The second week of the new quarter brings the Wall Street earnings season, with the first interesting stocks being reported tomorrow, Thursday, April 14. The top three companies of the day, Morgan Stanley, Wells Fargo and UnitedHealth Group, are scheduled to report ahead of the US market open, with the quarterly earnings reports accompanied by nterest rates hikes as the 10-year US yield hits a four-year high above 2.8%. This week, like in March, US inflation continued to rise to 8.5% year-on-year from 7.9%, however, inflation excluding food and energy prices fell 0.3% per month from 0.5% the previous month, which is seen as a sign that US inflation may be peaking and falling. Meanwhile the Fed’s plan to cut the balance sheet could come into effect in June.
In addition to the war in Ukraine, an outbreak of the omicron variant and supply chain disruptions are affecting economic growth. This has put Morgan Stanley and Wells Fargo’s Q1 2022 revenue forecasts lower than several previous quarters. Zacks expects Morgan Stanley sales of $14.61 billion, below the $15.72 billion in the same period last year and slightly higher than the $14.52 billion in the previous quarter. Meanwhile, the return per share is expected to be $1.69, below the $2.22 in the prior-year period and below the last five quarters.
Since the beginning of the year, the #MorganStanley company share price has so far dropped more than -14.50%, driven by the death cross signal seen in mid-March. As a result, the share price is now stuck in the first-quarter bottom, with Tuesday closing at 83.93, steady within Friday’s terittory. The next support level is at the Fibo 161.8 level at the 74.00 zone. The price may bounce with the currently forming double bottom pattern. The key resistance is in the high zone of the quarter at 95.00.
#WellsFargo, for its part, expects first-quarter sales of $17.77 billion, below the $18.06 billion in the prior-year period and $20.85 billion in the prior quarter. The return per share, meanwhile, is expected to be lower than the previous four quarters, at $0.83, and below the $1.05 in the prior-year quarter.
#WellsFargo company share price has dropped slightly this year by -2.31% after reaching a four-year high of 60.30 and continuing its decline thereafter in bearish divergence, giving its share price outlook a downtrend. If the price breaks 47.00, there will be the next support at the 42.00 zone. Conversely, if the price moves above the 200-day SMA, there will be the next resistance at the 54.00 zone.
While banking stocks were expected to underperform in this quarter, UnitedHealth Group, one of the largest private health insurers, said it received record Q1 sales forecasts of $78.64 billion, up 12.03% from $70.20 billion in the prior-year period. Return per share is expected at $5.40, higher than the previous six quarters.
The #UnitedHealth company share price has revised down from the all-time high 548.97 seen on Friday. If the correction continues (corresponding to the RSI falling from the overbought zone), there will be next support at 508.50 and a round figure of 500.00 at the 50-day SMA area. The next resistance will be at the Fibo 261.8 % level at the 610.00 zone.
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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand
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