S&P500 Forecast: Stocks fall after Tesla, Netflix disappoint

US futures

Dow futures +0.05% at 35075

S&P futures -0.26% at 4555

Nasdaq futures -0.75% at 15705

In Europe

FTSE +0.5% at 7637

Dax +0.13% at 16150

• Tesla & Netflix take the shine of tech stocks
• Jobless claims fall to 228k from 237k
• Economists now expect just 1 rate hike this year
• Oil edges higher amid a mixed demand picture

  Tesla’s margins fall, Netflix revenue misses

US stocks are pointing to a mixed open, with the NASDAQ100 on the S&P500 heading lower while the Dow Jones ticks a few points higher.

The tech sector is being hit after disappointing results from both Netflix and Tesla. The tech giants have been partly responsible for the impressive rally so far this year, so the bar was set high, and they failed to live up to expectations.

Elsewhere earnings season has gotten off to a relatively promising start, with around ¾ of those S&P500 companies that have reported beat forecasts.

On the economic data front figures have been mixed UK jobless claims unexpectedly fell two 228k, down from 237k in the previous week and well below the 242k forecast. The data highlighting the resilience of the US labour market, which could help EU S economy avoid a recession.

Meanwhile the Philly fed manufacturing index came in below forecasts at -13.5 in July, from -13.7 in June.

The data comes as the FOMC is expected to raise interest rates falling 25 basis point next week TO 5.25%-5.5%, the highest since 2001. However, with inflation cooling, economists are now expecting this to be the final rate hike-in line with the markets.

Corporate news

Tesla falls after quarterly results. While the EV maker posted record-high revenues of $24.93 billion and beat on earnings, the market was more concerned about a fall in gross profit margins to 18.2% from 26.2% last year after a series of price cuts. Later Musk suggested that more price reductions could be coming.

Netflix is also falling premarket after mixed results. The streaming giant’s crackdown on password sharing saw the company added 5.9 million new subscribers in the quarter over double what analysts were expecting. However, revenue was weaker than expected at $8.2 billion and Q3 revenue guidance of $8.5 billion was also weaker fan expected.

Apple will also be in focus and reached a record high after announcing it is developing a new generative AI programme to compete with open AI's ChatGPT. Apple GPT is being tested.

S&P500 forecast – technical analysis

The S&P 500 is hovering around 4550 after hitting 4578 a 2023 high in the previous session. The RSI remains deep in overbought territory, so buyers should be cautious. An extension above 4578 brings 4600 round number into play and the upper band of the riding channel. On the downside,4550 offers support ahead of 4500 round number and 4460 the June high.

FX markets – USD rises, GBP, GBP drops

The USD is rising for a third straight day after jobless claims data fuel bets that the US could avoid a recession, despite the Fed hiking rates aggressively.

EURUSD is holding steady after German PPI cooled to 0.1% YoY, down from 1%, adding to signs that inflation is cooling. Eurozone consumer confidence is due later and is expected to improve moderately to -16.

GBPUSD is falling for a fifth straight session as investors continue to unwind longs after weaker-than-expected UK inflation data. The market is now favouring a 25 bps over a 50 bps hike in the August meeting and a peak rate at 6%, below the previously expected 6.25% peak rate.

EUR/USD -0.0% at 1.120

GBP/USD -0.35% at 1.2895

Oil edges higher amid a mixed demand outlook picture

Oil prices are edging modestly higher in quiet trade after amid a smaller-than-expected draw in US stockpiles, a mixed demand outlook, and a weaker USD.

The EIA oil inventory data disappointed, showing that US oil stockpiles fell by 708k barrels in the week ending July 14, well short of the 2.4-million-barrel draw expected.

The US oil demand outlook could be improving. The market is increasingly confident that the Fed is close to the conclusion of its tightening cycle. Meanwhile, US economic data is showing that the economy remains resilient. Expectations of a US recession happening in the next 12 months appear to be falling, which would be good news for the demand outlook. Goldman Sachs revised down the odds of a US recession to 20%, down from 25% previously.

Meanwhile, the demand picture in China, the world's largest importer of oil, is mixed amid its slowing economy but high oil import figures.

WTI crude trades +0.4% at $75.65

Brent trades  +0.45% at $79.75

Looking ahead

15:00 Eurozone consumer confidence

15:00 US existing home sales