European Equities: Economic Data and Bond Yields in Focus

Economic Calendar:

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was another relatively bullish day for the European majors on Wednesday.

The CAC40 and the DAX30 saw gains of 0.35% and 0.29% respectively, while the EuroStoxx600 ended the day flat.

It was a choppy session for the majors, which faced rising Treasury yields late in the European session. News that the U.S would have enough vaccine doses to vaccinate everyone in the U.S before the summer drove yields higher.

Earlier in the session, economic data from the Eurozone had delivered mixed results. While the February PMI numbers were largely better than expected, the Eurozone’s private sector continued to contract.

The Stats

It was a busy day on the economic calendar on Wednesday.  Service sector PMI numbers for Italy and Spain were in focus early in the European session.

Finalized service and composite PMI figures for France, Germany, and the Eurozone also provided the majors with direction.

In February, Spain’s services PMI increased from 41.7 to 43.1. Economists had forecast a rise to 43.0.

Service sector activity also continued to contract in Italy. In February, the Services PMI increased from 44.7 to 48.8, coming in ahead of a forecasted 46.0.

For France, the services PMI fell from 47.3 to 45.6 in February, which was up from a prelim 43.6.

German’s Services PMI fell from 46.7 to 45.7, which was down from a prelim 45.9.

It was a different story for the composite PMIs, however.

An impressive pickup in manufacturing sector activity in Germany led to a rise in the German composite from 50.8 to 51.1. This was down marginally from a prelim 51.3.

For France, the Composite fell from 47.7 to 47.0. This was up from a prelim 45.2, however.

The Eurozone

For the Eurozone, the Services PMI rose from 45.4 to 45.7 in February, which was better than a prelim 44.7.

As a result of better numbers from Italy and Spain, the Composite PMI rose from 47.8 to 48.8, an upward revision from a prelim 48.1.

According to the February survey,

  • The modest fall in activity was closely linked to a decline in new orders, which fell for a 5th consecutive month.
  • In spite of this, new export business increased at its strongest pace for nearly 3-years.
  • For the Eurozone, there was a net increase in employment for the 1st time in 12-months.
  • Input cost inflation was recorded for the 9th successive month and to the sharpest degree since the Nov-2018.
  • As a result, output charges rose for the first time since last February.
  • Optimism hit its highest level in 3-years, supported by the rollout of vaccines and easing of restrictions.

From the U.S

The market’s preferred ISM Non-manufacturing PMI and ADP nonfarm employment change figures were in focus late in the session.

In February, the ISM Non-Manufacturing PMI fell from 58.7 to 55.3. Economists had forecast for the PMI to hold steady at 58.7.

  • The Price Index rose from 64.2% to 71.8%, aligned with a marked pickup in inflationary pressures in other major economies.
  • Other sub-indexes were in decline, weighing on the headline PMI figures.
    • ISM Non-Manufacturing Business Activity Index fell from 59.9 %to 55.5%.
    • The Employment Index fell from 55.2% to 52.7%.
    • Finally, the New Orders Index slid from 61.8% to 51.9%.

The ADP Nonfarm Employment figures for February also disappointed, with employment rising by just 117k in February. Economists had forecast a 177k rise following a 195k increase in January.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. BMW (+4.54%), Continental (+4.49%), and Volkswagen (+4.67%) led the way, while Daimler trailed with a more modest 0.94% gain.

It was also a bullish day for the banks. Deutsche Bank ended the up by 1.62%, with Commerzbank gaining 1.02%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.52% and by 2.46% respectively, with Soc Gen rallying by 3.62%.

It was a mixed day for the French auto sector, however. Stellantis NV slipped by 0.22%, while Renault rallied by 5.21%. While Stellantis closed out the day in the red, Stellantis delivered positive earnings and an optimistic outlook on Wednesday that supported the broader auto sector.

Air France-KLM eked out a 0.07% gain, with Airbus SE ending the day up by 1.37%.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Wednesday. Following a 3.21% gain on Tuesday, the VIX rose by 10.66% to end the day at 26.67.

Rising U.S Treasury yields delivered the upside for the VIX, as the U.S equity markets responded to vaccine updates from the administration.

The NASDAQ slid by 2.70%, with the Dow and S&P500 falling by 0.39% and by 1.31% respectively.

VIX 040321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include retail sales and unemployment figures for the Eurozone, with the ECB Economic Bulletin due out ahead of the numbers.

While we can expect some market sensitivity to the numbers, expect the ECB Economic Bulletin to be the key driver early on.

With the ECB in action next week, the markets will be looking for clues on what to expect at the press conference. Inflation, the economic outlook, EUR strength, and their impact on monetary policy will likely be the main areas of focus.

From the U.S, the weekly jobless claims figures and January factory order numbers will also influence late in the European session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 45 points.

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

UK Homebuilder Persimmon’s Shares Gain on Strong Guidance; Target Price GBX 3,160

The UK’s second-largest homebuilder Persimmon said its revenue and profit declined in 2020 but forecasts houses deliveries to reach pre-COVID-19 levels by 2022, sending its shares up over 6% on Wednesday.

The company is engaged in house building within the United Kingdom said its average private weekly sales for the first eight weeks were 7% ahead of last year. The company also said it expects 1H21 completion volumes to be in line with 1H19 of 7,584 units, with similar delivery in 2H.

“With much of FY20 results already known, investors will be focused on scope for upgrades and an update on the CEO priorities. We see no update of margins guidance. The new priorities set out by the CEO may be the key to further upgrades – the first two bringing lower costs, and the positioning of growth on the list suggesting greater ambitions: 1) build right first time, 2) customer first, 3) growth, 4) maintaining and growing financial strength, 5)forefront of sustainability,” said Glynis Johnson, equity analyst at Jefferies.

“The group has confirmed it will return 235p this year, albeit the payments are slightly more spread (125p March, 55p Aug, 55p Dec), and reiterated its previous policy: 125pfinal, and interim reflecting excess capital (clarified as levels above £700m cash).”

The FTSE-100-listed Persimmon shares, which rose about 3% in 2020, surged nearly 6% to GBX 2,871 on Wednesday.

Persimmon Stock Price Forecast

Seven analysts who offered stock ratings for Persimmon in the last three months forecast the average price in 12 months of GBX 3,159.86 with a high forecast of GBX 3,349 and a low forecast of GBX 2,950.

