US index futures managed to rally after Apple bucked the trend of weak tech results, while the Dow was supported by results from Exxon. As a result, the Dow opened higher while the S&P and Nasdaq recovered ground to open almost unchanged. That said, it has been a week of mostly disappointing results from US tech giants, putting significant pressure on the Nasdaq. Following Thursday’s sell-off, Nasdaq futures fell further on the Amazon result, before bouncing sharply. But there is a good chance that the tech-heavy index will drop again as we head towards the end of the week. This is especially the case in light of the drop in Chinese stocks, the rally in US bond yields, and of course not to mention the fact that sentiment towards US equities remains largely negative due to those bad results.
In fact, the cracks have started to reappear in the stock markets this week, after the recent recovery. Concerns about stagflation, China’s failing economy and more rate hikes, as well as disappointing US tech gains, are among the reasons keeping stock market bulls at bay. The technology sector remains a particular area of concern with Amazon shares falling after its earnings results disappointed. The parent of Facebook, Meta, crashed sharply the day before. Microsoft, Alphabet and Texas Instruments were among the other big losers, although Apple appears to have bucked the trend with its shares rising pre-market.
Amazon couldn’t resist low US tech profits.
Here’s a rundown of the big wins, by my colleague Joshua Warner:
- Amazon shares fell 13% in late hours today after third-quarter results were released yesterday, after it was revealed that sales and earnings missed expectations and its outlook for the holiday shopping season was disappointing. Sales were boosted by easier comparisons and the shift from Prime Day to the quarter, while operating profit was nearly halved to $2.5 billion and nowhere near the $3.1 billion forecast as it continues to grapple. with rising costs. It said it is targeting sales of $140 billion to $148 billion in the fourth quarter and operating income of between $0 and $4 billion, disappointing Wall Street which had expected sales of more than $155 billion and $4 .7 billion profit. Analysts warned that this means Amazon will achieve its slowest holiday sales growth on record and that costs have now risen at a faster rate than revenue for five straight quarters.
- It seems that Apple has escaped broader tech rout after reporting results last night, with shares trading marginally higher in premarket trading today while peers have lost significant ground after reporting results this week . The company’s revenue hit a new record and earnings exceeded expectations. iPhone sales hit the mark following the launch of the new iPhone 14 and also delivered strong growth in China despite the country’s economic woes. The supply issues seem largely resolved, even if some products, such as certain watch models, are still affected. However, the concern now is demand as we head into the golden district of sales over the holiday season. Still, Apple appears to have proven more resilient by continuing to boost sales and profits at a time when most of its peers are struggling.
Disappointing tech gains from Amazon and Facebook parent Meta Platforms added to those we saw earlier in the week from Alphabet, Microsoft and Texas Instruments. Meta lost up to a quarter of its value following its results, prompting several investment banks to downgrade the stock.
Sentiment in the sector is understandably negative. Coupled with last week’s figures from Alphabet, social media companies are clearly having a much tougher time amid lower demand for advertising. This is a reflection of a world economy in crisis, seriously affected by the increase in price levels throughout the world, both for companies and individuals. It is a problem for many companies around the world, something that will undoubtedly be repeated by most other companies that are prepared to produce their results.
Nasdaq breaks bearish flag
Following the tech results, the Nasdaq has broken out of its bearish flag pattern, which is a bearish continuation pattern. This could result in further technical selling as long as the index does not retrace and holds above the key resistance at 11370.
Key support around the 10890 to 11036 area has held firm for now. However, if the index breaks below here, it is probably game over for the bulls.
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