S&P 500 DOWN ON EARNINGS SCARE DESPITE STRONG GDP
S&P 500 futures are currently trading at 2659- lower by 0.83% as compared to the previous close. The index futures have been closing in the red since the last two trading sessions. Equities have suffered in recent weeks as fears of rising inflation — and rising interest rates — offset corporate profit expectations. Adding to the fears is the spat of weak results/Q4 guidance from big names such as Amazon, Alphabet and others.
Index components-Amazon and Google-parent company Alphabet were down 8.6% and 4.9% respectively at the time of writing. Both companies had released their latest quarterly results after the markets closed on Thursday. Earnings for both companies topped market estimates, but revenues fell short of expectations. Another index member, Charter Communications is down 7.9% in early trading on Friday, following the release of revenue numbers that fell short of market estimates.
Other top losers in the S&P 500 include Moodys (down 7.7%), Whirlpool (down 8.2%), AMD (down 9.1%) and CenturyLink (down 8.83%) at the time of writing.
The declines in equities were enough to offset a better-than-expected report on U.S. economy growth. The Commerce Department reported earlier that the U.S. economy grew at a 3.5% rate in the third quarter, above the market estimates of 3.4%.
The government also announced that its Personal Consumption Expenditures (PCE) index, a key measure of inflation, increased by 1.6% in the third quarter. The markets had expected a growth of 2% for the index. The Federal Reserve had set a target of 2% for the underlying inflation. Since the PCE index is the Federal Reserve’s preferred inflation gauge, any sign that the measure may be slowing could stall the central bank in its plan to continue to raise the overnight rate.
In addition, the University of Michigan’s consumer sentiment index for Oct. released earlier came in at 98.6. The index was below the consensus estimate of 99.
The S&P 500 is down 2.2% this week entering Friday’s session. Through Thursday’s close, the S&P 500 was down 7.2% for October.
On the technical front, the RSI is currently at 22.97% which is deep within the oversold zone. The current price is below the MA5 and MA20. The current price is below the middle line of the Bollinger Bands and is heading downwards. The %K has crossed the %D from above to the downside at around 34.85% and suggests that the market may head downwards. Even though according to the RSI, the market may be in the oversold zone, other indicators are not confirming it and this suggests that the market may continue sliding lower and may not reverse from immediate levels.
Overall Bias is Negative and Short-term trades can be initiated with tight Stop Loss and Take Profit targets. This trade can remain valid until Monday.
Trade Suggestion-Limit Sell At 2770, Take Profit At 2740 Stop Loss At 2785