The average price target represents a 10.48% increase from the last price of GBX 2,860. From those seven analysts, six rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of GBX 2,950 with a high of GBX 3,900 under a bull scenario and GBX 1,100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the UK’s largest housebuilders’ stock.

“FY20 contained few surprises after its January trading statement, but its 2021 volumes guidance was 2-3% ahead of our and consensus estimates,” said Christopher Fremantle, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to GBX 3,360 from GBX 3,210. Citigroup lowered the price objective to GBX 3,130 from GBX 3,197. Jefferies upped the price target to GBX 3,349 from GBX 3,213.

Moreover, Barclays upgraded to overweight from equal weight and raised the target price to GBX 3,000 from GBX 2,800. Credit Suisse lowered the target price to GBX 3,006 from GBX 3094. Deutsche Bank raised the target price to GBX 3,283 from GBX 3,173.

Analyst Comments

Persimmon has broad UK coverage and low exposure to the south-east and London. This has helped the company in recent years, given a weaker market in this region. Persimmon entered the crisis in good shape, with good cash balances and a smaller land creditor position than peers; it has outperformed peers through a lockdown and is set to deliver a strong performance at 2H,” Morgan Stanley’s Fremantle added.

“At c12x 2021e EPS and 2.6x 2021 TBV (sector: 1.5x), valuation is full, in our view; 2021 is still uncertain and the investment case continues to depend on the extent to which Persimmon can sustain revenues, margins and RoE from already very elevated levels, particularly given risks from Help to Buy phase-out and CEO transfer.”

Upside and Downside Risks

Risks to Upside: We see house price growth heavily correlated with nominal GDP growth, with changes in household leverage and interest rates other key factors. As local currency players, sector share prices have tended to be positively correlated with sterling strength/weakness, and with house price growth 6 months forward – highlighted by Morgan Stanley.

Risks to Downside: See ‘Risks to Upside’. Also Help to Buy removal remains a downside risk to volumes.

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast – Stock Markets Hang On To Uptrend Line

The S&P 500 went back and forth during the course of the trading session on Wednesday as we continue to try to struggle to find some type of stability and certainty. We are sitting just above the uptrend line and the 50 day EMA, and both of those could come into play as support. After all, they are both common technical indicator the people pay close attention to and have been widely followed during this uptrend.

S&P 500 Video 04.03.21

Even if we do break down below the uptrend line and the 50 day EMA, I think the market probably goes looking towards the uptrend line underneath for support, as there is a second one just below. After that, then you would be looking at the 3600 level. On the other hand, if we turn around a break above the highs of the Tuesday session, that opens up the possibility of a move towards the 4000 handle. Keep in mind that the yields situation or perhaps more importantly the velocity of yields rallying could come into play. If yields in the US treasury markets continue to spite, that probably will work against the value of stocks in general. Nonetheless, I think that we eventually will have buyers on the dips, especially with the jobs number coming out on Friday.

Between now and then, we may have a little bit of choppiness, but that is relatively common, as the markets are trying to figure out what to do next. In general, we are in an uptrend so there is no point in trying to fight it, and of course the previous consolidation area between 3200 and 3600 measures for a move to 4000.

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

Why Shares Of Dollar Tree Are Rallying Today?

Dollar Tree Video 03.03.21.

Dollar Tree Stock Moves Higher After Solid Earnings Report

Shares of Dollar Tree are gaining more than 3.5% in today’s trading session after the company released its fourth-quarter earnings report.

Dollar Tree reported revenue of $6.77 billion and GAAP earnings of $2.13 per share, beating analyst estimates on earnings and meeting them on revenue. Same-store sales showed solid growth in all segments, and the company continued to expand the number of its stores.

Dollar Tree also stated that the combination of Dollar Tree And Family Dollar stores proved to be a great format for small towns and that such Combination Stores were delivering a same-store sales lift of greater than 20% on average.

The market is clearly pleased with the report which showed that Dollar Tree continued to perform well in the fourth quarter. In addition, the company’s Board of Directors increased the share repurchase authorization by $2 billion which served as a bullish catalyst. At current stock price, Dollar Tree will repurchase about 19.4 million shares, while the number of shares outstanding is about 236 million.

What’s Next For Dollar Tree?

Shares of Dollar Tree had a challenging start of 2021 as traders bet that the healthy recovery of the economy will put pressure on discount stores. Shares of Dollar Tree’s peers were under pressure as well.

However, the strong fourth-quarter report and the decision to increase share buyback may serve as sufficient upside catalysts which may stop the local downside trend.

It should be noted that the U.S. will soon deliver a huge $1.9 trillion stimulus package which will boost consumer activity. It remains to be seen how much of $1,400 stimulus checks will be put into purchases in discount stores, but the new package will certainly boost sales of most retailers.

The stock is currently trading at about 17 forward P/E which is not very cheap, but the whole market is expensive right now so many investors will likely find Dollar Tree attractive enough at current levels.

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

US Stock Markets Daily Recap: Mixed Start for Stocks in March

At least Rocket Mortgage (RKT) had a good day, though! And, at least the 10-year yield didn’t spike either. But that could change. Yields ticked up overnight to 1.433%, after President Biden pledged enough vaccine supply to inoculate every American adult by the end of May.

So, where do we go from here? This positive economic and health news is excellent for reopening. But rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP scorch without hiking rates, inflation may return.

I don’t care what Chairman Powell says about inflation targets this and that. The price of gas and food is increasing already. In fact, according to Bloomberg, food prices are soaring faster than inflation and incomes.

For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in the prices of all goods included in the CPI.

Can you imagine what this was like for February? Can you imagine what it will be like for March? I’m not trying to sound the alarm – but be very aware. These are just the early warning signs.

So about March. Will it be more like Monday or Tuesday? Was the second half of February the start of the correction that I’ve been calling for? Or is the “downturn” already over? Only time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of this month could happen.

Rising bond yields are concerning. Inflation signs are there. But structurally, I don’t think it will crash the market (yet).

Corrections are also healthy and normal market behavior, and we are long overdue for one. It’s been almost a year now. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what could be a great second half of the year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Nasdaq- a Buyable Slowdown?

