US stock indices saw slight losses on Thursday (03/08), after 10-year T-note yields hit an 8-month high. Higher bond rates have a negative impact on stocks. The 10-year T-note yield increased further in August, reaching 4.18%, a level not seen since early November. Initial claims increased only slightly, as expected, but job losses were at their lowest level in almost a year and both labour prices and productivity exceeded expectations, suggesting that the labour market is still strong.
Stocks were also hit by some weaker-than-expected earnings reports, with DXC Technology and Expedia Group falling more than -29% and more than -16% respectively. Meanwhile, the technology index was volatile towards the close due to several reports from large-cap companies such as Apple and Amazon.
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Apple Inc. announced that its earnings per share for the third quarter of the fiscal year 2023 came in at $1.26, surpassing analyst estimates. The figure marks an annual jump of 5%. The company’s revenue fell 1% compared to the previous year, reaching $81.8 billion in the reported quarter. Meanwhile, operating income for the three-month period fell to $22.9 billion from the $23.1 billion recorded last year. Net income rose 2% to $19.8 billion, while iPhone sales fell 2.7% to $39.6 billion. Apple shares fell 0.32% in after-hours trading following the report release.
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Amazon.com Inc. reported that its net sales for the second quarter of 2023 reached $134.4 billion, exceeding estimates and increasing by 11% from the same period a year earlier. Compared to the loss reported a year earlier, net income increased to $6.75 billion, and diluted earnings per share increased to $0.65. Operating income for the second quarter of 2023 increased by 133% to $7.7 billion. Amazon shares jumped 6.59% in after hours trading on better-than-expected results.
Stock indices recovered from their worst levels after news on Thursday showed that US Q2 NonFarm productivity rose more than expected and Q2 unit labour costs fell more than expected, easing inflation concerns.
Positive comments from Richmond Fed President Barkin were also bullish for stocks, as he said that a larger-than-expected easing in inflation in June might be an indication the US economy could have a soft landing, returning to price stability without a damaging recession.
Technical Analysis
USA100, D1 was seen hindered at the 15300 round-figure, after some hopes were raised over tech company reports ahead of the market close. The daily Doji certainly doesn’t indicate a continued direction, after the previous 2 days of declines. It is vaguely visible that the high has declined to 15828 from 15946. Continued decline will face other support, especially at the 15000 round figure in addition to 14933.
On the upside, bulls may be cautious, after Fitch downgraded the US credit rating to AA+ from AAA, citing expected fiscal deterioration over the next three years and a growing general government debt burden.
The move to the upside is likely to continue on a technical basis, but some downside can’t be ruled out from the realisation of previous long positions. As long as the index trades above 13722 support, the bulls’ dominance will remain the winner.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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