SPX500 Indecisive as Markets Digest Strong Retail Sales & Poor Earnings from Target

  • SPX500
    (${instrument.percentChange}%)

SPX500 Analysis

The broad US index runs its second straight profitable month and comes from one of its best weeks of the year, as the soft CPI Inflation report, moderated market expectations around the Fed's tightening cycle and the terminal rate. Factory-gate prices also eased, as the Producer Price Index came in at +8.0% y/y in October, from +8.5% previously.

Data released earlier today, showed that Retail Sales jumped 1.3% in October, from the flat prior reading (0.0%). However, this is not necessarily good for the stock market, since strong economic data allow the Fed to stay on its aggressive tightening path.

Quarterly results from US retail giants were in the spotlight this week, amidst of unfavorable high inflation/rising interest rates environment, but most of them offering encouraging reports.
Walmart (WMT.us) saw its operating income drop on both quarterly and yearly basis but offered improved forward guidance. It now expects a decline of 6.5-7.5% for the full fiscal 2022, from 9-11% previously. [1]

Rival Target (TGT.us) however disappointed markets earlier today, which caused its stock to plunge. Target made progress in reducing its excess inventories and the Net Earnings of $712 million marked an improvement from the previous quarter, but were less than half of the year-ago period. [2] What stood out the most though, was the fact that the firm slashed its profit margin guidance for the remainder of the year and the important holiday season, now projecting fourth quarter operating margin around 3%.

Geopolitical fears meanwhile eased, as NATO Secretary said that the preliminary analysis shows that yesterday's explosion in Poland was "likely caused by a Ukrainian air defence missile" and not from a Russian attack, according to the preliminary investigation. [3]

SPX500 shows indecision as investors assess the aforementioned data points and news, but bulls remain in the driver's seat, having covered around half of the mid-September/mid-October losses. This allows them to push for the descending trendline from January's record highs (at around 4,130), but it is early to talk about a larger recovery towards 4,326.

On the other hand, SPX500 fails to clear the 4K handle and we cansee pressure back towards the EMA200 (at 4,830), but a catalyst would be required for daily closes below it. This would shift immediate bias to the downside and would render the index vulnerable to fresh monthly lows (3,696).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 16 Nov 2022 https://corporate.walmart.com/media-library/document/q3-fy23-earnings-release/_proxyDocument

2

Retrieved 16 Nov 2022 https://investors.target.com/news-releases/news-release-details/target-corporation-reports-third-quarter-earnings-1

3

Retrieved 30 Nov 2022 https://www.nato.int/cps/en/natohq/news_209104.htm

Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}