S&P 500 hits multi-month highs with big-tech earnings ahead

S&P 500 closed up 2.42% last week to just above 4,500.
Bank of America, Morgan Stanley report earnings on Tuesday.
Wednesday sees Goldman Sachs, Tesla, Netflix reporting.
Thursday has Taiwan Semiconductor, Johnson & Johnson releasing quarterly earnings.
US Retail Sales for June will be released on Tuesday afternoon.

The S&P 500 index returned its fifth-best performance of the year last week, adding 2.42%. If the current up-down, up-down pattern continues, this week will witness a pullback. However, that does seem somewhat unlikely, with so many popular companies reporting earnings this week.

Last week saw JPMorgan and Wells Fargo both produce solid beats; this week sees the likes of Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS) and American Express (AXP) give more color to the financial sphere.

Tesla (TSLA) and Netflix (NFLX) are both set to report on Wednesday, making that session the pinnacle for tech volatility. Tesla has already come into focus on Monday, after a letter written by Senator Elizabeth Warren to Securities and Exchange Commision (SEC) Chairman Gary Gensler was leaked. In the missive Warren asks the SEC to investigate the perceived conflict of interest in Tesla head's Elon Musk being co-owner of both Tesla and Twitter.

In the letter Warren questions whether Musk and the Tesla board have acted in Tesla shareholders' best interests, both because of the apparent missappropriation of Tesal corporate revenue to fund the Twitter venture, and specifically as regards to the board's fiduciary duty to disclose its concerns regarding Musk. TSLA stock price does not seem to have been badly affected by the news, however, and is up over 2.5% on the day.

Prior to tech earnings, however, the US Census Bureau will release US Retail Sales for June on Tuesday afternoon.

At the time of writing, S&P 500 futures are up 0.5%, while NASDAQ 100 futures are gaining 0.8%.

S&P 500 News: Big earnings results on tap from TSLA, NFLX

Tesla reports second-quarter earnings after the close on Wednesday. Wall Street’s consensus is $0.82 in adjusted earnings per share (EPS) on $24.76 billion in revenue. More than 90% of analysts have shaved their EPS forecasts for Tesla over the past three months since the electric vehicle leader has cut prices drastically in order to boost deliveries.

That part of CEO Elon Musk’s strategy has worked based on the Q2 delivery data released early in July. Tesla delivered an impressive 466,140 EVs in the quarter. That figure was 10% higher compared to Q1 and 83% higher than one year ago. But the consensus is that gross margins have condensed in order to produce this hefty growth.

Then there is Netflix. The market is expecting good news from the king of streaming since the platform introduced a cheaper advertising tier. Wall Street consensus expects $2.86 in GAAP EPS on sales of $8.29 billion. Downward EPS revisions have been plenty of late, but that incremental revenue figure looks like an easy beat for Netflix.

On Friday, American Express will provide some real-world fodder for US consumer spending in its earnings update. Wall Street has forecast $2.81 in GAAP EPS on $15.36 billion in revenue. Unlike the aforementioned tech companies, analysts have mostly revised earnings higher this quarter for American Express.

US Retail Sales data leads indicator pack this week

The June US Retail Sales data is the top economic indicator this week for the US. Many traders will probably be more excited for UK inflation data on Wednesday, but the retail figures will, of course, have more relevance to the US equity market.

Analyst consensus is quite bullish for June. The average forecast calls for the US Census Bureau to report 0.5% MoM growth in US retail. This follows May’s 0.3% figure.

US Retail Sales ex-Autos figure is expected to grow 0.3% MoM after that segment grew just 0.1% in May.

Besides retail sales, Housing Starts data arrives late Wednesday. Analysts expect 1.48 million new starts in June, below May’s 1.63 million.

Earnings of the week

Tuesday, July 18 - Bank of America (BAC), Novartis (NVS), Morgan Stanley (MS), Lockheed Martin (LMT).

Wednesday, July 19 - Tesla (TSLA), Netflix (NFLX), Goldman Sachs (GS), IBM (IBM), US Bancorp (USB), United Airlines (UAL)

Thursday, July 20 - Johnson & Johnson (JNJ), Abbott Laboratories (ABT), Taiwan Semiconductor Manufacturing (TSM), Philip Morris International (PM), Travelers (TRV), American Airlines (AAL), Capital One (COF), and CSX (CSX).

Friday, July 21 - American Express (AXP), Huntington Bancshares (HBAN).

What they said about the market – Christian Mueller-Glissmann

Goldman Sachs analyst Christian Mueller-Glissman and his team have determined that there is less chance of further upside in the second half of 2023 for stocks. In a note last Friday, the Mueller-Glissmann team said that receding inflation combined with mixed economic data out of China and Europe should lead to a range-bound market.

"As a result, we expect equities to remain stuck in their ‘fat and flat’ range."

S&P 500 daily chart

Nasdaq FAQs

What is the Nasdaq?

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

What is the Nasdaq 100?

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

How can I trade the Nasdaq 100?

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

What Factors Drive the Nasdaq 100

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

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