebound in crypto markets. Bitcoin gained strong upside momentum and moved back above the $21,000 level, proving support to all crypto-related assets.

From a big picture point of view, it looks that traders want to increase their positions in riskier assets. For example, ARK Innovation ETF, which focused on high-growth companies, is up by more than 4% today.

Next week, S&P 500 dynamics will depend on whether leading tech stocks continue to rebound. In case Treasury yields move back to recent highs, stocks may face material resistance.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Rebounds As Tech Stocks Move Higher

Key Insights

  • Lower Treasury yields provided support to tech stocks. 
  • The rebound in leading tech stocks pushed S&P 500 towards the 3950 level. 
  • Energy stocks found themselves under strong pressure amid sell-off in oil markets. 

Tech Stocks Rebound After Recent Pullback

S&P 500 gained upside momentum and moved towards the 3950 level as leading tech stocks rebounded.

Treasury yields declined, while the U.S. dollar pulled back from yearly highs, which served as an additional positive catalyst for tech stocks. It should be noted that some tech stocks, like Apple, Meta, and NVIDIA, lack positive momentum today.

Meanwhile, energy stocks were among the worst performers as WTI oil broke through the key support level and moved towards $83. Major energy stocks like Exxon Mobil, Chervon, and Schlumberger are down by about 2% in today’s trading.

Previously, we have discussed that a rebound in tech stocks was needed to push the market higher. Today’s market action indicates that S&P 500 may gain strong upside momentum even when the previous leader (energy stocks) is under pressure, in case leading tech stocks enjoy strong support. In this light, the continuation of the current rebound will depend on the dynamics of leading tech stocks, which remain the key catalyst for S&P 500.

S&P 500 Tests Resistance At 3950

S&P 500

 

S&P 500 found support near 3885 and moved above the resistance level at 3915. Currently, S&P 500 is trying to settle above the resistance at 3950.

In case this attempt is successful, S&P 500 will move towards the next resistance level, which is located at 3980. A move above this level will open the way to the test of the resistance at 4000. If S&P 500 climbs above 4000, it will head towards the resistance at 4015.

On the support side, the previous resistance level at 3915 will serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will head towards the next support at the recent lows at 3885. A successful test of this level will push S&P 500 towards the support at 3830.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Moves Towards 3900 As Chip Stocks Retreat

Key Insights

  • The strong Manufacturing PMI report raised chances for an aggressive rate hike at the next Fed meeting. 
  • NVIDIA and AMD retreated as U.S. banned exports of some advanced chips to China. 
  • Traders have started buying stocks from defensive sectors. 

U.S. Export Ban On Advanced Chips Pushed Stocks To New Lows

S&P 500 declined towards the 3900 level amid worries about aggressive rate hikes from the Fed and an export ban on advanced chips to China.

The strong ISM Manufacturing PMI report pushed the U.S. dollar to new highs. Treasury yields have also moved higher. The FedWatch Tool indicates that there is a 76% probability of a 75 bps rate hike at the next meeting, which is bearish for stocks.

S&P 500

Interestingly, RSI remains in the moderate territory despite the strong pullback, so there is enough room to gain additional downside momentum in the upcoming trading sessions.

If S&P 500 manages to settle below the support at 3915, it will head towards the next support level at 3875. A move below this level will push S&P 500 towards the support at 3830.

On the upside, the previous support at 3950 will serve as the first resistance level for S&P 500. If S&P 500 manages to settle back above this level, it will head towards the resistance at 3980.

Traders Show Some Interest In Defensive Sectors

NVIDIA stock is down by about 12% amid worries that U.S. export ban will deal a material blow to the company’s revenue. AMD is down by 7%. The ban targets sophisticated and expensive chips that are used in AI work.

The market is worried that the ban marks the beginning of a multi-year assault on China’s capabilities in the high-tech segment, and that additional restrictions will be announced in the future.

As the relations between U.S. and China continue to deteriorate, Chinese stocks like Alibaba and NIO have also found themselves under material pressure.

Leading tech stocks, like Apple, Microsoft, and Alphabet, are also moving lower today.

Meanwhile, investors are trying to find safe-haven assets after the strong pullback, as stocks like Johson & Johnson, Walmart, and Philip Morris are moving higher.

Traders should keep an eye on the trading dynamics of such stocks as their rebound may signal that buyers’ interest is growing after the sell-off in S&P 500.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Rebounds From Session Lows As Energy Stocks Rally

Key Insights

  • Tech stocks are losing ground as Treasury yields are moving higher. 
  • Energy stocks stay strong as WTI oil rallies amid protests in Iraq. 
  • The strong rally in energy stocks may provide more support to the broader market.

