Will U.S. stocks turn around again?
The three major stock indexes have experienced a week of consecutive gains, but they seem to come to an abrupt end on Friday. Next week will usher in the financial reports of the five major FAAMG giants, and a very volatile trading week is coming.
The importance of FAAMG is naturally self-evident. These five giants have led the rise of US stocks in the past and have always been an important driving force for the rise of US stocks, accounting for close to 40% of the weight of QQQ. Once turmoil occurs, it will inevitably trigger a new round of selling.
Let's review the trend of next Friday. The first four days are basically speculating on financial reports. Institutions are pulling up without thinking. I won't talk about the trend here. Let's take a look at what happened on Friday. On Friday, the Dow hit a record high. The S&P closed down slightly by 0.1%, while the Nasdaq fell by 0.82%. The three major stock indexes showed significant differentiation.
Let's take a look at the technical patterns of the three major stock indexes. The S&P opened higher and lowered, then pulled up again at the end, and finally formed a very obvious negative cross. The doji is a state of long-short balance, but after 7 consecutive positive lines, followed by a negative doji, it has to be suspected that this is a peaking doji.
The Nasdaq was the most volatile. The Nasdaq closed down 1.26% during the intraday session, and finally closed down 0.82%. There was a clear increase in volume. The previous 15200 was an obvious resistance level. Next week, unless FAAMG's financial report far exceeds expectations, the probability of breaking through is not high. . Although there was a pull up late Friday, the Nasdaq fell below the 5-day moving average.
The Dow once again set a new historical high. It seems that there is still momentum to continue to rise in the short term. However, for 8 consecutive Yang lines, short-term technical indicators have been seriously overbought. Even if they can continue to rise, there is a high probability that there will be a healthy callback. It makes more sense.
An important reason for the differentiation of the three major stock indexes and such large fluctuations is that SNAP, as a weather vane for digital advertising in the United States, SNAP’s financial report thunder has directly destroyed players on Facebook, Google, Twitter, TTD, PINS and other advertising tracks. Because Amazon also has a digital advertising business, it has also received a lot of impact.
SNAP’s third-quarter financial report was not bad. DAU growth exceeded market expectations, but revenue was US$30 million away from expectations. The guidance for the next quarter was US$200 million away from expectations. The downward revision of future performance guidance is obviously a sharp drop. the real reason.
SNAP gave two reasons for lowering its fourth-quarter performance guidance: First, the change in iOS privacy policy has caused a considerable impact, and this problem cannot be resolved in a short period of time. Second, the supply chain crisis has triggered changes in supply and demand, and advertisers are reducing digital advertising expenditures.
I won’t say much about the first reason. It does not have universal representative significance. It only affects some companies with similar business models. The second reason is the supply chain crisis. The rough meaning is this: the current commodity market is severely in short supply, and because of the surge in demand due to the holiday shopping season, merchants simply don’t have enough goods to sell, so there is no need to advertise at all.
This is actually an uncommon perception, but it seems reasonable. We know that in the fourth quarter of each year, the United States will usher in the annual holiday shopping season. This is when the digital advertising circuit is showing its strength. After all, in order to compete for a higher market share, businesses must advertise a lot in order to reach more consumers.
But this year suddenly no longer needed. In the automotive industry, traditional automakers such as General Motors, Ford, and Volkswagen have reduced their production by more than 10 million vehicles due to chip shortages. However, market demand has surged because of "an unprecedented release by the Federal Reserve."
On the one hand, the car is not enough to sell, on the other hand, consumer demand is bursting. The final result is that the retail price of the car has skyrocketed. In this context, do companies still need to advertise so much? I think the answer must be no.
Another company that has had a huge impact on the broader market is INTC. This company delivered a relatively pessimistic financial report, and its stock price plummeted by more than 10%. However, INTC announced the news that it is preparing to build a factory in Italy, which has also driven the rise of AMAT, LRCX, ASML and other companies. The disadvantage of INTC is often the good of AMD and NVDA, so the overall performance of the chip sector is good.
However, the two major signals revealed by the INTC financial report have to arouse our vigilance. INTC gave two reasons why the financial report was not as good as expected: First, the shortage of chips and the supply chain crisis have caused a lot of negative impact on the shipments of PC manufacturers. Second, China's regulation of industries such as online games and online education has triggered changes in the spending of cloud computing service providers, and this problem cannot be resolved in the next two quarters.