Figure 1- Nasdaq Composite Index $COMP

The Nasdaq’s slowdown has been long overdue. Even though more pain could be on the horizon, I like the Nasdaq at this level for some buying opportunities.

But I’d prefer it drop below support at 13000 for real buying opportunities.

But it can’t hurt to start nibbling now. If you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.

Plus, it’s safe to say that Cathie Wood, the guru of the ARK ETFs, is the best growth stock picker of our generation. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler seems to think so too. Her ETFs, which have continuously outperformed, focus on the most innovative and disruptive tech companies out there. Not to put a lot of stock in one person. But it’s safe to say she knows a thing or two about tech stocks and when to initiate positions- and she did a lot of buying the last few weeks.

I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.

Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.

Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted almost 5.5% since February 12 and is closer to oversold than overbought!

But it’s still not enough.

Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.

The RSI is king for the Nasdaq . Its RSI is now around 45.

I follow the RSI for the Nasdaq religiously because the index is merely trading in a precise pattern.

In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.

  • December 9- exceeded an RSI of 70 and briefly pulled back.
  • January 4- exceeded a 70 RSI just before the new year and declined 1.47%.
  • January 11- declined by 1.45% after exceeding a 70 RSI.
  • Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.

Again- if the index drops below 13000, and the RSI hits undeniably overbought levels, get on the train.

But because we haven’t declined just enough, I am making this a SHORT-TERM BUY. But follow the RSI literally and take profits once you have the chance to.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.

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

Matthew Levy, CFA

Stock Trading Strategist

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All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be 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, Matthew Levy, CFA, 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. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’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. Matthew Levy, CFA, 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.

Beyond Meat Could Sell Off into Double Digits

Beyond Meat Inc. (BYND) initially traded higher despite missing Q4 2020 top and bottom line estimates by wide margins on Feb. 25, attracting a large supply of bulls who promptly got trapped in a 21-point decline. The stock has continued to struggle in the last week and is now testing February support in the 130s, raising odds for a breakdown that relinquishes the last tranche of January’s vertical assault to an 18-month high.

Partnership with McDonald’s

Investors forgave the quarter and a profit warning after the company announced partnerships with McDonald’s Corp. (MCD) and Yum! Brands Inc. (YUM). The Mickey D. news, in particular, stoked buying interest after a failed trial of Beyond’s plant-based meat in Canada in 2020. However, pleasure turned to pain when the fast food giant “clarified’ the partnership, advising the McPlant burger would be limited to franchises that choose to carry the item.

BTIG Research analyst Peter Saleh reiterated a ‘Neutral’ rating after the news, noting “While the announcements are encouraging, we don’t anticipate much revenue from these partnerships in 2021, as the domestic quick service industry remains focused on core menu items and chicken, rather than plant-based meat. While we continue to believe in the long-term consumer adoption of plant-based meat, we don’t expect the Beyond Burger to be tested or make its debut in the U.S. in 2021, as McDonald’s and the industry remain focused on chicken.”

Wall Street and Technical Outlook

Wall Street has turned bearish on Beyond Meat’s outlook in the last year, posting a consensus ‘Hold’ rating based upon 2 ‘Buy’ and 8 ‘Hold’ recommendations. More importantly, four analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $112 to a Street-high $184 while the stock is set to open Wednesday’s U.S. session about $2 below the median $140 target.

The stock soared after coming public at 46 in May 2019, lifting to an all-time high at 239.71 in July. The wheels came off into 2020, with the momentum crowd jumping ship in reaction to insider selling and secondary offerings. It fell within two points of the IPO opening print in March and turned higher, posting three higher highs into January 2021 when it topped out just 19 points below the 2019 peak.  Aggressive sellers have taken control since that time, with a decline into the November low at 113.26 the path of least resistance.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Stocks Retreat After Disappointing ADP Employment Change Report

ADP Employment Change Report Disappoints

The U.S. has just released ADP Employment Change report for February. The report indicated that private businesses hired 117,000 workers compared to analyst consensus of 177,000. Back in January, private businesses added 174,000 jobs.

The disappointing report has put some pressure on S&P 500 futures in premarket trading, and they have pulled back into the negative territory.

This week, traders will remain focused on U.S. employment data. Initial Jobless Claims and Continuing Jobless Claims reports will be published on Thursday while Non Farm Payrolls and Unemployment Rate reports will be released on Friday. It remains to be seen whether the market will be able to gain more upside momentum in case employment reports are weaker than expected.

Oil Moves Higher Despite Rising Inventories

The recent API Crude Oil Stock Change report indicated that crude inventories increased by 7.36 million barrels compared to analyst consensus which called for a decline of 1.85 million barrels.

While the inventory report was disappointing, WTI oil managed to get back above the $60 level on hopes that OPEC+ will leave current production cuts intact.

According to recent reports, OPEC+ is discussing the possibility of keeping current production cuts in place for April as demand recovery remains fragile due to the continued problems on the coronavirus front.

Saudi Arabia is projected to end its voluntary production cuts of 1 million barrels per day (bpd), so the oil market will have to deal with rising supply in any scenario.

OPEC+ ministers will meet on Thursday, and the oil market will likely remain volatile until the end of the week.

U.S. Treasury Yields Continue To Rebound

Treasury yields continue to move higher after the pullback at the end of February as traders remain focused on the upcoming stimulus package which could bring higher inflation.

The yields of 10-year Treasuries have increased to 1.46% while the yields of 30-year Treasuries are trying to settle above 2.25%. Rising yields did not put much pressure on stocks today, but S&P 500 futures are already moving lower in premarket trading. Higher yields may ultimately hurt high-flying tech stocks which will be bearish for the general market.

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

Big Week for Big Oil

In the lead up to these key events, which serve as key barometers for the global oil industry’s outlook, Exxon Mobil’s share prices have been on a tear, surging 36% so far in 2021. Having formed a technical “golden cross” in mid-January, the stock’s uptrend since November remains firmly intact. However, with its 14-day relative strength index (RSI) flirting with overbought territory, this stock has been prone to dip once that 70 threshold is reached.