Stocks Remain Under Some Pressure

S&P 500 declined below the 4050 level as traders remained focused on Powell’s hawkish comments.

The yield of 10-year Treasuries has climbed back above the 3.10% level, so it was not surprising to see that tech stocks were the worst performers today. Apple, Microsoft, Tesla, NVIDIA, Meta and other big tech names remained under significant pressure.

In Dow Jones, 3M Company was the main laggard. The stock remains under significant pressure as traders are worried that the company may face up to $100 billion of losses from combat earplug lawsuits. On Friday, a judge ruled that bankruptcy of 3M Company’s subsidiary could not prevent lawsuits against the parent company.

Energy stocks is the leading market segment today. WTI oil rallied amid violent protests in Iraq, providing additional support to leading energy stocks like Exxon Mobil and Chevron. The rally in the energy segment may push S&P 500 to higher levels at the end of today’s trading session.

Will The Sell-Off Continue?

Traders fear that Fed’s aggressive rate hikes will put significant pressure on the economy. Tech stocks remain sensitive to Treasury yield dynamics as many shares in this market segment are trading at high valuation levels. For example, NVIDIA, which is down by about 45% year-to-date, is still trading at 35 forward P/E.

While Fed’s potential rate hikes and rising Treasury yields are strong bearish catalysts, it would be naive to expect that S&P 500 will move lower day after day. There are no signs of serious liquidity problems in the world, and there should be a sufficient number of buyers who are waiting for pullbacks to establish their positions in U.S. stocks. The rally in energy stocks may provide additional support to the broader market.

S&P 500

S&P 500 failed to settle below the 4000 level and is trying to get back above the resistance at 4040. In case this attempt is successful, S&P 500 will move towards the 50 EMA, which is located near the 4080 level. A move above the resistance at the 50 EMA will open the way to the test of the resistance at 4115.

On the support side, S&P 500 needs to settle back below 4040 to have a chance to gain additional downside momentum. The next support level for S&P 500 is located at 4000. If S&P 500 manages to settle below this level, it will head towards the support at 3975. A move below 3975 will push S&P 500 towards the support level at 3945.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Is Moving Towards 4100 As Sell-Off Intensifies

Key Insights

  • Powell’s remarks triggered fears of an economic slowdown, leading to a sell-off in equity markets. 
  • Nasdaq is down by almost 3% amid strong sell-off in tech stocks. 
  • A move below the 4100 level will push S&P 500 towards the 50 EMA at 4085.

Powell’s Comments Put Pressure On S&P 500

S&P 500 is down by more than 2% as traders react to Powell’s speech, which pushed traders out of riskier assets.

Powell’s speech was focused on inflation. He noted that the Fed should solve the problem before public’s inflation expectations become entrenched at higher levels. Powell spoke about economic pain due to tight monetary policy but noted that high inflation was more dangerous.

Markets were volatile when Powell spoke. Later, traders focused on the “economic pain” part of his message, and S&P 500 found itself under huge pressure.

S&P 500

S&P 500 faced resistance near 4220 and declined below the 20 EMA. Currently, S&P 500 is testing the support level at 4115. In case this test is successful, S&P 500 will move towards the next support at the 50 EMA at 4085. A move below the 50 EMA will open the way to the test of the support at 4040. On the upside, S&P 500 needs to get back above the 20 EMA to have a chance to develop sustainable upside momentum.

Tech Stocks Retreat, Led By Alphabet And NVIDIA

Today’s sell-off is broad, and all market segments are under pressure. Not surprisingly, tech stocks are leading the sell-off. Alphabet is down by almost 5%, while NVIDIA stock is losing more than 6% of its value.

Notable losers in the tech segment include Affirm, which is down by 20% after the release of a disappointing quarterly report, and Dell, which cut its fiscal 2023 guidance.

Electronic Arts is up by about 5% after a report suggested that Amazon would not make an offer for the company.

Most likely, traders will focus on general market sentiment today. Powell’s speech has led to a strong reaction in markets. Traders are moving out of riskier assets, so tech stocks will remain under strong pressure today.

At this point, it looks that it will be hard to find safe-havens ahead of the weekend. Energy stocks, which have performed well in recent trading sessions, are also moving lower as WTI oil declines on demand worries.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Drops More Than 2% As Traders Rush To Take Profits After Recent Rally

Key Insights

  • S&P 500 retreated as traders continued to take profits after the recent rally. 
  • Recession fears, strong dollar, and rising yields served as additional bearish catalysts. 
  • The tech sector was hit hard, while the energy sector managed to stay in the positive territory. 

