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Morning Research Notes - 26.07.24
Tech stocks fluctuated overnight amid alphabet’s slump and IBM’s rise as GDP surpassed expectations. Brent (oil) traded 0.7% higher, with the current price per barrel sitting at $82.30. Spot gold fell by 1.7%, with the current price per ounce standing at $2358.00. Volatility, as measured by the VIX index, decreased by 1.3% to $14.72.
On Thursday, the S&P500 closed lower, impacted by Alphabet’s 3% fall, which slowed the tech rebound despite hopes for multiple Federal Reserve rate cuts this year. However, IBM and ServiceNow saw rises of over 4% and 13% respectively, with IBM highlighting growth in its AI business and ServiceNow reporting strong quarterly results. Meanwhile, Tesla recovered slightly after a significant slump. U.S. GDP grew by 2.8% in Q2, surpassing forecasts, but inflation slowed, fueling expectations of rate cuts. Durable goods orders fell by 6.6% in June. In earnings news, American Airlines rose despite cutting its profit forecast, Hasbro saw a smaller-than-expected Q2 drop, and Ford’s shares fell after disappointing earnings. Lastly, Lineage Inc made a successful Nasdaq debut, closing above its opening price.
On Thursday, the Australian Securities Exchange (ASX 200) experienced a downturn, falling by 1.30%. This decline was reflected across various sectors, with Utilities dropping by 1.45%, Financials by 0.79%, Info-Tech by 2.68%, Health Care by 1.37%, and the Materials sector by 1.57%. In the commodity market, the performance was largely neutral. Among the winners, Zinc saw a gain of 0.55% and Iron Ore increased by 1%. On the other hand, Copper and Nickel experienced declines of 0.38% and 0.73% respectively, while Aluminium remained steady with a negligible change of -1%.
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In other news, ASX to rise, Wall St’s rally proves fleeting, MinRes on track to meet production guidance, and Dexcom plummets 40pc after cutting full-year sales forecast. (Source: AFR)
Chart of the day
Over the weekend, we observed the weekly charts of the Economic Modern Family, which includes the original members (Russell 2000 (IWM), Retail XRT, Transportation IYT, Regional Banks KRE, Biotechnology IBB, and Semiconductors SMH), all of which gained. Our newest member, Bitcoin, and NASDAQ also saw gains, with QQQ gaining the most percentage-wise, indicating a healthy start to the week for the family.
Now, turning our attention to the long bonds TLT, amidst mixed economic signals, an upcoming FOMC, earnings on tap, and the full swing of the election cycle, TLT is a key element to watch. SPY maintains its lead over TLT, a positive sign for the overall market and indicative of a risk-on sentiment. In terms of price, TLT failed to pierce the July 6-month calendar range high but sits above the 50-DMA after a golden cross last week, placing it in a bullish phase. On Real Motion, the red dots align with the 50-DMA, suggesting that the momentum is in line with the price.
Thus, TLT is holding up as rates have peaked, but we have yet to see real evidence of rates coming down, which is acceptable as long as the economy remains stable. However, should TLT clear July highs, we could see a potential shift in the landscape with fears of recession starting to emerge.
Source: Investing.com
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