Tech Earnings Season – Will Investors Buy The Dip?
Last week the NASDAQ’s decline marked the worst week since November 2022, but the price trades higher on Monday. Currently the NASDAQ is the best performing global index, but its performance will largely be dependent on earnings. Investors also need to take into consideration that European indices are trading lower after the European market open. If the price of global indices decline over the next 5-hours, it could indicate a lower risk appetite. In addition to this, investors will also keep an eye on the US Bond Yields which trade 29 points higher. If they remain high, this could apply further pressure.
So far, technical analysis is still indicating a downward trend and continues to form higher lows as well as highs. The asset also continues to trade lower than the main trend lines, Moving Averages and in the “sell” zone of the RSI. Based on the past 3 retracements, the average retracement size is 1.41%, which means similar retracements could see the price rise a further 0.42%. If the price rises above this level or above $17,234 (Fibonacci retracement 60.0 level), the possibility of a correction or new trend rises.
Last week, the Chair of the regulator, Jerome Powell, once again said that the path of inflation to 2.0% may take a little longer than initially estimated. Against this background, investors once again doubted the likelihood of an interest rate cut in June. Now the most plausible scenario remains an adjustment in the rate in September, while some analysts predict a change in monetary policy only at the end of this year.
The question for investors is if the market will take advantage of the lower price to better their entry. This will depend on the upcoming earnings data. The main earnings report this week will be Microsoft and Alphabet but even other less influential companies such as Tesla and Visa.
The most impactful reports will come from Microsoft and Alphabet, which carry significant weight within the index. Meanwhile, Tesla’s ongoing concerns trouble shareholders, prompting CEO Musk to cancel a trip to India for an urgent meeting at the company. Tesla has announced plans to reduce its workforce by 10% and implement price cuts on specific products. Despite being the ninth most influential stock on the NASDAQ, if earnings and revenue fail to meet already subdued expectations, there is a high likelihood of further decline in the stock price.
Consequently, the performance of the stock is expected to hinge largely on the upcoming earnings reports. Favorable earnings may prompt a market correction, while disappointing results could discourage further investment. Should the price drop below $17,102.03, it would continue to align with the current bearish trend pattern.
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