Traders Prepare For The Jackson Hole Symposium

S&P 500 found itself under strong pressure at the start of the week and moved below the 4150 level as traders took profits ahead of the Jackson Hole Symposium, which starts on August 25.

Recession worries, strong dollar, and rising yields have also contributed to the sell-off. However, it looks that traders searched for an excuse to move out of long positions after the strong rally from June lows.

While the FedWatch Tool indicates that there is a 56.5% probability of a 75 bps rate hike, bulls are afraid that they will hear something too hawkish from Fed Chair Jerome Powell, who is scheduled to speak on Friday.

At this point, a 100 bps rate hike looks extremely unlikely, but traders often become nervous when they want to take some profits off the table.

Semiconductor Stocks Retreat As Yields Rise

Semiconductor stocks were hit hard, and Intel retreated to multi-year lows. Competitors like AMD and NVIDIA have also declined by 3 – 4% today.

While semiconductor stocks have been under pressure for months, some stocks in this market segment, like NVIDIA, remain richly valued. High valuation levels may them more sensitive to rising yields.

Meanwhile, Ford put pressure on Dow Jones as it announced that it would cut 3,000 jobs. Ford noted that it wanted to focus on electric vehicles and software.

However, the market is worried that job cuts signal that demand for cars is not as strong as previously expected. Electric vehicle makers like Tesla and Rivian have also moved lower today.

It was a hot day for the followers of meme stocks as AMC stock collapsed on worries about Cineworld bankruptcy. Bed Bath & Beyond lost more than 15% amid worries about the financial health of the company. The current market sentiment may present a problem for meme stocks, which may find themselves under more pressure in the upcoming trading sessions.

In general, there was nowhere to hide except energy today. Energy stocks received support due to strong performance of the oil and natural gas markets. Shares of Chesapeake and Range Resources moved closer to yearly highs.

For a look at all of today’s economic events, check out our economic calendar.

Uncertainty Remains in the Chip Industry

Even though US inflation eased slightly in July, especially on lower oil prices, the CPI index is still extremely high at 8.5% year over year. As inflation continues to plague numerous industries across the globe, the impact it’s having on the semiconductor industry continues to cause concern as experts fear it may be heading into a possible downturn.

This past Tuesday, the 9th of August, Micron Technology Inc, the U.S Semiconductor manufacturer, dramatically reduced its current-quarter revenue forecast, citing a recent slowdown in the demand for personal computers and smartphones. Meanwhile, on the Monday prior, the U.S tech company Nvidia also advised of a decline in its gaming business, which has caused its second-quarter revenue to drop by a dramatic 19%.

In immediate light of the news, Nvidia’s shares dropped 8%, and on Tuesday, Micron’s shares fell 5.7%, pushing the Philadelphia SE Semiconductor index, composed of 30 members who are largely engaged in the creation of semiconductors as well as their distribution, manufacturing, and retail sales, down 4.3%. Since then, they’ve all bounced back to their pre-fall levels. Sony, Advanced Micro Devices, Qualcomm, and Intel have also all reported a softening in demand.

Daily charts of Nvidia and Micron – Source: ActivTrader platform

Micron has even warned of a negative free cash flow situation in the next few months as a result, a condition not seen since the beginning of 2020. The company now has plans to spend less on new manufacturing plants and equipment and is cutting the number of chips they create in response, to ensure the integrity and stability of their chip prices.

The company’s chief business officer, Sumit Sadana, told Reuters in late June that the shift from high to low demand had been “bigger than anyone was anticipating.” And that the changes would already be rippling through the ecosystem.

A highly cyclical business

In the last few months, the decline in orders has mostly been seen in chips that are used in technologies for smaller consumer products and gadgets, but more recently it’s been broadening to other markets too, including industrial, automotive, and data centers.

Some companies were understandably banking on a surge in demand post-covid, with the population supposedly heading back to work and experiencing better economic conditions, but inventories of chips and accessories continue to pile up in factories as sales stagnate.

After years of shortages across the globe, when wait times for certain chips were around six months at one point, and major companies like Apple lost out on countless millions of dollars worth of sales as a result, investors are now anxiously watching the industry as it experiences a sharp market correction, the likes of which have not been seen in around a decade.

During the height of the pandemic, smartphones, personal computers, and other technology were in unusually high demand, as the population moved to working and studying from their own homes. Naturally, companies worked hard to meet this new boom in demand, putting more and more capital into technology, manufacturing, and data centers to support the massive shift in consumer spending.

