Market Overview
European indices have shown recovery from a weaker start, turning positive by mid-morning, while US futures are still experiencing slight losses. Global indices are attempting to build on previous gains as investors evaluate strong earnings reports from SpaceX and Super Micro against the backdrop of elevated oil prices, which are constraining the potential for risk assets. The upcoming tech earnings are anticipated to influence the near-term outlook for the Nasdaq 100.
Strong Earnings from SpaceX and Super Micro
SpaceX reported impressive Q3 earnings, with net income soaring to $4.1 billion from a loss of $1.1 billion a year prior, and revenue reaching $14.6 billion, surpassing Wall Street expectations. This positive performance has revitalized interest in AI-related hardware stocks. Additionally, Elon Musk hinted at a potential merger between SpaceX and Tesla, which could create a massive $3.5 trillion entity encompassing electric vehicles, AI infrastructure, and more.
Super Micro also raised its quarterly revenue outlook by nearly 30% due to strong demand for AI, resulting in a 15% increase in its stock price after hours. This is significant as Super Micro is closely tied to the physical infrastructure supporting the AI boom, making its outlook a critical indicator of data-center spending trends.
Tech Stocks Under Scrutiny
Despite the revival of the AI trade, concerns linger regarding the substantial capital being invested in AI and whether it will yield adequate returns. The upcoming earnings reports from major tech companies like Tesla, Meta, and IBM are crucial for assessing whether earnings growth can justify current valuations, rather than relying solely on optimistic projections about AI spending.
Impact of Rising Oil Prices
While the recent earnings reports have provided a boost to AI stocks, the macroeconomic environment is becoming less favorable. Brent crude oil prices are hovering around $110 per barrel, which raises inflation risks and complicates central banks' ability to ease monetary policy. Higher oil prices could dampen the optimism stemming from AI earnings, particularly if they lead to expectations of further interest rate hikes.
Additionally, widening French bond spreads indicate growing skepticism about the country's fiscal consolidation efforts, adding to the cautious sentiment in the market.
Technical Analysis of the Nasdaq 100
The Nasdaq 100 has recently broken below its bullish trend line, indicating further downside pressure. Currently, the index is up approximately 1.5% this week, suggesting some easing of selling pressure, but bullish control has not yet been established. For a more convincing bullish signal, the index needs to reclaim the broken trend line and surpass the 30,000 level.
If this does not occur, consolidation may continue, with potential retests of recent lows around 29,000. Key levels to monitor include 29,240, which marks the base of a previous breakout, and 28,745, the last significant low before the recent upward movement. On the upside, resistance levels are identified at 30,000 and 30,370, with the June high at 30,756 being a critical level to watch for potential all-time highs.