There was a trading tug of war around the S&P 500’s 200-day moving average in yesterday’s session. The bulls won and a managed to secure a close above that key technical level. Nonetheless, there wasn’t a lot of air between the closing price (4,247.68) and the 200-day moving average (now 4,238.72), so there is a bit of hesitation in the early trade tied to an inclination to see if there will be follow-through to the recovery effort.
It seems only fitting then that two of the market’s biggest companies — Microsoft (MSFT) and Alphabet (GOOG) — are being tugged in different directions following their earnings reports to create a mixed picture in the early going. Microsoft, which reported some impressive growth for its Azure business, is up 4.7%, and Alphabet, which reported some relatively disappointing growth for its cloud business, is down 5.9%.
Currently, the S&P 500 futures are down 15 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 89 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 61 points and are trading 0.2% above fair value.
Microsoft is providing some extra pull for the Dow Jones Industrial Average futures along with Boeing (BA), which came up shy of analysts’ consensus earnings estimate but reaffirmed its FY23 operating cash flow and free cash flow guidance at the same time it lowered it 737 MAX delivery forecast. Shares of Boeing are up 3.2%.
Still, the overhang of Alphabet’s weakness along with a 6.7% decline in Texas Instruments (TXN), which came up shy of analysts’ consensus earnings estimate and said it continues to operate in a weak environment and that weakness in the industrial end market has broadened, has been a bit of a counter tug for the broader market.
IBM (IBM), Meta Platforms (META), Whirlpool (WHR), KLA-Tencor (KLAC), and ServiceNow (NOW) are scheduled to report their results after today’s close, which is to say there is plenty of tension still on the earnings reporting line that is making it challenging for the market to pull hard one way or the other.
The volatility in the Treasury market has been another limiting factor. The 10-yr note yield eclipsed 5.00% earlier this week before dropping to 4.80%. It is currently at 4.88%, up four basis points from yesterday’s settlement in front of the September New Home Sales Report at 10:00 a.m. ET (Brieifng.com consensus 683,000; prior 675,000) and the $52 billion 5-yr note auction at 1:00 p.m. ET.
Tucked in between those two happenings will be yet another floor vote in the House at 12:00 p.m. ET for the Speaker position. The latest nominee is Mike Johnson (R-LA) and there is some chatter that he might actually get enough votes (217 needed) to win.
Mr. Johnson is the GOP’s fourth nominee for Speaker, so seeing will be believing when it comes to the voting process.
In the same vein, seeing will be believing for the stock market when it comes to winning the tug of war again at the 200-day moving average. That battle isn’t over yet, and market participants are waiting to see from which side interest rates, earnings results, and geopolitics will be pulling.
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Originally Posted October 25, 2023 – A game of tug of war
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