Now it seems that the tables have turned since the worst of the pandemic has apparently passed, and an oversupply of stock and other expenditures for many companies may cause consistent losses in the coming months while they make adjustments and/or divest.

As the cost of everyday living also skyrockets as a result of growing inflation, and interest rates continue to be increased worldwide, consumers are re-working their household budgets and weighing up the importance of spending their disposable income on leisure activities such as gaming and keeping up-to-date with new devices and technology if what they have is already working fine.

Innovation helps growth

One company that has apparently skirted the latest downward industry trends, according to their July earnings report, is the Taiwan Semiconductor Manufacturing Co. (TSMC). The company boasted its second record-breaking month with a 6.2% sales bump in July above the previous month, with US$6.23billion.

Analysts credit the revenue increase to the superior processes that have been developed to meet the demand for emerging technologies in computing and automotive electronics, such as the 5-nanometer and 7-nanometer processes currently in use, and the new 3-nanometer and 2-nanometer processes to be developed and produced in the near future.

U.S set to boost local production

Despite the current waning demand, the U.S will now provide $52.7 billion in subsidies to boost its local production, research, and technology in a bill signed by President Biden on Tuesday the 9th of August. The bill aims to push the U.S to be more competitive with China and will affect industries including automotive, white goods, video games, and weapons systems, among others, while also creating thousands of jobs.

Companies out of Taiwan, such as the Taiwan Semiconductor Manufacturing Co. were responsible for around 60% of chip foundry revenue around the globe last year, and there are fears that the U.S is far too dependent on them for its key industries.

President Biden called it “a once-in-a-generation investment in America itself.” But skeptics argue that the grants for private businesses would be treated as blank checks. As expected, many of the major U.S Semiconductor company CEOs were present at the signing.

Nasdaq 100 Drops 1.15% Amid Further Pessemistic Chipmaker Guidance; Micron Dips 3.75%

Key Points

  • The major US equity indices fell across the board on Tuesday, led by downside in chipmakers amid further pessimistic guidance.
  • The Nasdaq 100 dipped 1.15%, but remained above the 13,000 level.
  • Hotter than expected Q2 Unit Labor Cost growth added to inflation worries, likely also weighing on sentiment somewhat.

Chipmakers Weigh on the Nasdaq 100 After Pessemistic Micron Revenue Guidance

The major US equity indices fell across the board on Tuesday, led by downside in chipmakers amid further pessimistic guidance, this time from Micron Technology. But the major indices for the most part remain close to recent multi-week highs, with investors in wait-and-see mode ahead of Wednesday’s US Consumer Price Index data release.

The tech/growth stock dense Nasdaq 100 index was unsurprisingly the underperformer out of the major US indices, dropping over 1.0% on the day, though managing to hold above the 13,000 level. Micron cut its revenue forecast and warned investors of the likelihood it would see negative free cash flow in the near future amid waning demand for its chips as the personal computer and smartphone market weakens.

Micron’s gloomy update comes a day after the largest US chipmaker Nvidia issued a revenue warning to investors ahead of its earnings release on 24 August. The Philadelphia Semiconductor Index (SOX), which is comprised of US chipmakers, tanked over 4.0% on Tuesday, taking its gains since last week’s highs to around 7.0%. The likes of Intel, AMD and Western Digital have all also recently issued pessimistic revenue guidance and warned about softening demand for their products. Despite this, the SOX index is still about 20% up from the annual lows it printed in early July.

Hot Q2 Unit Labor Cost Figures Add to Woes

The S&P 500, meanwhile, dropped about 0.4%, while the Dow Jone Industrial Average was down 0.2%. The worst performing of the eleven S&P 500 GICS sectors was Consumer Discretionary, which lost 1.5%. Information Technology was the next worst, losing 1.0%. Energy was the best performer, following a 1.8% gain, despite WTI prices ending the day broadly flat.

Data released on Tuesday showed US Nonfarm Productivity sliding 4.6% QoQ in Q2, roughly in line with expectations, while Unit Labor Costs surged 10.8% QoQ, above the expected gain of 9.5%, although lower than Q1’s 12.7% QoQ gain, probably weighed on sentiment a touch. Analysts said Tuesday’s data highlighted the fact that the US labor market remains tight and inflation concerns high. Rising wages can feed into higher consumer price inflation.

Traders were last pricing about a 70% chance that the Fed lifts interest rates by 75 bps for a third time in a row in September. Recent stronger than expected data (ISM PMI surveys and the US jobs report last week, plus this week’s data) and hawkish commentary from Fed policymakers have seen markets pare back on dovish bets made in late July that the Fed might slow the pace of tightening given a weakening economy.

