The market the day before
The main American stock indexes ended the trading session on May 13 in the green zone. The S&P 500 rose 2.39% to 4,024 points, the Nasdaq rose 3.82%, the Dow Jones added 1.47%. All sectors of the S&P500 showed positive dynamics. Manufacturers of cyclical consumer goods (+4.1%) and IT companies (+3.45%) looked better than the market.
Company news
- Duolingo (DUOL: +34%) demonstrated EBITDA, net profit and revenue better than expected in the first quarter, recording strong dynamics of DAU, MAU and the number of paid users. Further guidance on EBITDA and revenue has been raised.
- The CEO of FTX crypto exchange said that he owns 7.6% of Robinhood (HOOD: +24.9%), but FTX does not plan to gain control of the company.
- Elon Musk has suspended the Twitter takeover deal (TWTR: -9.7%) pending an investigation into the number of bot accounts, but there is no question of refusing to buy.
We expect
The S&P 500 ended the week with a decline for the sixth time in a row, which has not happened since 2011. The reason for maintaining the "bearish" sentiment is the tightening of the monetary policy of the world's leading central banks. Although there were signs last week that inflation has peaked, it remains at a fairly high level, giving no reason to soften the PREP. An additional pressure factor is the persistence of coronavirus restrictions in China, due to which corporations give more pessimistic forecasts and cautious comments. At the same time, there are reasons for positivity: The Chinese authorities expect to stop the current wave of the epidemic by May 20. In Shanghai, it has already been brought under control: in 15 of the 16 districts outside the quarantine zones, the spread of infection has stopped. Shanghai enterprises, including shopping malls, department stores and supermarkets, are gradually opening, and transport operations have partially resumed. The city authorities are planning its return to normal operation in mid-late June. At the same time, quarantine measures were tightened in Beijing. Most likely, until the lockdown in China is completely lifted, pressure on global supply chains will continue.
- The Asia-Pacific markets ended trading on May 16 in different directions. Japan's Nikkei fell by 3.33%, China's CSI 300 lost 0.8%, Hong Kong's Hang Seng rose by 0.26%. EuroStoxx 50 has fallen by 0.53% since the opening of trading.
- Brent crude futures drop to $110 per barrel. Gold is trading at $1802 per troy ounce.
In our opinion, the S&P 500 will hold the upcoming session in the range of 3980-4050 points.
Macrostatistics
No significant macro statistics are planned to be published.
Sentiment Index
The sentiment index dropped 1 point to 34.
Technical picture
Last week, the S&P 500 tested support near 3860 points, after which it rebounded sharply into the resistance zone of 4000-4060 points. The next resistance for the broad market index is at 4150. RSI and MACD support the possibility of short-term strengthening of the bulls' positions. At the same time, the medium-term trend remains downward, the closest support for the S&P 500 is the level of 3860 points.
In sight
Walmart (WMT) will report for the first quarter on May 17. The FactSet consensus puts the retailer's revenue at $138.9 billion (+0.4%) YoY, EPS at $1.48 (-13.4% YoY). Walmart's previous report was positive in many ways. However, the e-commerce segment turned out to be outsiders. Buyers increasingly prefer offline shopping, therefore, most likely, the trend towards slowing down the development of online sales will continue. This assumption is confirmed by the already released Amazon report. Like other retail representatives, Walmart is probably forced to raise transportation costs and wages. It is possible that the demand from some high-margin goods, such as furniture and clothing, has shifted towards essential goods. Investors expected that Walmart's profitability would soon begin to return to the highs of 2013. But this process may take longer, as profits remain under pressure due to slowing demand growth and increased investment costs.
Deere & Co. (DE) will report for the second fiscal quarter on May 20. The share of agricultural machinery in the company's revenue is 65%, the share of construction machinery is 26%, the share of leasing is 9%. Over the past five years, the revenue and EPS CAGR amounted to 10.5% and 31.6%, respectively. In the last two years, Deere's earnings per share have come out above expectations. High growth rates and strong financial results led to the fact that the company's shares rose from $120 in March 2020 to $430 in the same month of 2022. The transformation of the agro-industrial sector will further improve Deere's financial performance. Rising prices for grain crops stimulate an increase in their production worldwide. The food shortage, which was provoked by the conflict in Ukraine, will require new tools to optimize the harvest.