Key considerations for Exxon Mobil’s Investor Day

When Exxon held its investor day in 2020, the world had yet to fully realize the full extent of the damage wrought by Covid-19. Now, some 12 months later and with the astonishing recovery in oil prices since, investors will be eager for more details on how Exxon intends to forge ahead into the post-pandemic era:

  • Investment strategy

Greater capital expenditure, with the aim of taking advantage of the oil price recovery, could also threaten Exxon’s massive pledge of $15 billion in annual dividends. The company stated recently that its cashflow would be enough to meet its dividend commitment at $50 Brent.

Yet, markets will be cognizant of Exxon’s latest earnings announcement on 2 February, declaring its first annual net loss since its 1999 merger that created the largest US oil company, also its first annual net loss in about 40 years. In the aftermath of a year to forget for Big Oil, investors want to know whether Exxon can get that tricky balance right between strengthening its balance sheet and the spending required to take advantage of future opportunities, all while trying to appease dividend-hungry shareholders.

  • Carbon emissions

Exxon’s European rivals, such as BP, Royal Dutch Shell, and Total, are already making the shift to curb oil and drastically lower their carbon emissions by 2050. In contrast, Exxon has been loudly criticized over their apparent reluctance to match their rivals’ adoption of the green agenda.

It remains to be seen how much Exxon will warm up (no pun intended) to a net-zero carbon goal. With that in mind, Exxon appointed activist investor Jeff Ubben to its board just this week to give Exxon a more environmentally-friendly tilt while also setting up a new business unit to focus on low-emission technologies.

Still, much more is likely required out of Exxon in order to appease activist investors such as Engine No.1, which holds over $400 million in Exxon shares.

While Exxon Mobil’s Investor Day holds plenty of potential developments to rock its share prices, more volatility could be in store for Big Oil stocks the day after.

OPEC+ supply decision looms

On Thursday, OPEC+ is set to decide on the output levels for its 23 members for April, and could restore as much as 1.5 million barrels per day (bpd) back into global markets next month. That 1.5 million figure includes Saudi Arabia’s voluntary cuts of 1 million bpd that had been implemented throughout February and March.

Markets are already expecting the alliance to ease at least 500,000 bpd back into the world, hence the declines in oil benchmarks in recent sessions as they ponder the prospects of OPEC+ taps being loosened. Confirmation that a full 1.5 million bpd being flooded back into global markets starting next month could even drag Brent back to sub-$60 levels once more, and pare down its 21% in year-to-date gains.

To be clear, this isn’t to suggest we could see oil prices capitulate this week. The global demand recovery appears robust enough to absorb more incoming barrels of oil in April. However, it’s the supply side of the equation as will be determined by OPEC+ this week that could determine whether Brent above $60/bbl is warranted in the immediate aftermath.

The decision by OPEC+ wouldn’t just impact Brent and WTI crude prices, but is also likely to feed into the stock prices of oil companies over the coming days. With investors having plenty to digest over the next couple of days, this pair of events could dictate how oil-linked assets perform over the immediate term.

Written on 03/03/2021 07:00 GMT by Han Tan, Market Analyst at FXTM

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Hewlett Packard Enterprise Tops Earnings Forecasts, Ups Full-Year Guidance

Hewlett Packard Enterprise Company (HPE) traded mostly unchanged in Tuesday’s extended-hours session despite the enterprise-computing hardware company surpassing Wall Street expectations and raising its full-year forecast.

The company posted a fiscal Q1 profit of 52 cents per share while analysts had expected earnings of 40 cents a share. Moreover, the bottom line grew 18% from a year earlier. Sales of $6.83 billion also came in ahead of Street forecasts but were down from revenues of $6.95 billion reported in the same quarter last year.

Looking ahead, management now expects FY 2021 earnings to range between $1.77 and $1.80 a share, up from its previous forecasts of $1.60 to $1.78. CEO Antonio Neri told Barron’s that the company saw a recovery in enterprise IT spending throughout the quarter, adding that he anticipates demand gradually resuming this year.

As of March 3, 2021, Hewlett Packard has a market value of $18.86 billion, issues a healthy 3.29% dividend yield, and trades 22.36% higher year to date (YTD). Over the past 12 months, the shares have gained 12.5%. Valuation wise, the stock trades at nearly nine times projected earnings, slightly below its five-year average multiple of 9.65 times.

Wall Street View

In January, JPMorgan analyst Paul Coster upgraded HP Enterprise to ‘Overweight’ and lifted his price target to $16 from $13. Coster told investors the stock was a good “contrarian long trade,” given the company’s move into the SD-WAN space, its ongoing cost-cutting initiatives, and the expected recovery in enterprise IT spending.

Most other analysts have a wait-and-see view on the stock. It receives 13 ‘Hold’ ratings, 5 ‘Buy’ ratings, and 1 ‘Sell’ rating. Twelve-month price targets range from a Street-high $18 to a low of $10. The median target sits at $14 – 3.4% below Tuesday’s closing price of $14.50.

Technical Outlook and Trading Tactics

Since bottoming out around $8 a share in late October, the share price has trended sharply higher. More recently, traders have booked profits ahead of the company’s quarterly earnings. This provides a “buy the dip” opportunity for active traders.

Look for entry points at the $14 level, where the price finds support from a four-month uptrend line. In terms of trade management, consider placing a stop-loss order beneath the 50-day simple moving average (SMA). Think about booking profits on a retest of pre-pandemic high at $17.59.

For a look at today’s earnings schedule, check out our earnings calendar.

NIO Shares Slump on Big Q4 Loss, Slowing Sales Due to Global Chip Shortage

Chinese electric vehicle maker NIO’s shares slumped 13% on Tuesday after the company’s loss far surpassed analysts’ expectations for the fourth quarter and warned the global chip shortage would slow the pace of EV deliveries in the first quarter.

The company, which designs, manufactures, and sells smart and connected premium electric vehicles, reported a fourth-quarter net loss of 1.49 billion yuan, way above Wall Street consensus estimates for a loss of 757 million yuan.

NIO’s reported a net loss per share of $1.05 for the fourth quarter, largely missing the market expectations for a loss of $0.16 per share. The firm said its revenue surged over 130% to $6.64 billion from the same period last year but came a little below analyst’s forecasts of $6.71 billion.

