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S&P 500 surges on upbeat earnings and economic data

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The situation of Chinese real estate companies continues to be worrisome

The stock indices had a very positive day yesterday, driven by banks and semiconductor companies that published better than expected results and business expectations. Moreover, the negative sentiment that had prevailed for the past two weeks seemed to dissipate due to yesterday's earnings.

 

The S&P500 index experienced its most significant rise in months with an advance of 1.7%. It distanced from the support zone located at 4250, making itself vulnerable to losses of greater depth. With yesterday's gains, it has managed to break above the 100-day SMA line and close to the resistance around 4474.

Interfaz de usuario gráfica, GráficoDescripción generada automáticamente

 

However, the elements of uncertainty that had caused the substantial corrections in the indices are still present.

The previous day we knew that the Federal Reserve was ready to start tapering, although the Treasury bonds seem not to have taken notice and have continued to drop yields to 1.51%. The situation of Chinese real estate companies continues to be worrisome. Evergrande's default in the payment of interest on the debt in dollars and the increase in energy price hint at a brake on economic growth. The inflationary tensions, far from retreating, continue without pause.

Yesterday, the inventory figures published for oil by the Energy Information Administration showed enormous growth to 6.08M from the only 0.7M expected. It is a figure that would have caused a price drop; not only was it not sold, but it rose almost a dollar on the day, eliminating the possibility of bearish divergences from a technical analysis point of view in the daily RSI. It approaches the maximum level reached two days ago of 82.16.

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The cause behind this enormous demand is the rotation from natural gas to fuel oil in electric power generating plants due to the increase in gas price, which has been the most used fuel for electricity generation. This increase in demand would represent around 500k BPD, which counteracts the increase in production recently approved by OPEC+.

Suppose this situation of tension in energy raw materials continues. In that case, pessimistic sentiment will soon return to the market due to its negative repercussions on global growth because of the relationship they have with inflationary tensions that each time seem to be not as transitory as the bankers insist on considering.

 

Sources: Bloomberg.com, Reuters.com

 

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.