Worries in stock markets, especially in tech-heavy Nasdaq, seem to have returned, even with the US indexes registering solid weekly gains last week, with the S&P 500 adding 2.5%, the Nasdaq Composite jumping 4.3% and the Dow industrials rising 1.8%. 

Fed officials are broadly expected to raise interest rates by a quarter of a percentage point when their two-day meeting concludes Wednesday, lowering the size of the increase for a second straight meeting. Officials are also likely to debate how much further they need to go in taming inflation before pausing rate rises. 

Thus, we see some rising cautiousness ahead of the Fed meeting and the Tech earnings that weigh on market sentiment. Despite that, investors remain cautious about the economy. The Fed, under Mr Powell, is determined to tame inflation, and many believe the Fed is unlikely to quickly begin lowering interest rates as it has done in the past. Some investors worry that sustained high rates could drag the economy into recession. 

Apple: Bearish sentiment expected as earnings loom 

Apple's share prices may drop to $138 in the coming weeks if the company reports bleak Q4 earnings and outlook. Apple is expected to post its first year-over-year revenue decline since 2019 when it reports earnings on Thursday this week.

The company could not build enough of their high-end iPhones when its primary assembly facility in China was shut down for weeks during Covid lockdowns. Customers in many regions noticed as early as November that Apple couldn’t promise Christmas delivery of a new iPhone.

Apple gave a rare warning to investors that month explaining that production issues would result in lower shipments than previously anticipated. It was a data point that caused many analysts watching the stock to cut their estimates.

Analysts now expect Apple to report just over $121 billion in revenue in the December quarter, which would be a slight decline from the company’s $123.9 billion from a year ago.

Investors want to know whether the shortage of iPhone 14 Pro models in the December quarter will drive demand in the March quarter now that supply has improved.

Tesla: price may outperform other techs as its long-term outlook improving 

Last week, the electric-vehicle maker’s stock leapt by more than 30% following its earnings announcement. This year so far, Tesla shares are up by around 35%. These moves came with a few developments: The company reported fourth-quarter earnings and revenue that topped analyst projections last week. It also cut prices in the US and Europe to boost demand in January earlier.

Tesla may outperform its peers in the Nasdaq index. Tesla’s fourth-quarter earnings pointed to further gains for the EV maker. The company is well positioned for long-term growth with its leadership position in terms of cost structure and is a full solution provider in clean mobility. The combination of price cuts and federal EV credits will drive a near-term demand resurgence. He also described its balance sheet as robust. Despite that, TSLA’s long-term upside potential is significant following the stock’s steep decline over the past few months. In some way, its valuation is attractive given that it is “trading near its cheapest multiples” in years.

The share price of Tesla may boost to $200 if the overall stock market sentiment continues to improve.

Meta: The ad business saw a third quarter of decline, and the stock’s fundamentals are weak.

Meta, whose ad business is expected to report a third straight quarter of declines, and its steepest drop yet at more than 6%, according to current market consensus, revenue is expected to fall another 2.8% in the first quarter, before sub-1% growth returns in the second period.

Since April 2021, when Apple’s ATT update went into effect, Meta has been improving its advertising technology and utilising data from other sources. Facebook has had many challenges coming up with tools and metrics to prove the effectiveness of those ads.

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Fullerton Markets Research Team

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