The bulls and bears ended the day equally matched as the DIA, SPY, and QQQ chopped below resistance and above their 50-day averages.  However, without the benefit of the magnificent seven, the IWM slipped lower closing the day well below its 50-day average.  The tech giants enjoyed most of the bullish energy as they almost exclusively determine the direction of the big three indexes.  Today traders have a busy day of earnings to keep them guessing as well as Jobless Claims and Fed speeches that include Jerome Powell at 2 PM Eastern.  While the bulls seem determined to extend the rally into the end of the week the pending inflation data next week could keep price action choppy into the weekend.

Overnight the Asian markets closed mostly higher with only Hong Kong closing modestly lower after China’s deflationary price reports.  European markets look to extend their rally this morning boosted by earnings sentiment.  Ahead of another busy day earnings, Jobless Claims, and a Powell speech, U.S. futures suggest a modest yet mixed open with slight a weakness showing up in the Nasdaq but that could quickly change as data rolls out.  Buckle up for another day of challenging price action.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ALRM, AQN, MT, ARLO, AZN, BDX, BLNK, CPRI, CLNE, CCOI, DGII, FA, FVRR, FLO, GDRX, GRAB, HBI, HIMX, HOLX, ILMN, INDI, IRWD, KELYA, DNUT, LI, LGF, MTD, NWSA, NOMD, NVAX, OTLY, PLUG, RDNT, STNG, TPR, TTD, TDG, U, USFD, UTZ, VERX, WB, WRK, WPM, WWW, & YETI.

News & Technicals’

Sony, the Japanese electronics and entertainment giant, reported a lower operating profit for the second quarter of 2023, as it faced challenges in its imaging sensor business and other segments. The company’s operating profit fell by 29% to 211.8 billion yen ($1.9 billion), compared to the same quarter last year. The main reason for the decline was the weakness in the imaging sensor business, which supplies camera chips to smartphone makers such as Apple and Samsung. The business was affected by the global chip shortage, the slowdown in smartphone demand, and the increased competition from other suppliers. Sony also saw lower profits in its financial services and entertainment, technology, and services units, which include its music, movie, and gaming businesses. However, the company said it expects its PlayStation 5 console, which launched in November 2020, to meet its sales target of 25 million units shipped in 2023, despite the supply constraints and the rising costs of components. The PlayStation 5 is one of the most popular gaming consoles in the world and has been in high demand since its release.

Disney, the world’s largest entertainment company, reported its quarterly earnings on Wednesday, beating the profit estimates but missing the revenue expectations. The company’s profit was $1.12 per share, higher than the analysts’ forecast of $0.98 per share. However, the company’s revenue was $16.25 billion, lower than the expected $16.76 billion. The company’s revenue was affected by the decline in ad revenue, which fell by 13% to $2.6 billion, as well as the impact of the COVID-19 pandemic on its theme parks and movie studios. On the positive side, the company’s streaming segment, which includes Disney+, Hulu, and ESPN+, reduced its operating loss to $312 million, from $580 million a year ago. The streaming segment also added 18.5 million subscribers in the quarter, reaching a total of 179 million. Disney also revealed the quarterly results of its ESPN unit for the first time, showing that both revenue and operating income increased in the quarter, to $2.8 billion and $814 million, respectively. Disney’s CEO Bob Iger announced that the company plans to launch ESPN as a direct-to-consumer service by 2025, which will allow sports fans to access ESPN content without a cable subscription.

SoftBank, the Japanese technology conglomerate, reported a mixed performance for the second quarter of its fiscal year, as it recorded an investment gain on its Vision Fund but also a net loss for the quarter. The Vision Fund, which is SoftBank’s main vehicle for investing in startups, posted a gain of 1.3 trillion yen ($11.6 billion) for the quarter, thanks to a gain from the sale of its stake in Arm, a chipmaker, to a SoftBank subsidiary. However, this gain was partly offset by a decline in the value of some of the Vision Fund’s portfolio companies, such as SenseTime, a Chinese artificial intelligence company, which faced regulatory challenges in China. SoftBank also reported a net loss of 131.7 billion yen ($1.2 billion) for the quarter, compared to a net profit of 627.4 billion yen ($5.6 billion) a year ago. The loss was mainly due to a loss on derivatives and a loss on investments in listed stocks. SoftBank’s CEO Masayoshi Son said that the company remains confident in its long-term vision and strategy and that it will continue to invest in innovative and disruptive companies.

The DIA, SPY, and QQQ chopped sideways Wednesday lacking the volume to push through resistance levels though holding above their 50-day averages. Once again the magnificent seven enjoyed most of the bullish activity that held the indexes steady. The SPY edged up by 0.1%, extending its winning streak to eight days. The IWM, which is the only index that does not have representation from the magnificent seven continues to lag well below its 50-day average. Bond yields fell, with the 10-year Treasury yield dropping to around 4.5%, while the 2-year yield stayed around 4.95% and oil continued to fall sharply.  Today we have another busy earnings calendar with Jobless Claims, Fed speeches that include Jerome Powell, Natural Gas, and Fed Balance Sheet figures to find inspiration.  Expect choppy price action to continue with the uncertainty of inflation data pending next week.

Trade Wisely,

Doug