“NIO concluded a transformational 2020 with a new quarterly delivery record of 17,353 vehicles in the fourth quarter of 2020. The strong momentum has continued in 2021 as we achieved a historic monthly delivery of 7,225 vehicles in January and a resilient delivery of 5,578 vehicles in February, representing strong 352% and 689% year-over-year growth, respectively,” said William Bin Li, founder, chairman and chief executive officer of NIO.

“Supported by competitive product offerings, outstanding services and innovative business models, we have won increasing recognition from our users and expect to deliver 20,000 to 20,500 vehicles in the first quarter of 2021.”

However, that is slower than the 42% increase the Chinese electric vehicle maker reported between the third and the fourth quarter.

Following this, the U.S.-listed NIO shares, which surged over 1,100% in 2020, slumped 13% to $43.29 on Tuesday. However, it gained 1.6% to $43.98 in extended trading.

“We cut our DCF-based TP to USD91 from USD100 after factoring in our new earnings forecasts while our WACC assumption is unchanged. We reiterate our Buy rating on NIO as we see its technology as ahead of peers with strong sales volume growth ahead. The recent share-price retreat serves as a good entry point, in our view. Key downside risks: lower-than-expected sales volume and margin,” said Daiwa’s Kelvin Lau.

“Our 2021-2023E earnings are more conservative than the street likely as we are more cautious on its EBIT margin outlook. However, we are likely more positive on NIO’s long-run outlook.”

NIO Stock Price Forecast

Ten analysts who offered stock ratings for NIO in the last three months forecast the average price in 12 months of $68.26 with a high forecast of $80.30 and a low forecast of $54.00.

The average price target represents a 57.68% increase from the last price of $43.29. From those ten analysts, seven rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $122 under a bull scenario and $42 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese electric vehicle makers’ stock.

Several other analysts have also updated their stock outlook. JPMorgan lowered their target price to $70 from $75. Jefferies set a hold rating and a $60 target price for the company. Nomura set a buy rating and $80.30 target price for the company.

Moreover, Nomura set a buy rating and $80.30 target price for the company. Bank of America boosted their price objective to $70 from $59 and gave the stock a buy rating.

Analyst Comments

“Solid 1Q volume guidance suggests the good trajectory of sales recovery post CNY, corroborating superior market recognition of NIO’s models and brand. The strong balance sheet can finance more aggressive channel expansion and technology investment. Tight component supply will likely cap 2Q sales upside,” said Tim Hsiao, equity analyst at Morgan Stanley.

“We expect higher long-term growth visibility from the software development BaaS initiative. Tesla’s success in China has also attracted fund flows for EV makers, which we think bodes well for NIO’s long-term R&D investment capability and growth potential. Proven scale benefits with continuous gross margin improvement.”

Upside and Downside Risks

Risks to Upside: 1) Progress in planned A-share listing. 2) Stronger-than-expected sales volume. 3) Better-than-expected improvements in operating efficiency- highlighted by Morgan Stanley.

Risks to Downside: 1) Weaker-than-expected sales volume. 2) Lack of signs of efficiency improvement. 3) Lower-than-expected NOP option take rate.

Check out FX Empire’s earnings calendar

Wall Street Dips as Apple, Tesla Lead Fresh Round of Sector Rotation Selling

The major U.S. stock indexes settled lower on Tuesday, pressured by popular technology issues, Apple and Tesla. Losses were softened, however, by a climb in materials stocks as investors waited for the U.S. Congress to approve another stimulus package. Losses may have also been limited by Treasury yields, which stabilized after hitting a one-year high last Thursday.

In the cash market on Tuesday, the benchmark S&P 500 Index settled at 3870.29, down 31.53 or -0.81%. The blue chip Dow Jones Industrial Average finished at 31391.52, down 143.99, or -0.46% and the technology-driven NASDAQ Composite closed at 13358.79, down 230.04 or -1.69%.

Still Up for the Week Led by Vaccination Optimism, Stimulus Progress

The S&P 500 on Monday logged its best day since June as markets cheered approval of a third COVID-19 vaccine in the United States and the U.S. House of Representatives’ green light for a $1.9 trillion coronavirus relief package.

The U.S. Senate will start debating President Joe Biden’s relief bill this week when Democrats aim to pass the legislation through a maneuver known as “reconciliation,” which would allow the bill to pass with a simple majority.

Sector Rotation Resumes

Following strong gains in the prior session, technology shares dipped in the resumption of a rotation by investors out of stocks that outperformed due to the coronavirus pandemic and into others viewed as likely to do well as the economy recovers, Reuters reported.

The S&P 500 technology sector dropped, extending a pullback from late last month after a selloff in the U.S. bond market sparked fears over highly valued stocks. These losses were offset a little as S&P 500 Materials and Consumer Staples Sector Indexes rose.

Individual Gains and Losses Spread Around

The biggest influences on the overall stock market performance were shares of Apple and Tesla. Apple is a component of the Dow, S&P 500 and NASDAQ, while Tesla is a constituent of the NASDAQ Composite and the S&P 500 Index. Shares of both companies declined on Tuesday.

In the Retail Sector, Kohl’s Corp rose after it posted holiday-quarter results beyond market expectations on a boost in online sales and as the company reigned in costs. Retailer Target also exceeded Wall Street’s expectations for the fourth quarter, thanks to a strong holiday season and stimulus checks.

Zoom Video Communication was a favorite on Wall Street after the company forecast current-quarter revenue above estimates, as it expects millions of people to continue using its video-conferencing platform.

TV ratings provider Nielsen also gained after it sold its advanced video advertising business, which includes automatic content recognition and dynamic ad insertion technologies, to television streaming platform provider Roku.

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

European Equities: Service PMIs from the Eurozone and the U.S in Focus

Economic Calendar:

Wednesday, 3rd March

Spanish Services PMI (Feb)

Italian Services PMI (Feb)

French Services PMI (Feb) Final

German Services PMI (Feb) Final

Eurozone Markit Composite PMI (Feb) Final

Eurozone Services PMI (Feb) Final

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was a relatively bullish day for the European majors on Tuesday.  The EuroStoxx600 and DAX30 both rose by 0.19% respectively, with the CAC40 ending the day up by 0.29%.

Disappointing economic data from the Eurozone failed to peg back the European majors that had kicked off the day in the red.

