FAAMG financial report intensively announced, focusing on Fed FOMC
This week's US stock market outlook (July 26-July 30)
[Financial Report Summary] As of Friday, 24% of the S&P 500 constituent stocks have announced 21Q2 results. Overall profit increased by +74.2% year-on-year, and revenue increased by +20.9% year-on-year, the fastest growth rate since the 2008 financial crisis, and performance was better than market expectations. The next week is the peak period of earnings, as many as 180 constituent stocks will disclose their performance. Including the five largest technology giants AAPL, MSFT, AMZN, GOOGL, FB, and TSLA, industrial giants CAT, LMT, BA, MMM, GE, energy giants CVX and XOM, consumer MCD, PG, etc. The results of the financial report will not only directly affect the stock prices of various companies, but also directly affect the revaluation of the industry and the trend of the market in the summer.
[Macroeconomics] The Fed will hold the last interest rate meeting before the summer vacation this week, and the market generally expects that interest rates will remain unchanged this time. However, whether the Fed has begun to discuss reducing the scale of asset purchases, as well as the expectations of soaring inflation, is still the focus of global capital markets. In addition, the United States will face the debt ceiling again at the end of this month. Whether Congress can reach a final agreement this week is also the focus of the market’s attention.
[Market performance] The stock index opened sharply lower on Monday and once caused market panic. After that, it rebounded strongly for four consecutive trading days. On Friday, the S&P and Nasdaq set new record highs again. Leading technology stocks FB, MSFT, and GOOGL led the gains strongly, while leading consumer companies such as MCD, PG, SBUX, and NKE all hit new highs. Large-scale medical leading stocks performed steadily. The above-mentioned varieties are the main force supporting the broader market. The energy sector pulled back for the fourth consecutive week, and the overall performance of basic materials and banking stocks that had already announced their results was poor. These varieties are the main force dragging down the broader market.
After a week of highs and retreat, the short-term oversold status of each stock index has been corrected, and the market depth indicator has returned to normal. However, after experiencing continuous lows and rapid rebounds, the current stock index has entered the overbought area in the short term and may face a rest at any time. Although the stock index once again set a record high, S&P still has as many as +47% of the component stock prices below the mid-term moving average. The number of stocks on the two major exchanges this week hit a 52-week high this week, instead of increasing month-on-month. At present, market funds are mainly concentrated in a few leading stocks in the industry. The next week's financial report will directly affect the direction of these stocks and stock indexes.
[Technical trend] The stock index rose and fell last week, causing market panic. However, the previous weekly report reminded everyone that the stock index has not fallen below the rising channel formed since November last year. Regardless of short-term, medium-term or long-term, S&P is still in an upward trend. On Monday, the S&P dropped to 4233 at the lowest point. After a short break below the mid-term moving average, it was quickly pulled back. The mid-term support of the 4250 area is still valid. At present, SMA50 has moved up to the 4260 area, and the market outlook is still focusing on this area. As long as the stock index does not fall below this position, the mid- to long-term upward trend of the market will remain intact. After the stock index broke through the previous platform high of 4393 on Friday, the target points to the upper edge of the trend channel. The short-term first resistance area is near 4435, and the mid-term target is moved to the 4572 area. There are still the last 5 trading days this month. S&P is currently up +2.66% for the entire month. If nothing goes wrong, SPX's closing of the positive line this month is basically a foregone conclusion, and the market is expected to achieve the sixth consecutive month of rise in the line.
The Nasdaq fell to 14178 points on Monday and rebounded quickly, which was almost exactly the lower edge of the support area suggested by the previous weekly report at 14200, which was also the upper edge of the previous five-month period of consolidation. At present, it can be basically confirmed that the stock index's previous breakthroughs are effective, and the 14800-14200 area will become the key support area for the Nasdaq's mid- to long-term upward movement. This week, whether the stock index can quickly get rid of the region with the help of the financial reports of leading technology stocks will become the weather vane of the summer market, which requires special attention.
The Dow has not broken through the previous high of 35100 area for the whole week. This week, a large number of blue-chip leading stocks will announce financial reports, especially whether the consumer and industrial sectors can drive the index to break through the consolidation range of the past three months. The small and medium-cap index Russell 2000 has been underperforming, and it is still fluctuating in the second half of the consolidation range in the past six months. It needs to quickly keep up with other stock indexes.
[Operation strategy] To sum up, as the end of the month approaches, a number of major macro-political and economic events are superimposed on a large number of leading stocks’ financial reports, and the market is at an important selection juncture. The stocks of the most heavily weighted technology and consumer leading stocks have risen sharply before the financial report. Whether actual profit growth can keep up with the stock price increase and whether the Fed will enter the tightening cycle ahead of schedule needs to be paid attention to by investors. Before the fundamental situation is clear, investors holding positions still focus on individual stock risk management, and beware of stock prices rising and falling after the results are announced. Investors who have not yet entered the market should also be patient and wait for the news to become clear.
