The market the day before
The session on April 28, the main American stock exchanges ended in the green zone. The S&P 500 rose by 2.47% to 4,288 points, the Dow Jones gained 1.85%, the high-tech Nasdaq rebounded by 3.06%. All 11 sectors of the index closed in positive territory. IT companies (+4.04%), telecoms (+3.88%) and representatives of the energy industry (+3.13%) looked better than others.
Company news
- Instagram Facebook (FB: +17.6%; Meta Platforms Inc.'s activities on the sale of Facebook and Instagram products on the territory of the Russian Federation are prohibited on the grounds of extremist activity) reported revenue for the first quarter and presented a forecast for the new reporting period worse than expected. Since the beginning of the year, the shares have lost 50%. Despite concerns about competition with TikTok, management emphasized the positive dynamics of audience engagement and reduced operating costs. In addition, revenue growth is expected to accelerate in the third quarter.
- Qualcomm's results (QCOM: +9.7%) for the first quarter exceeded consensus, despite some weakness in China. In cooperation with Samsung and Android, the company is actively increasing the share of content in phones, expecting an increase of 50% in 2022.
- Eli Lilly (LLY: +4.3%) reported revenue and profit growth for the first quarter, and also released the results of a study of the anti-obesity drug SURMOUNT-1 (Tircepatide): at the highest dose, patients lost up to 23% of their body weight. The obesity treatment market is $5 billion, and the drug looks competitive.
We expect
On April 28, negative data on a decline in real GDP in the United States was released, amounting to 1.4% QoQ, with expectations of growth of 1.1%. Thus, the first drop in GDP was recorded since the introduction of lockdown in the second quarter of 2020. According to a preliminary estimate published by the Bureau of Economic Analysis, in the fourth quarter of 2021, the US economy expanded by 6.9%. The latest data signal an apparently inflated forecast of economic growth from the IMF. Earlier in April, this international organization had already published revised growth expectations for the global and American economies, lowering estimates from 4.2% to 3.6% and from 4.0% to 3.7%, respectively. These forecasts serve as a guideline for a wide range of economic agents, including banks and investment companies. Accordingly, overstating forecast data distorts estimates of the real value of assets, many of which are directly correlated with economic growth. The decline in production capacity has already been recorded in the raw materials sector, so there are additional risks associated with a possible recession in the United States.
The statistics published today are based on initial data, which are subject to further revision by the source agency. An updated estimate of GDP for the first quarter will be presented on May 26, 2022.
The yields of two- and 10-year treasuries increased by 3 bps and 2 bps, to 2.64% and 2.86%, respectively. The indicator for 30-year securities decreased by one point, to 2.90%.
Trading on the Tokyo Stock Exchange is closed today on the occasion of a national holiday. At the end of the session on April 28, the Chinese CSI 300 added 2.43%, the Hong Kong Hang Seng rose by 4.01%. EuroStoxx 50 has been adjusted by 0.80% since the opening of the session.
Brent crude futures are quoted at $107.6 per barrel. Gold is trading at $1,888 per troy ounce.
In our opinion, the S&P 500 will hold the upcoming session in the range of 4300-4350 points.
Macrostatistics
Important macro statistics are not expected to be published today.
Sentiment Index
The sentiment index rose 2 points to 43.
Technical picture
After the breakdown of the support line at 4,200 points, the S&P 500 continued to test the lows of March. The RSI, which has approached the overbought zone, and the MACD signals confirm the strength of the "bearish" trend. Against the background of strong reporting by major players and especially in anticipation of the releases of companies in the technology sector, the broad market index may return to the green zone, rising to the 50-day moving average located at 4380 points.
Reports
Today, one of the largest integrated oil and gas companies Chevron (CVX) will present its first quarter reports. We expect strong results due to higher prices for oil, gas and petroleum products. Chevron's revenue is expected to grow by 60% YoY and 6.3% QoQ, reaching $51 billion, and adjusted net earnings per share will rise by 280% YoY and 33.6% QoQ, to $3.42. Net debt may decrease by $1 billion. Investors will be interested in estimates of losses and the volume of asset write-offs in connection with military operations in Ukraine, as well as losses of the Kazakh joint venture Tengizchevroil incurred as a result of an accident at the export terminal of the Caspian Pipeline Company. In our opinion, Chevron shares are trading above fair value, so positive reporting can be used to fix profits.