Analysts said that traders could price in an even higher likelihood of a 75 bps rate hike in September if Wednesday’s US inflation figures print to the upside of expectations, which could weigh on equity market sentiment.

3 Stocks Hedge Funds are Saying are Undervalued

It is not the right time to flee from stocks because investing in high-growth companies today could lead to sizable returns in the long run as many of these companies are trading at a discount because of the pessimism in the broad market. The following are three stocks that hedge funds believe have significant growth potential.

NVIDIA Co. (NVDA)

NVIDIA is a hedge fund favorite, with many hedge funds raising their stake in the company recently. KG&L Capital Management LLC increased its stake in NVIDIA by 15.7% in the first quarter. In Q4 2021, Ken Griffin’s Citadel fund increased its position in the company by more than 56%. Other hedge funds that have increased their stake in NVIDIA recently include CENTRAL TRUST Co, Welch Group LLC, and Shelton Wealth Management LLC.

NVIDIA is a semiconductor powerhouse, and despite the drop in GPU prices, this could be an excellent long-term investment opportunity given that the stock has taken a beating this year (down 40% YTD). GPU selling prices have been falling in recent months which is a major concern for investors. Given the continuous decline of PC shipments in the second quarter, GPU demand may have fallen further than in the second quarter as well. However, investors should ideally focus on the long-term prospects for the company.

NVIDIA is a leading player in many emerging high-tech sectors such as Artificial Intelligence, cryptocurrencies, Metaverse, and autonomous vehicles. Nvidia is likely to excel in the fast-growing gaming market as well, which is expected to be worth $339.95 billion by 2027.

PlantX Life Inc. (CSE: VEGA) (Frankfurt: WNT1) (OTCQB: PLTXF)

In a recent independent research report on PlantX, New York-based hedge fund Capital Y Management referred to PlantX as “a market leader with a revolutionary business in a growing industry with long-term tailwinds.” A 12-month price target of C$0.67 per common share has been set by Capital Y Management, which would equate to a C$68 million enterprise value for PlantX.

According to the report, PlantX’s partnerships with Amazon and Walmart would probably generate an extra 12% of sales for the business. The stock of PlantX, according to analysts, could eventually be valued “between C$1.52 and C$2.91 by the end of the 2025 financial year.” The massive runway for growth ahead of the company and this price prediction allows investors potential multibagger returns in the long run.

There is no doubt that PlantX has the potential for a promising future. Despite the economic uncertainty, PlantX’s revenue has consistently increased in recent quarters. In June 2022, PlantX generated $1.4 million in gross revenue, a 97% increase over the corresponding period the previous year. The company has formed many strategic partnerships and is also entering the $284 billion alcoholic beverages market. With its diverse product and services portfolio, the company is well-positioned to experience strong growth in the rapidly expanding plant-based market.

Capri Holdings Ltd. (CAPRI)

Capri Holdings stock has suffered a significant sell-off this year despite robust growth. The stock is down 27% this year but that has only attracted institutional investors to the company. Hedge funds such as Counterpoint Mutual Funds LLC and National Bank of Canada FI have increased their stake in the company this year. Despite macroeconomic challenges, the company delivered solid Q1 2022 results and issued above-consensus guidance.

Capri Holdings Limited is a global fashion group that designs, manufactures, and sells a wide range of fashion products such as apparel, accessories, watches, jewelry, and eyewear. Michael Kors, Versace, and Jimmy Choo are three of the world’s most popular and iconic brands owned by the company.

Inflationary pressures may cause a temporary slowdown in spending on fashion and luxury items but Capri Holdings is well-positioned to grow with the high-end fashion market expected to be worth more than $100 billion by 2026.

Conclusion

Economic uncertainty will continue to drive market volatility, and in the short term, investors may see companies with strong fundamentals dragged down by the negative sentiment surrounding the global economy and stock markets. Companies that have sufficient resources and have taken strategic steps to weather these macro challenges are likely to come out on top in the long term. The three companies introduced in this article are examples of such companies that could reward investors handsomely in the long run.

Nasdaq 100 Falls Ahead of Key Risk Events, Nvidia Drops 1.8%

Key Points

  • The S&P 500 and Nasdaq 100 indices both fell on Monday ahead of a key week for earnings/macro risk.
  • Several major large-cap US stocks will report Q2 earnings, while there is also a Fed meeting and US GDP data.
  • Chip names led downside in the US tech sector.

