Notifications Bell

The earnings season for US companies beat the analysts’ forecasts

The earnings season for US companies beat the analysts’ forecasts

Yesterday, Tesla published a quarterly revenue of $16.93 bln and an EPS of $2.27, well above the $16.52 bln revenue and $1.82 earnings per share expected by the market

The stock was up 3% after the session closed.

Despite the promising results, gloomy expectations haunt the market for a significant decline in corporate earnings amid a sharp slowdown, and falling demand is slowly fading.

However, Wall Street indices had another day of gains, of 1.55% in the case of the technological Nasdaq. More significant is that technically, they are beginning to give very positive signals, surpassing technical reference levels.

Nasdaq has already broken above the 12.233 level, which is the 0.618% Fibonacci retracement of the bearish leg that started in early June. It is now heading towards the 12,947 area, the previous high that marked the point above which the bear market started earlier this year would technically end.

Gráfico, Gráfico de líneasDescripción generada automáticamente

Now, all this movement contributes to better investor risk sentiment. On the one hand, inflation expectations have fallen sharply; as figures from the University of Michigan showed last week, commodity prices have dropped, in some cases, to pre-crisis levels. Also, interest rate hikes of the Fed are already touted in the market with a certain possibility that interest rates as high as anticipated will not be necessary.

But today, all attention will be on the European Central Bank meeting. The European indices fell yesterday in anticipation of this event. Unlike the Federal Reserve, the ECB faces a more complicated situation. Without changing interest rates yet, the ECB is under pressure to abandon an excessively accommodative monetary policy, zero interest rates, with the highest inflation in recent decades. The Euro threatened to lose parity with the US Dollar and drop to historic lows.

The ECB needs firm action to calm the markets; a 25-bps hike is probably not enough. But to start with 50-bps hikes, it must first convince the markets with specific measures to prevent peripheral country bonds from suffering. Investors sell them strongly, and the spread between their yields and the German bond (which is taken as a reference) is widened above what is usual.

If this were to happen, it would be seen as a European debt crisis, and the Euro would again be under high pressure.

Everything is in the hands of the ECB at its meeting today. Proper communication to the market and firm decisions that inspire confidence will be the key to avoiding turmoil in the market.

Sources: Bloomberg, Reuters

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors