Following a market recovery, attention turns to upcoming earnings reports from tech titans Meta and Microsoft. Renewed optimism has lifted tech stocks, notably Tesla, which experienced a significant surge in after-hours trading despite mixed quarterly results. Alongside this, the QQQ approaches a key resistance level.
Recent market rallies have tempered bearish control, and QQQ has surpassed multiple short-term resistance levels. However, a breach of the 21-day exponential moving average is still pending, indicating a full reversal toward the long-term bullish trend. Should QQQ surpass the crucial resistance area of 430.21 to 434.00, such a reversal could materialize.
Until then, caution is advised as profit-taking may trigger a price decline. Immediate support lies between 422.75 and 421.18, representing the highs from Friday and Monday, respectively. Maintaining this support level is crucial, as a breach could lead to a dip into the longer-term support zone between 408.71 and 412.92.
Tesla’s post-market surge has been attributed to the company’s accelerated rollout of more affordable vehicles, aiming to reinvigorate waning demand. Despite underwhelming earnings, Elon Musk’s emphasis on Tesla as an AI company and future plans for robotaxis and vehicle rentals have buoyed sentiment.
Positive sentiment extends to the European tech sector, with ASM International reporting higher-than-expected orders. Investors anticipate further earnings releases from Microsoft, Meta, and Alphabet this week, with collective profits for the “Magnificent Seven” tech companies projected to rise by approximately 40% year-over-year.
As the tech sector’s focus remains on earnings, the macroeconomic landscape will also draw attention. Key US data, including GDP and core PCE price index, is due for release later this week. Robust indicators may lead to higher bond yields, potentially impacting risk assets. However, the primary driver for the Nasdaq this week will be tech earnings.
GDP is expected to reach 2.5% in Q1 on an annualized basis, while core PCE is forecast to maintain its robust growth. Such data could prolong elevated interest rates, influencing the Fed’s future policy decisions. A potentially weaker PCE reading, however, could be welcomed by stock investors.
Despite rising interest payments on US Federal debt, investor demand for government debt remains strong. However, the increasing yields raise concerns about the sustainability of the fiscal path, highlighting the need for tax increases or government spending cuts. While stock investors currently appear to be disregarding these risks, they may have significant implications in the long run.
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