Welcome to Michael Kramer’s pick of the top three market events to look out for in the week ahead.
US company earnings will be in the spotlight from Tuesday as leading Nasdaq-listed technology stocks Tesla, Google parent Alphabet, and Amazon prepare to report results. On the macroeconomic front, interest rate chatter should quieten after the European Central Bank held its main interest rate at 3.75% on Thursday, while the US Federal Reserve has entered a blackout period ahead of its 30-31 July rate meeting. The announcement on US second-quarter GDP this coming Thursday – which is expected to show that the world’s largest economy grew 1.8% in the three months to the end of June – is unlikely to be market-moving unless the reading misses estimates by a wide margin. Instead, most traders and investors will be focused on the June personal consumption expenditures (PCE) price index report, out on Friday.
Tesla Q2 results
Tuesday 23 July
Analysts expect Tesla’s second quarter results, due out after the US market closes on Tuesday, to show earnings of $0.58 a share, down from $0.91 in the year-ago period, on revenue of $24.1bn, down from $24.9bn a year ago. Gross margin is expected to have contracted during the quarter to 17.4%, versus 18.2% a year ago. The market sees the stock rising or falling by around 8.3% following the results, based on options pricing.
Tesla shares have rebounded of late, rising by more than a third in the past month to around $250 by Thursday’s close, as the company announced that it delivered more vehicles than expected during Q2. And now the options market appears to be betting on further upside following the results. Implied volatility levels for Tesla options expiring on 26 July were above 80% as of 18 July, and they’re likely to continue rising as we approach the earnings release. Most of the option positioning in the stock is for further upside, based on call delta and call gamma values, with the strike price at $270 serving as resistance. A move above $270 could send the stock sharply higher, while a failure to push beyond $270 could draw sellers into the market.
The stock reached overbought levels around 10 July, when its relative strength index peaked at 87 points and the share price broke above the upper Bollinger Band. The shares also hit a technical resistance level at $265. Since then, the share price has consolidated, moving sideways while remaining below resistance. The stock also appears to have completed an inverse head and shoulders pattern, as indicated by the blue lines on the below chart, suggesting that the shares could retest the breakout level near $210 in the days and weeks after the Q2 results.
Tesla share price, January 2023-present
Alphabet Q2 results
Tuesday 23 July
Alphabet, which like Tesla is set to report after the close on Tuesday, is expected to post second-quarter earnings of $1.84 a share, up 27.6% year-on-year, on revenue of $84.3bn, up 13% year-on-year. Revenue excluding traffic acquisition costs is forecast to have grown 13.8% to $70.6bn. Based on options pricing, the market sees the stock rising or falling by around 5.4% following the results. Implied volatility is only around 50%, which is why Alphabet’s implied move post-earnings is considerably lower than Tesla’s.
For Alphabet shares, which have gained 28% this year to reach $179, the key level to watch is $170. This could serve as a support level for the shares amid a build-up of put delta and put gamma for Alphabet options expiring on 26 July.
Our technical analysis indicates that the stock, down roughly 4% in the past week, has a support zone from $170 to $175. This means it would take a particularly bad set of results to send the stock below $170 and down to the next support area, around $150, in the coming weeks. If the stock stays above $170, it has the potential to rebound back towards the upper Bollinger Band around $190.
Alphabet share price, December 2023-present
Disclosure: Michael Kramer and his clients at Mott Capital Management have owned shares in Alphabet since 2017.
US June PCE inflation
Friday 26 July
The PCE price index, said to be the Fed’s preferred measure of inflation, is expected to have risen 0.1% month-on-month in June, up from 0.0% in May, while increasing 2.5% year-on-year, down from 2.6% in May. Core PCE, which excludes volatile food and energy prices, is expected to show a monthly gain of 0.2%, up from 0.1%, and an annual gain of 2.6%, flat versus May.
A weaker-than-expected PCE report could negatively impact the US dollar, potentially sending the British pound even higher after GBP/USD recently reached its highest levels in a year. The pound finally cleared resistance at around $1.28 this month, breaking above a downtrend that stretched back to July last year. This upward move could result in the pound climbing back to $1.31 in the near term. Meanwhile, $1.28 should offer solid support.
GBP/USD, January 2023-present
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday 22 July
• China: People’s Bank of China interest rate decision
• Germany: May retail sales
• Results: Verizon (Q2)
Tuesday 23 July
• Eurozone: July consumer confidence index
• US: June existing home sales
• Results: Alphabet (Q2), Coca-Cola (Q2), Comcast (Q2), Danaher (Q2), GE Aerospace (Q2), Lockheed Martin (Q2), Philip Morris International (Q2), Tesla (Q2), Texas Instruments (Q2), UPS (Q2), Visa (Q3)
Wednesday 24 July
• Canada: Bank of Canada interest rate decision
• Eurozone: July manufacturing purchasing managers’ index (PMI), July services PMI
• France: July manufacturing PMI, July services PMI
• Germany: July manufacturing PMI, July services PMI
• UK: July manufacturing PMI, July services PMI
• US: July manufacturing PMI, July services PMI
• Results: AT&T (Q2), Boston Scientific (Q2), IBM (Q2), NextEra Energy (Q2), ServiceNow (Q2), Thermo Fisher Scientific (Q2)
Thursday 25 July
• Germany: July IFO business sentiment index
• Japan: July Tokyo consumer price index (CPI)
• US: Q2 gross domestic product (GDP), initial jobless claims to 19 July
• Results: AbbVie (Q2), Airtel Africa (Q1), Amazon (Q2), AstraZeneca (HY), Honeywell (Q2), Lloyds Banking Group (HY), RTX (Q2), Unilever (HY), Union Pacific (Q2), Vodafone (Q1)
Friday 26 July
• US: June personal consumption expenditures (PCE) price index
• Results: 3M (Q2), Aon (Q2), Babcock (FY), Bristol-Myers Squibb (Q2), Colgate-Palmolive (Q2), T. Rowe Price (Q2)
Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change
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