Equites Lower Ahead of Key Macro/Earnings Week

Major US indices were mixed on Monday, with investors cautious ahead of a key week for both corporate earnings and macro events. These include earnings from US giants Apple, Amazon, Google, Meta Platforms, Microsoft, as well as Coca-Cola. According to Reuters, of the 107 S&P 500 companies to have reported Q2 earnings as of Monday morning, 74.8% had beaten analyst forecasts, worse than the 81% beat rate of the past four quarters, but well above the historic average of 66%.

Meanwhile, the Fed is expected to bring interest rates back above pre-pandemic levels with a second successive 75 bps rate hike on Wednesday, while US GDP data on Wednesday will confirm whether or not the US economy fell into a technical recession in H1 2022. Equity bulls are hoping for a “goldilocks combination” of Fed Chair Jerome Powell adopting a softer tone on upside inflation risks and the need for aggressive tightening and growth data showing that, for now, a recession has been avoided.

But chatter is growing on Wall Street that the recent rebound in stocks that has seen the S&P 500 rally over 8.0% from its annual lows printed back in June looks like it may be coming to an end. “We are still in the confines of a bear market,” said Jonathan Krinsky, an analyst at BTIG, as quoted by Reuters, a sentiment echoed by many others.

Chip Names Weigh

The S&P 500 ended the session slightly in the green and was last changing hands in the 3,960s, roughly 1.5% below the highs it reached above 4,000 at the end of last week, but still comfortably above its 50-Day Moving Average at 3,920. The Nasdaq 100 index, meanwhile, was last changing hands in the 12,300s, extending its losses from last Friday’s highs in the 12,600s to around 3.0%, weighed by underperformance in major chip names.

Market commentators attributed the downside in chip stocks (the Philadelphia semiconductor index was last down about 1.2%) to bearish commentary from analysts. Barclays argued in a note on Monday that the rebound in chip stocks which has seen the Philadelphia semiconductor index bounce 18% from annual lows is a “head fake”.

Barclays cut its price targets for a number of US chipmakers, including Nvidia, and the bearish rhetoric seems to be weighing on the sector. Susquehanna analyst Christopher Rolland also cut his price target on a few chip stocks, warning that PC and smartphone exposed companies are at risk of an industry downturn.

In terms of the S&P 500 GICS sectors; the Information Technology and Consumer Discretionary sectors were the underperforms, both down over 1.0%. Energy, meanwhile, performed the best, with the sector last up close to 4.0% amid a rebound in oil prices.

End of GPU Mining? Crypto Crash Forces Miners To Sell Graphic Cards

Key Insights:

  • As BTC and ETH are rapidly losing value, swaths of miners are forced to sell hoarded GPUs for auction.
  • Some industry experts say that mining a single BTC now would cost up to $25,000.
  • Ethereum would switch to a Proof of Stake model, meaning miners would no longer use GPUs.

For many years, bitcoin (BTC) mining has been an astonishingly lucrative activity, with gross margins as high as 90%. 

For mining profitability, three key factors are responsible – the price of BTC, high power costs, and computing hardware. Currently, all three factors contribute to major distress among miners.

For instance, BTC and Ethereum (ETH) are rapidly losing value. The largest cryptocurrency by market cap once traded above $67,000 before falling prey to the overall market crash. BTC is now trading at as low as $20,430 at press time. 

On the other hand, ETH is the worst-hit crypto, losing its price by 70% in one month and now trading at $1087.

These mining centers, akin to data centers, are power-hungry and consume enormous electricity. According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes around 110 Terawatt Hours per year, roughly equivalent to the annual energy consumed by countries like Malaysia or Sweden.

According to Daniel Jogg, CEO of Enerhash, a company running blockchain data centers, the energy rates have soared up in some parts of Europe that mining one BTC would cost up to $25,000.

Given these factors, miners have given up on graphics processing unit (GPU) mining. They are forced to auction graphic cards on online marketplaces at less than half the cost of the GPUs.

Mass sale of graphic cards for auction

Crypto miners and internet cafe owners, who were involved in buying mass graphic cards for mining, are left with nothing but to dump their GPUs or sell them for as low as $300-$350.

On Tuesday, pictures of mining grids flooded online on various Chinese internet services companies like Baidu that was up for sale.

Source: Baidu

Graphic cards from AMD and NVIDIA were sold for over half their actual costs. For instance, the popular NVIDIA GeForce RTX 3060 Ti graphic card is now auctioned for $300, when the actual price was over $700-$800 a few months ago.