An easing in government bond yields continued to deliver support, with no major stats from the U.S to rock the boat.

Optimism of a speedy economic recovery remained the key driver, with economies supported by both fiscal and monetary policy and vaccination rollouts.

The Stats

It was a relatively busy day on the economic calendar on Tuesday. Retail sales and unemployment figures from Germany were in focus early in the session.

Later in the morning, prelim February inflation figures for the Eurozone also drew interest.

German Retail Sales and Unemployment

Month-on-month, retail sales fell by 4.5% in January, following an upwardly revised 9.1% slide in December. Economists had forecast a more modest 0.3% decline.

According to Destatis,

  • Year-on-year, retail sales was down by 8.7% in January. In December, retail sales had risen by 2.8%.
  • Compared with Feb-2020, the month prior to the COVID-19 outbreak, turnover was 5.8% lower.

In February, unemployment rose by 9k, partially reversing a 37k fall in January. In spite of the rise, the unemployment rate held steady at 6.0%.

Economists had forecast a 13k fall in unemployment and for the unemployment rate to hold steady at 6.0%.

Eurozone Inflation

The annual core rate of inflation softened from 1.4% to 1.1% in February, according to prelim figures. Economists had forecast for inflation to hold at 1.4%.

The annual rate of inflation held steady at 0.9%, however, which was in line with forecasts.

According to Eurostat,

  • Food, alcohol & tobacco is expected to have the highest annual rate (1.4% compared with 1.5% in January).
  • Services is forecasted to have an annual rate of 1.2% compared with 1.4% in January.
  • Non-energy industrial goods are expected to see its annual rate soften from 1.5% to 1.0%.
  • Energy remained a drag, with an expected annual rate of -1.7% compared with -4.2% in January.

From the U.S

There were no material stats to provide the European majors with direction later in the day.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Tuesday. Daimler rallied by 2.34%, with BMW and Volkswagen seeing gains of 0.29% and 0.76% respectively. Continental saw red once more, however, falling by 0.89%.

It was also a mixed day for the banks. Deutsche Bank ended the day flat, while Commerzbank rose by a modest 0.33%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole rose by 2.68% and by 1.66% respectively, while Soc Gen fell by 0.24%.

It was another bearish day for the French auto sector. Stellantis NV and Renault ended the day with losses of 0.06% and 0.57% respectively.

Air France-KLM fell by 0.96%, with Airbus SE ending the day down by 1.57%.

On the VIX Index

It was back into the green, following 2nd consecutive day in the red, for the VIX on Tuesday. Partially reversing a 16.46% slide from Monday, the VIX rose by 3.21% to end the day at 24.10.

The NASDAQ slid by 1.69%, with the Dow and S&P500 falling by 0.46% and by 0.81% respectively.

VIX 03321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include Italian and Spanish service PMI figures for February.

Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring marked revisions to prelim figures, Italy and the Eurozone’s PMIs will have the greatest impact on the majors.

Expect the stats to draw plenty of interest early in the European session.

From the U.S, the market’s preferred ISM Non-Manufacturing PMI and ADP nonfarm employment change figures will also provide direction later in the day.

Ahead of the European open, service and composite PMI numbers from China will set the tone.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 34 points.

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

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Trader Reaction to 31450 Sets the Tone

March E-mini Dow Jones Industrial Average futures are trading lower at the mid-session on Tuesday after failing to follow-through to the upside following yesterday’s strong performance. Helping to hold prices in a tight range are concerns over the impact of the surge in bond yields. Investors are also eyeing the progress toward the passing of President Joe Biden’s coronavirus relief bill.

At 17:47 GMT, March E-mini Dow Jones Industrial Average futures are at 31453, down 56 or -0.18%.

Daily March E-mini Dow Jones Industrial Average

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 32033 will change the main trend to up. A move through 30866 will signal a resumption of the downtrend.

The minor range is 32033 to 30866. The Dow is currently testing its retracement zone at 31450 to 31587. Trend trading sellers are coming in to stop the rally in an effort to form a potentially bearish secondary lower top. Aggressive buyers are trying to drive the market through 31587 in an effort to challenge the record high at 32033.

The inside trading range suggests investor indecision and impending volatility.

On the downside, the first support is a 50% level at 30793. This is followed by a retracement zone at 30676 to 30355.

Daily Swing Chart Technical Forecast

The direction of the March E-mini Dow Jones Industrial Average into the close on Tuesday will be determined by trader reaction to 31450 and 31587.

Bullish Scenario

Overtaking 31450 will be the first sign of strength, while a sustained move over 31587 will indicate the buying is getting stronger. This could create the upside momentum needed to challenge the record high at 32033.

Bearish Scenario

A sustained move under 31450 will signal the presence of sellers. If this move generates enough downside momentum then look for a test of last week’s low at 30866, followed by a pair of 50% levels at 30793 and 30676.

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

AutoZone Tops Q2 Earnings Estimates; Stock Has Over 15% Upside Potential

Memphis, Tennessee-based auto parts retailer AutoZone reported better-than-expected earnings in the second quarter, largely driven by government stimulus and recovery in consumer demand from the COVID-19 pandemic slump, sending its shares up over 1% on Tuesday.

The United States’ leading retailer and a leading distributor of automotive replacement parts and accessories reported quarterly adjusted earnings of $14.93​​ per share for the quarter ended in February, beating Wall Street consensus estimates of $13.07 per share.

The auto parts retailer’s revenue surged more than 15% to $2.91 billion from a year ago​, higher than the market expectations of $2.76 billion.

Following this upbeat result, AutoZone shares rose 1.35% to $1185.17 on Tuesday.

AutoZone’ (AZO) comps were 15.2%, significantly better than consensus of 8.2% and our upwardly revised estimate of 10%. This was better than both O’Reilly’s and Advance Auto Part’s most recent quarterly comps of 11.2% and 4.7%. This makes sense as AZO’s quarter ended in mid-February, and thus included what we think was a very strong month of January for the industry as a whole,” noted Michael Baker, senior research analyst at D.A. Davidson.

“The others had quarter ends at the end of December and will thus see this benefit next quarter. Nonetheless, AZO’s beat should be viewed positively relative to estimates, and we maintain our BUY rating.”

