Equities report: Shaky ground for US stock markets

Since the start of the week US stock markets seem to have regained some confidence as Nasdaq, S&P 500 and Dow Jones are on the rise. On a fundamental level, the weak August US employment report and the market’s expectations for the Fed tend to provide support for US stock markets, while the release of August’s US CPI rates could shake US equities tomorrow. On a company level, Oracle seems to be gaining ground, while it remains questionable if Apple’s event yesterday is to help its share price. The report is to be concluded with a technical analysis of S&P’s 500 daily chart.    

The market’s expectations for the Fed’s intentions

We start our paragraph for the Fed’s intentions by having a look at the state of the US employment market. The release of the US employment report for August, revealed that the US employment market was at a weaker state than expected, as the NFP figure dropped beyond expectations to reach as low as 22k, while the unemployment rate ticked up to 4.3%, as expected. The release of the US Payrolls Benchmark, yesterday, with a reading of a -911k correction implied an even worse situation of the US employment market. The release intensified the market’s expectations for the Fed which is to reach an interest rate decision on the 17th of September. The bank is now expected to deliver a 25 basis points rate cut in the September meeting, while Fed Fund Futures (FFF) also imply a 7.3% probability for a 50 basis points rate cut. FFF also imply that the market expects the bank to deliver another rate cut in the October meeting and another one in the December meeting. So the market’s expectations are intense. We expect the bank to deliver the 25 basis points rate cut and if actually so, we may see the market’s attention turning towards the bank’s forward guidance, which is to be included in the accompanying statement and Fed Chairman Powell’s press conference. Should the bank signal that more rate cuts are to come, we may see the market’s dovish expectations intensifying, which could provide some support for US stock markets. On the flip side, should the bank seem to be have doubts for extensive rate cuts to come, we may see the market being forced to reposition itself and if so the release could weigh on US equities. On the path to the Fed’s interest rate decision, we highlight the release of the US CPI rates for August, tomorrow Thursday and a possible beyond market expectations acceleration of the CPI rates implying a possible resilience of the inflationary pressures in the US economy, we may see the market’s dovish expectations for the Fed easing and thus weighing on US stock markets and vice versa. Similar effects on US stock markets, could have also the release of the US PPI rates for August later today.  

Oracle’s rally sends its stock price soaring

The release of Oracle’s earnings report for the second quarter, showed that the company missed by a bit the market’s expectations for its EPS and revenue figures. The share’s price nevertheless soared, as the company’s forward guidance  was high spirited and the company’s CEO Safra Catz was reported stating "We expect Oracle Cloud Infrastructure revenue to grow 77% to $18 billion this fiscal year — and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years," practically highlighting the prospects for the company. We consider this element as maybe the most promising and the one which caused the company’s share to soar. We tend to see more prospects to the company’s activities at the current stage given the increased demand for its cloud services. Should we see additional promising elements emerging for the company, we may see it’s share price getting additional support.

Apple’s  event may not be of much help

Apple held its event yesterday at which it announced the first major redesign of the iPhone for a number of years now. The Company’s CEO Tim Cook called it the “biggest leap ever for iPhone”, which may be somewhat exaggerated. The company announced four new iPhone models, with one being the iPhone 17 Air, which is thinner and lighter than the rest of the devices, based on a titanium body and its price starting at $999. Interestingly the new AirPods Pro 3 have improved audio quality and noise cancelling, which we consider a plus. Yet in the big picture, despite the improvements the event with its releases does not display dominance in the market, rather than that of another cell phone producing company. Definitely one of the big ones but not necessarily the leading one. The share’s price got a hit after the release and should field technical experts be critical we may see the losses extending.

Technical analysis

US500 daily chart

• Support: 6420 (S1), 6140 (S2), 5925 (S3).

• Resistance: 6600 (R1), 6800 (R2), 7000 (R3).

The bullish tendencies of the S&P 500 seem to have been confirmed over the past week, despite some hesitation as the index’s price action is aiming for the 6600 (R1) resistance line. The bullish outlook seems to remain as the price action of the index continues to follow the upward trendline initiated since the early days of May. Furthermore the RSI indicator is on the rise nearing the reading of 70, implying a growing bullish sentiment for index by market participants. On the flip side, the index’s price action has reached the upper Bollinger band, which may slow down the bulls if not cause a correction lower. For the time being and as long as the prementioned upward trendline remains intact, we maintain a bullish outlook for the index. Should the bulls maintain control over the index as expected, we may see the S&P’s price action breaking the 6600 (R1) resistance threshold and we set as the next possible target for the index the 6800 (R2) resistance level. Please note that the index is at all time high levels, which may enhance the possibility of a correction lower for its price action. Should the bears take over, we may see S&P 500 breaking initially the prementioned upward trendline in a first signal that the upward movement has been interrupted and continue to break the 6420 (S1) support level clearly, and then starting to aim actively for the 6140 (S2) support level.