Users took to Twitter and other forums advising buyers not to buy these GPUs as they were “abusively used for mining.”

One user on the Geeks 3D forum noted,

“With the crash of the crypto market (Bitcoin, Ethereum as well as other cryptocurrencies), a lot of graphics cards are now on sale by some of the most important of crypto miners (Chinese GPU miners, scalpers, and Internet cafes) at low prices, below MSRP! Keep in mind that these graphics cards were abusively used for mining during months, and it’s not recommended to buy one of them.”

However, enthusiastic gamers would still find these overly used graphic cards useful and buy them at a great deal. According to a Bloomberg report, Ethereum miners have spent roughly $15 billion on GPUs during the previous mining craze since 2021.

GPUs are no longer useful for mining

As Ethereum is shifting from its proof-of-work to proof-of-stake mechanism, many miners aren’t happy, forcing them to find an alternative.

As reported by FX Empire, ETH announced that it would shift to POS between the third and fourth quarters of this year. It is a significant step as it reduces energy consumption by more than 99%, good news for environmentalists and crypto critics.

However, ETH has pushed this merge several times, disappointing expectant. Tim Beiko, a computer scientist who coordinates Ethereum developers, noted that the odds of it not happening this year are “very low.” He added,

“The thing I want to avoid is someone buying a mining GPU today, and the Merge happens this summer, making it almost worthless.”

Here’s a Complete Guide to Investing in the Metaverse

Key Insights:

  • A massive boom in metaverse’s popularity was witnessed in October 2021. 
  • Global revenue opportunity from the metaverse could approach $800 billion by 2024. 
  • NFTs, metaverse tokens, and virtual land are ways in which one can invest in the crypto space. 

Metaverse and NFTs were the buzzwords of 2021 as both sectors saw a massive rise in market capitalization and general interest.

A massive boom in metaverse’s popularity was witnessed in October 2021, when Facebook made big news by changing its name to Meta. However, there’s much more to the metaverse than Mark Zuckerberg or the social media.

Over the last years, curiosity about the investment opportunities in the metaverse has often crossed traders’ and investors’ minds. However, before investing in the metaverse, it is crucial to know more about the virtual world that investors and institutions are so excited about.

The Metaverse and its Growth

According to many, metaverse technology is the next big tech as it has managed to attract social networks, online game makers, and various technology leaders globally.

In a more general sense, the metaverse can include virtual reality – characterized by usually purposeful virtual worlds that continue to exist. It also has augmented reality that combines aspects of the digital and physical worlds.

Terms like social, shared, virtual, and persistently 3D are used to describe the metaverse technology. According to many, metaverse technology is the convergence of the digital and physical worlds within the evolution of the internet and social networks. Additionally, the metaverse also makes use of real-time 3D software.

Over the last couple of years, mainstream organizations have started to jump on the metaverse bandwagon as customer demand for the technology rises. The idea of the metaverse revolves around an online space where people get to connect and interact with each other.

In fact, the metaverse mania is so immense that in January this year the Tennis Australia partnered with Decentraland to host the Australian Open (AO), which was the first official tennis grand slam in the metaverse.

Likewise, in March 2022, presenters, performers, and nominees, at the Grammys had a virtual reality experience in the metaverse via CEEK. More recently, in April this year, another project partnered with Decentraland to introduce for people to marrying in the metaverse.

Metaverse-centric organizations such as Decentraland, Meta, The Sandbox, and others are also building promising metaverse platforms and projects. Prophecy Market Insights predicted that the Global Metaverse Market accounted for $337.23 million in 2020 and is estimated to be $1003.06 million by 2030. The sector is anticipated to register a CAGR of 11.50% over the years.

A Citibank report highlighted that the metaverse economy could be valued between $8 trillion and $13 trillion by 2030.

So, for a market growing at such a high pace, what are the ways in which one can invest in the space? This article will highlight how one can, directly and indirectly, invest in the metaverse.

Investing in Metaverse for Beginners

A Bloomberg report presented that the global revenue opportunity from the metaverse could approach $800 billion by 2024. With investment opportunities in the metaverse on the rise, it could be a good space for beginners to explore. However, the crypto and metaverse market is a tricky sector that often leaves new investors overwhelmed.

Much like cryptocurrencies, the metaverse allows almost anyone to invest and earn from the space. It’s essential to note that investing in metaverse is not limited to buying crypto-assets infact one can also invest or trade-in stocks of metaverse firms.

There are quite a few publicly traded companies from the metaverse space. Furthermore, beginners can choose from different industries in the metaverse space, including real estate, video games, and entertainment.

