Fed Decisions, Earnings Reports, and AI Looms Above This Week (July 24-July 28)
July 24-July 28, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Monday everyone and welcome back to the Rippy Global weekly outlook. The markets held green today with energy leading the pack, although the rest of the market was muted as we have another large week of catalysts and market moving information coming up. Here is today’s heat map:
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This week is full of catalysts for different sectors, which I will get into in a minute. Treasury yields rose slightly today with regard to the upcoming monetary policy meeting from the Federal reserve this Wednesday. If investors are anticipating a more hawkish stance from the Fed, yields tend to rise, although the market isn’t pricing in too much from the Fed as the Fed Funds Futures are pricing in a 98% chance of a 25bps hike. With the fear and greed index at “extreme greed”, if the Fed really is hawkish we could be in for a slower second half of the year:
David Kostin from Goldman Sachs wrote in a report that there is good reason for the resilience of the market even in an environment of rising rates for three main reasons:
1) He believes earnings have bottomed in 2022 and that the period of declining profits is over.
2) Yields had risen among an environment of weak expected economic growth, but that outlook is now shifting to a more positive one.
3) Investors are expecting AI to boost the productivity and profitability of their companies.
The rate strategists at Goldman Sachs are expecting a rise to 3.9% in the 10Y yield with it dipping down to 3.75% by 2024. These reasons may explain the decoupling of the market in regards to the 10Y yield this year.
After Tesla’s earnings report last week, EV stocks took a hit but recovered substantially this week. A large focus is on China names, with NIO and LI outperforming today as they are in both the EV and China sector. I am expecting continuation through the fall with these stocks.
The oil sector maintained its strength today with the market expecting oil supply to continue to stay tight after cuts from Saudi Arabia last month. There is also growing expectation for the Chinese government to help boost their economy via stimulus (another possible reason for the outperformance of $NIO and $LI today). Chevron also released that they are on guidance for a “better than expected Q2”. Citi bank as a PT of $83/bbl on oil with the expectation of summer driving the price higher.
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#1) Earnings week is in full force starting tomorrow. Microsoft, Meta, Snapchat, Boeing, and many other large names that have huge positions in the major indexes are reporting and therefore I am personally waiting to swing trade until after Wednesday.
Snapchat is usually a large earnings mover and I am interested to see what they say about the potential TikTok ban and how they are using AI in their business. Shares are up ~40% this year after a massive drop last earnings, so it will be interesting to note if they were able to bounce back.
#2) On Tuesday, the American Petroleum Institute will release a report on oil inventories. Elon Musk will also be speaking at an event for $PCG between the CEO and Elon.
#3) On Wednesday, the US House of Representatives is going to be taking a look at how self driving cars may be deployed in the workspace. I would watch Uber to see how it reacts to this. Fed chair Powell is also speaking after they release their notes on monetary policy.
#4) On Thursday, the European central bank will announce their decision on monetary policy.
#5) On Friday, the Bank of Japan will have their decision on monetary policy.
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S&P 500
The S&P 500 ($SPX index) is flagging after what has been an amazing first half of the year. My expectation is that the market cools off a bit from this massive supply zone until the fall.
My key breaks are $4560 for bulls and $4535 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
It’s hard to deny this one has been a wall street favorite this year, so as long as this current low holds, I think this has room to the upside, but a break under $247 and this name is a no-touch trade for me.
AAPL
Apple’s next move this week is completely reliant on how Microsoft will perform for earnings since they are highly correlated stocks. I think this one really needs to cool off soon.
TSM
This one is an interesting trade to me with Germany wanting to increase chip production by subsidizing ~$22B to different companies, one of them being TSM. They also got massive options flow today with a great chart and a gap above which is always something I am looking out for.
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Insider Activity
In terms of insider trades, APGE and JANX are two biotech names that got some massive buys and HPK is an energy name that is breaking out as well.
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High Short Interest Stocks (S3 Data)
#1 - CXAI 83% SI
#2 - CVNA 48% SI
#3 - BYND 42% SI
#4- LCID 40% SI
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)