Stocks to start September on the back foot
S&P500 -> The index falls below 3950
Broadcom -> The stock trades 22% lower YTD
EUR/GBP -> The pair rises to 0.8650
S&P 500 falls for the 5th day
US stocks fell for a fourth straight day yesterday, closing 0.8% lower, and the futures continue falling today.
The index booked its weakest August performance in seven years amid rising concerns that the Federal Reserve will continue hiking interest rates aggressively. The latest leg lower comes following Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday. While data earlier in the week showed that US consumer confidence and job vacancies rose more than expected, yesterday, the ADP private payrolls fell short of forecasts.
Today the mood remains downbeat as China widens its latest COVID lockdown. Jobless claims data and challenger job cuts could bring more insight into the health of the jobs market ahead of tomorrow’s non-farm payroll data.
Where next for the S&P?
After failing to rise above the 200 sma, the S&P500 has fallen sharply lower.
The price has fallen below support at 4100, 4000, and the 50 sma, which in addition to the bearish RSI, hints toward further losses. Sellers will look to take out 3900, the late July low, to bring 3720, the July 14 low, into play before targeting 3630, the 2022 low, back into focus. On the upside, buyers need a move over 4000 to bring 4100, the February low, into play.
Broadcom Q3 earnings preview
Broadcom is set to release Q3 earnings as demand concerns within the semiconductor business rise and as it looks to complete its acquisition of cloud software firm VMware.
The acquisition is part of a strategy to reduce dependence on the chip side of the business. Even so, the share price trades down over 20% this year as chipmakers are under pressure, hurt by weaker consumer demand and rising recession fears.
Expectations are for revenue to increase by 24% in Q3 to $8.41 billion. EPS is expected to grow 37% to $9.55 as margins improve. The outlook will be in focus, with Q4 revenue expected to increase just 18% to $8.72 billion.
EUR/GBP rises to a 2-month high
EUR/GBP jumped 0.7% in the previous session after stronger than forecast eurozone inflation data and as UK recession fears continued to build.
Inflation in the euro area jumped to a new record high in August, driven by energy and food prices. Hot inflation fuelled bets that the ECB could raise interest rates by a larger than expected 75 basis points rather than a 50 basis point hike in July.
Meanwhile, the pound came under pressure as the economic outlook worsened following the energy price cap jump. Today the pair is holding steady as attention turns to manufacturing PMI data from the UK and the eurozone and German retail sales, which are expected to be flat.
|EZ inflation||Actual: 9.1% (0.2%)||Previous: 8.9%|
Support can be found at 0.86 (round number) and 0.8585 (July 21 high).
Resistance for the pair can be seen at 0.8680 (July high) and 0.8720 (2022 high).