Decentraland is one firm that offers users the opportunities to buy virtual land in the metaverse. On the other hand, Meta is one traditional finance firm offering investments in the growing space.

That said, some ways a newcomer can invest in the metaverse include purchasing virtual land and prefabricated metaverse properties. Investors can also look at buying metaverse crypto, which offers a decent exposure, especially to beginners.

More seasoned investors can also look at investing in a metaverse ETF which is often considered to be a lot safer and less volatile. Furthermore, one can look at buying metaverse stocks and creating and flipping NFTs.

Directly Investing in the Metaverse

While investing in metaverse can be done indirectly, too, directly investing in metaverse projects has lured many investors. Over the last year and a half, investing in cryptocurrencies and the metaverse has been one of the most exciting areas in the finance space.

Even though many new investors think of investing in cryptocurrencies like bitcoin and ether as similar to investing in the metaverse, it isn’t always mutually exclusive. In fact, one can invest in cryptocurrencies and the metaverse by taking various approaches.

One way of directly investing in the metaverse can be via cryptocurrencies and digital assets like NFTs in the metaverse space. Another way could be by investing or trading metaverse cryptocurrencies like Decentraland (MANA), The Sandbox (SAND), and Enjin Coin (ENJ).

These metaverse cryptocurrencies can be bought or traded directly from any major crypto exchange like Binance or Coinbase. Multiple assets across the metaverse can be used for buying products and services.

One can also invest in metaverse stocks from prominent firms such as Meta Platforms, Roblox, Microsoft Corporation, NVIDIA, and the Boeing Company, among others. Metaverse real estate is another industry that has seen tremendous growth over the last year.

Market reports have estimated that real estate sales in the metaverse could double in the year 2022. New investors and traders play a huge role in pumping the metaverse space by paying millions of dollars to buy real estate in the metaverse.

One can buy lands on the metaverse with cryptocurrencies like ether, SAND, and MANA. AXS, MANA, THETA, and ENJ are some of the most popular metaverse cryptocurrencies in use. Thus, buying one of these crypto-assets could be the first step to owning land on the metaverse.

As the metaverse technology gains more traction, entrepreneurs and business leaders stand to gain by looking into the space and investing in virtual real estate. Platforms like Decentraland and Otherside offer exciting opportunities in the virtual real estate market.

Staying Safe is the Key

While investing in cryptocurrencies and the metaverse is often seen as a glamorous, get-rich quick scheme investing in projects for their value, ecosystem, market cap, and macro growth is one thing that needs to be kept in mind.

That said, one of the most crucial things in the space is to stay safe and make informed decisions. Most importantly, it is vital to do your research in the market and assess the volatility of this growing space well.

NVIDIA Falls On Weak Outlook

Key Insights

  • NVIDIA beats analyst estimates on both earnings and revenue. 
  • Traders focus on the weaker-than-expected outlook for fiscal Q2 2023. 
  • NVIDIA is trading at 24 forward P/E, which may attract some speculative traders. 

NVIDIA Stock Falls As Fiscal Q2 2023 Outlook Disappoints

Shares of NVIDIA found themselves under pressure after the company released its fiscal first quarter report.

NVIDIA reported revenue of $8.28 billion and adjusted earnings of $1.36 per share, beating analyst estimates on both earnings and revenue. While the results exceeded analyst consensus, traders focused on the outlook for the next quarter.

In fiscal Q2 2023, NVIDIA expects to report revenue of $8.10 billion, including “an estimated reduction of approximately $500 million relating to Russia and the COVID lockdowns in China”.

The size of the hit from the recent problems in Russia and China surprised the market, and NVIDIA stock moved closer to yearly lows.

What’s Next For NVIDIA Stock?

Analysts expect that NVIDIA will report earnings of $5.61 per share in the current fiscal year and $6.7 per share in the next fiscal year, so the stock is trading at 24 forward P/E.

The current valuation looks rather cheap for NVIDIA which has been trading at higher multiples. However, it remains to be seen whether the stock will get strong support near yearly lows.

The crypto market remains under pressure. Some investors believed that the strong growth of crypto markets would lead to huge demand for NVIDIA products, but the total crypto market capitalization has already declined from $3 trillion to $1.2 trillion.

Meanwhile, traders remain cautious towards higher-PE stocks. While the current valuation of 24 forward P/E may look attractive for NVIDIA, it is not cheap for an “average” stock. In this light, general market sentiment will have a strong impact on the near-term direction of NVIDIA stock.

To keep up with the latest earnings updates, visit our earnings calendar.