You can clearly see the two major reasons. These are not all problems of INTC, but the changes in the macro environment of the entire chip industry. These issues were selectively ignored by the market on Friday. In the next week, there are still many chip stocks to make financial reports, and volatility seems to be inevitable.
The most important reasons for the volatility of the market on Friday were of course the Federal Reserve and Powell. The FOMC monetary policy meeting will be held from November 2nd to 3rd, so Friday is also the last heavy speech before Fed Chairman Powell enters the silence period. He mainly talked about several very important points:
1. Now is the time to reduce debt purchases, but not the time to raise interest rates. The Fed is now on the track of beginning to taper gradually and is expected to complete this process in mid-2022.
2. The shortage of the supply chain caused by the epidemic, as well as the inflation and wage pressures caused by it, may continue until next year. The Fed will pay close attention to the signs that U.S. households and companies expect inflationary pressures to continue. If the Fed sees continued inflation expectations The serious risk of going higher will use tools to reduce inflation.
3. Supply constraints are getting worse, and it is difficult to say how long it will take for the supply bottleneck to be eliminated. Supply constraints are still pushing up inflation, and the current risk is obviously a longer and more permanent bottleneck, leading to higher inflation.
From the above three points, in fact, everyone can clearly see. As a staunch advocate of the "temporary inflation theory," Powell finally couldn't sit still in the face of the raging inflationary pressure, and even the idea that interest rates might be raised earlier came out.
In the past six months, inflation has not only not declined, but has continued to rise. The 5-year breakeven inflation rate in the United States climbed more than 9 basis points to 3.007%, breaking through 3% for the first time in a record, far exceeding the Fed’s long-term inflation target of 2%.
In fact, the "temporary inflation theory" that the Fed has been advocating is completely nonsense. In September of this year, the price of gasoline in the United States rose by 42%, used car prices by 24%, steaks by 22%, bacon by 19%, hotels by 17%, eggs by 12.6%, and furniture by 11.2%... From February this year. It has been said that inflation is temporary, it is almost October, and it is temporary, which is obviously a bit unreasonable.
On the morning of the weekend, there is one more thing, that is, Twitter and Square CEO Dorsey issued a new point of view, "The era of hyperinflation in the United States is coming." As the leader of a Wall Street technology company, Dorsey's point of view still has a lot to refer to. On the one hand, Twitter is an important player on the social media advertising track, on the other hand, Square is an important player on the mobile payment track. American advertising and consumption, Dorsey should know far more information than us.
Going back to the forecast for the financial reporting season, the most important thing next week will naturally be the financial reports of the five major FAAMG giants. The financial reports of SNAP, IBM (International Business Machines Corporation) (NYSE: IBM) and INTC last week can be said to set the tone for the next financial reporting season. It can be said that it will affect the whole body. You must be careful:
IBM's financial report thundered, heralding a reduction in corporate cloud computing spending, which has an impact on Google (NASDAQ:GOOG), Microsoft and Amazon (NASDAQ:AMZN).
The software service track must also be affected. If Microsoft has a thunderstorm next week, the SAAS financial report for next week will be empty and accurate. After all, these companies are perfectly priced.
FedEx Group (NYSE: FDX) and Market Opener (NASDAQ: COST) reported a thunderstorm, indicating that the company is affected by the supply chain and labor costs, and Amazon’s performance is most likely to be thundered.
The SNAP financial report thundered, foreshadowing the reduction of corporate online advertising expenditures and the increase of offline retail market share, which has an impact on e-commerce and advertising. Amazon, Google, and Facebook's financial reports may have a significant impact.
Intel's (NASDAQ: INTC) financial report indicates that the chip sector may not be trending well. The decline in China's cloud computing market demand and the PC market suffer from a supply chain crisis, all of which will have a significant impact on the chip sector.
Apple (NASDAQ:AAPL) had reported a supply chain crisis before, but it was digested by the crazy market in half a day. If the crisis is raised again in the financial report next week, it must make up for the decline.
Microsoft (NASDAQ: MSFT) is the least likely to have a thunderstorm, but the current Microsoft stock price has reached a record high. Whether the revenue growth rate of about 18% in the third quarter can support the current PE that is close to 38 times, this is where the market needs to be cautious.
The above is just a forward-looking judgment of ours, not the final result, but it does explain some problems, at least the financial report of FAAMG this quarter is not so perfect. In the current market that is perfectly priced, risks are definitely greater than opportunities.