AutoZone Stock Price Forecast

Seven analysts who offered stock ratings for AutoZone in the last three months forecast the average price in 12 months of $1,370.00 with a high forecast of $1,565.00 and a low forecast of $1,206.00.

The average price target represents a 16.10% increase from the last price of $1,180.06. From those seven analysts, six rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,505 with a high of $1,980 under a bull scenario and $1,000 under the worst-case scenario. The firm gave an “Overweight” rating on the leading auto parts retailer’s stock.

“Top- and bottom-line growth is still near record highs but decelerating (as expected). Strong FQ2 results in absolute terms but enough to pick at (weak GM) to leave the sector’s debate unresolved. We like AutoZone (AZO) as an inexpensive LT compounder but the stock could remain stuck in neutral in the NT,” said Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $1,455 from $1,325. Credit Suisse upped the target price to $1,437 from $1300. RBC increased the price objective to $1269 from $1190.

Moreover, Goldman Sachs lowered the target price to $1206 from $1265. Stephens cut the target price to $1,350 from $1,420. D.A. Davidson slashed the target price to $1,355 from $1,400.

Analyst Comments

AutoZone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (80% of sales),” Morgan Stanley’s Gutman added.

“In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term.”

Upside and Downside Risks

Risks to Upside: Longer than expected industry shift towards DIY; share gains in both DIY and DIFM segments. A shift to DIY insulates gross margin headwinds. Tapering of investments/higher expense growth- highlighted by Morgan Stanley.

Risks to Downside: Less than expected share gain amid a recession. Greater than expected margin pressure due to rising expenses and ongoing investments. Increasing e-commerce penetration in the DIY market.

Check out FX Empire’s earnings calendar

S&P 500 Price Forecast – Stock Markets Pull Back Slightly

The S&P 500 has pulled back a bit during the course of the trading session on Tuesday to give back some of the gains on Monday. The market is still very much in a bullish trend, and of course we have a major uptrend line underneath, and therefore it is likely that we will see buyers jump in somewhere near that area. Furthermore, we have the 50 day EMA supporting that uptrend line as well. All things being equal, we could then go to the highs again, perhaps looking towards the 4000 level above, which has been my longer-term target for some time. I think that there are enough people out there looking to pick up value and paying attention to the big figure that we will eventually have to visit that level.

S&P 500 Video 03.03.21

When you look at the previous consolidation, as I have mentioned in the past was between the 3200 level and the 3600 level, it measures for a 400 point move higher, suggesting that we were going to go to the 4000 level. All things been equal, this is a market that I think will continue to attract traders on dips, but quite frankly there are a lot of concerns when it comes to higher value, and therefore I think we will continue to see a lot of choppiness, but longer-term traders are going to continue to see every dip as a buying opportunity. The 3800 level underneath could be support as well, and of course the uptrend line just underneath there also.

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

E-mini S&P 500 Index (ES) Futures Technical Analysis – Trader Reaction to 3872.00 Sets Tone into Close

March E-mini S&P 500 Index futures are edging lower at the mid-session on Tuesday after posting solid gains the previous session. Helping to put a drag on prices were concerns over relatively high bond yields as well as worries over the progress on the next round of fiscal stimulus negotiations.

The technology sector weighed the most on the benchmark S&P 500 Index. Healthcare, materials and energy stocks extended gains from the previous session.

At 16:36 GMT, March E-mini S&P 500 Index futures are trading 3884.00, down 14.75 or -0.38%.

The U.S. bond market has stabilized since a selloff sent the benchmark 10-year Treasury yield to a one-year high last week, but continue to remain elevated, sparking fears over high valuations in the stock market and emerging as a competitive alternative to equities.

Daily March E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. Tuesday’s inside trading range suggests investor indecision and impending volatility.

A trade through 3934.50 will change the main trend to up. A move through 3785.00 will signal a resumption of the downtrend.

The minor range is 3959.25 to 3785.00. The market is currently trading on the strong side of its 50% level at 3872.00.

The short-term range is 3656.50 to 3959.25. Its 50% level at 3807.75 is potential support. This is followed by an additional 50% level at 3779.00.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the March E-mini S&P 500 Index will be determined by trader reaction to 3872.00.

Bullish Scenario

A sustained move over 3872.00 will indicate the presence of buyers. Turning higher for the session will indicate the buying is getting stronger with the next target the main top at 3934.50. Taking out this level will change the main trend to up with 3959.25 the next likely upside target.

Bearish Scenario

A sustained move under 3872.00 will signal the presence of sellers. The first downside target is a pivot at 3848.50, followed by a 50% level at 3807.75, a minor bottom at 3785.00 and another 50% level at 3779.00.

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

Why NIO Stock Is Down By 8% Today?

NIO Video 02.03.21.

NIO Missed Analyst Estimates

Shares of NIO found themselves under significant pressure after the company released its fourth-quarter report.

NIO reported revenue of $1 billion and GAAP loss of $0.16 per share, missing analyst estimates on both earnings and revenue. The company stated that it delivered 17,353 vehicles in the fourth quarter. For the full year, deliveries of vehicles were 43,728 compared to 20,565 vehicles in 2019.

NIO added that it had already delivered 12,803 vehicles in the first two months of this year and expected that first-quarter deliveries would be between 20,000 and 20,500 vehicles. The company also expects that its revenue will grow to $1.1 billion in the first quarter.

Traders did not like the report and sold NIO shares which are down by about 8% in today’s trading session. The company missed analyst estimates while its delivery guidance was not aggressive enough for the market.

What’s Next For NIO?

It should be noted that NIO shares gained more than 1000% in just one year so the market expected strong results from the company. Currently, investors are willing to bet on almost any company that is focused on electric vehicles. As a result, such stocks followed Tesla‘s lead and gained strong upside momentum in 2020.

This year, investors will likely pay more attention to financial results, but it remains to be seen whether disappointing earnings reports will be able to put any long-term pressure on shares of electric vehicle companies like NIO.

Such companies often miss expectations on profits or deliveries, but the market is often ready to turn a blind eye to temporary problems. While NIO’s earnings report was not as strong as analysts expected, the company continues to grow at a healthy pace. In this light, its stock may soon find enough support from speculative traders and investors who are ready to establish positions in EV-related stocks after a pullback.

