S&P 500 Drops – Microsoft Q4 Earnings on Horizon

S&P 500  => Falls towards 4350

Microsoft  =>Tests 200 sma

EUR/GBP  => The pair rises above 113.50

S&P Falls Into Correction Territory

The S&P plunged through 4300 to a low of 4220 in the previous session as fears over Russia invading Ukraine and concerns over a more hawkish Fed hit market sentiment. Mid-session, the selloff looked overdone, and the index rebounded, closing the session in positive territory. Today the same fears are back keeping the market depressed. Attention will remain on Russia and also on the Fed as the two-day monetary policy meeting begins. The Fed is expected to be hawkish, potentially pushing for 4 or 5 rate hikes his year. Fears could grow that the US economy is unable to absorb the fast path back to policy normalization, which could send stocks lower.

S&P 500 daily market update chart

What’s next for S&P?

The S&P fell out of its multi-month rising channel and broke below its 200 sma last week in a bearish move. The selloff extended yesterday to a low of 4220, a level last seen in July last year. This is the first lower low on the daily chart since October. The RSI has moved into oversold territory so there could be some consolidation at these levels. Immediate support can be seen at 4270 the October low ahead of 4220 yesterday’s low. On the upside, resistance can be seen at 4445 the 200 sma ahead of 4490, the 3rd December low.

Microsoft Q4 Earnings Preview

Microsoft is due to report today after the closing bell, with Q4 earnings coming after an announcement last week that Microsoft will buy Activation Blizzard for almost $69 billion, its largest acquisition ever. Expectations are for a solid quarter from Microsoft with Wall Street forecasting revenue will rise 18% to $50.74 billion, up from $43.08 billion in the same period the year before, this would mark the slowest rate of growth in 12 months. That said, it would still be better growth than what is expected from the other big tech giants. EPS is expected to rise to $2.32 above $2.03.

Japanese yen rises on safe-haven demand

USD/JPY is falling lower as the risk-off mood in the market continues. Concerns over Russia invading Ukraine ramped up yesterday as diplomatic families were ordered by the US & UK to leave Kiev and as Russia has built up 100,000 troops on the Ukraine boarder. These fears of invasion continue the haunt the market today and are combining with concerns over a more hawkish Fed as the US central bank kicks off its two-day monetary policy meeting. Will the US economy be able to absorb the rate rises that the Fed plans for this year?

UK composite PMI Jan Actual: 50.9 (1.4) Previous: 53.6


Support can be found at 113.50 (weekly low) and 113.00 (round number).           

Resistance can be seen at 114.30 (50 sma) and 115.00 last week’s high).


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