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

Stocks Pull Back After Yesterday’s Rally

Stocks Take A Pause After Yesterday’s Upside Move

S&P 500 futures are losing some ground in premarket trading as traders wait for additional catalysts after yesterday’s strong session.

The market remains optimistic about the next round of stimulus as Democrats are ready to abandon their plans on minimum wage in order to ensure that the stimulus package is passed in the upcoming days.

The recent increase in U.S. Treasury yields put some pressure on stocks, especially in the tech space. However, Big Tech stocks like Microsoft or Apple have managed to quickly recover from sell-off and gained strong momentum on Monday.

Interestingly, Treasury yields continue to move higher but traders look ready to ignore the risk of higher inflation as they stay focused on dovish Fed and the upcoming stimulus package.

Oil Gains Ground As Traders Prepare For OPEC+ Meeting

OPEC+ will meet on March 4 to discuss the current situation in the oil market. Oil got significant support from Saudi Arabia’s decision to cut production by 1 million barrels per day (bpd) in February and March, but now OPEC+ will have to find a way to get to higher production levels.

OPEC+ members will likely try to increase their output in April as they want to profit from the recent upside move in the oil market. At the same time, it remains to be seen whether the market is strong enough to deal with 1 million bpd of returning supply from Saudi Arabia and additional supply from other OPEC+ members.

At this point, traders remain optimistic, and WTI oil gets significant support near the psychologically important $60 level which is bullish for oil-related equities.

U.S. Dollar Continues To Move Higher

Rising yields provided material suport to the American currency, and the U.S. dollar is moving higher for the fourth trading session in a row. The market’s mood was bearish at the beginning of this year, but the U.S. dollar managed to gain ground in the first two months of 2021.

Stronger dollar and higher yields continue to put pressure on gold and silver. Gold has recently managed to settle below $1750 and made an attempt to get to the test of the $1700 level, so shares of gold miners may face additional pressure at the start of today’s trading session.

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

Zoom Trading Sharply Higher After Blowout Quarter

Zoom Video Communications Inc. (ZM) is trading higher by more than 8% in Tuesday’s pre-market after reporting blowout Q4 2021 top and bottom line results. The company posted a profit of $1.22 per-share in the quarter ending on Jan. 31, much better than $0.79 estimates, while revenue surged 368.8% year-over-year to $882.49 million, beating $810.97 million expectations.  Gross margin rose to 69.7% from 66.7% as a result of a seasonal decline in audio usage.

Managing Post-COVID Growth

The video conference software provider sharply raised Q1 and FY2022 EPS and revenue guidance but still expects high churn rates through the year, with many customers getting vaccinated and leaving their homes, returning a sense of normalcy. Zoom had 467,100 customers with more than 10 employees at the end of the fourth quarter, up 470% on an annualized basis, and heads into the new reporting year with $4.24 billion in cash and equivalents.

Zoom Phone could replace lost meeting income in coming quarters. As Stifel analyst Tom Roderick notes: “While the market for IP-based PBX equipment is a competitive one, Zoom has made remarkable strides in short order with Zoom Phone. Looking ahead, we expect Zoom to focus on expanding its relationship with current video customers gained from the pandemic and driving up-sell opportunities through the company’s growing product suite. After experiencing unprecedented customer growth last quarter of 485% among customers with 10+ employees, we are reminded of the powerful addressable opportunity in the enterprise for Zoom.”

Wall Street and Technical Outlook

Wall Street consensus had grown more cautious on the company’s long-term outlook prior to the earnings release, with an ‘Overweight’ rating based upon 13 ‘Buy’, 2 ‘Overweight’, 15 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $340 to a Street-high $610 while the stock is set to open Tuesday’s session about $5 below the median $450 target. This mid-range placement could support a rapid advance toward the $500 level.

Zoom broke out above the 2019 high at 107.34 in February 2020 and entered a powerful trend advance that posted an all-time high at 588.84 in October, A pullback accelerated in November after positive vaccine news triggered a rotation out of COVID-19 beneficiaries. The decline reversed at the 200-day EMA in January, yielding a bounce, followed by a successful support test last week. This bullish price action completes a double bottom that should signal the end of the five-month correction.

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

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strengthens Over 13281.50, Weakens Under 13195.75

The March E-mini NASDAQ-100 futures contract is trading slightly lower during the pre-market session on Tuesday after an attempt to follow-through to the upside early in the session failed to attract any sizable buying.

The tech-weighted index began the month on Monday with a price jump of more than 3% after losing 4.9% last week. Investors said a pause in the rise of Treasury yields allowed high-growth tech names to recoup a sizable portion of their recent losses.

At 11:47 GMT, March E-mini NASDAQ-100 Index futures are trading 13233.25, down 46.50 or -0.35%.

On Tuesday, traders are expected to get their cues from the Treasury market, which has become the focal point since last week’s meltdown in bond prices. Yields are currently trading below last week’s high of about 1.6%, helping to stabilize the NASDAQ-100. Some investors anticipate another steep sell-off if yields rise above last week’s high.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside when Friday’s closing price reversal top was confirmed during yesterday’s session.

A trade through 12662.25 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a move through 13900.50.

The minor trend is down. A trade through 13353.75 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, support is a 50% level at 13195.75 and a 61.8% level at 13029.50.

The short-term range is 13900.50 to 12662.25. Its retracement zone at 13281.50 to 13427.50 is resistance. This zone stopped the rally on Monday and earlier today. Trader reaction to this area will determine the short-term direction of the index.

Since the main trend is down, sellers are going to come in at 13281.50 to 13427.50. Aggressive counter-trend buyers are going to try to trigger a breakout over this zone.

Daily Swing Chart Technical Forecast

The direction of the March E-mini NASDAQ-100 Index is likely to be determined by trader reaction to a pair of 50% levels at 13281.50 and 13195.75.

Bullish Scenario

A sustained move over 13281.50 will indicate the presence of buyers. This could trigger a surge into 13353.75, followed by 13427.50. The latter is a potential trigger point for an acceleration to the upside with 13729.00 the next potential upside target.

Bearish Scenario

A sustained move under 13195.75 will signal the presence of sellers. This could trigger an acceleration to the downside with 13029.50 the first target. This is a potential trigger point for an acceleration to the downside.

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