Market sentiment was upbeat on Monday after the Federal Reserve raised interest rates and hinted at more hikes to come. The S&P 500 jumped 1,000 points from Friday’s lows while its tech-heavy Nasdaq went up another 600 points, a day after the company reported that it plans to spend $10 billion on movies for Prime subscribers with Warner Bros Pictures. This week, AMC Entertainment is releasing one of Netflix’s most popular shows “The Walking Dead,” which will premiere this year. In addition, we have Apple Inc. (AAPL), whose CEO Tim Cook took questions from investors in a video conference call.
The stock market had been down about 80 percent since early March and recently fell below 10,000 amid fears of recession and uncertainty over whether Congress will pass Biden’s infrastructure bill. Analysts at Goldman Sachs cut their forecasts for earnings season by 90 percent and said the economy will remain weak into 2023, Reuters reported. There are also reports that U.S. stocks could soon plunge further to new lows due to surging inflation and supply chain snarl-ups.
Stock index futures
A strong dollar helped boost equities in response to the rate hike announcement, but commodities like crude oil, gold, silver, copper, wheat and other commodities also rose, Reuters reported. Meanwhile, the yield spread between two 30-year Treasury notes decreased to 2.8 percent, the smallest level in almost seven years, according to data provider VIX.
The greenback gained 0.3 percent early in morning trading, adding 0.35 points to 105.18, a level last seen in July 2019 when the U.S. dollar strengthened sharply against major currencies. The euro traded lower by 0.2 percent to $1.0207, while sterling slipped by 0.1 percent to $1.0396. Euro zone inflation hit 11.3 percent in May, slightly higher than economists expected. Energy prices increased by 5.9 percent in April, the biggest rise since November 2014.
New York City banned cryptocurrencies due to growing risks to financial stability and privacy. Earlier this month, Governor Andrew M. Cuomo announced that Bitcoin ATM machines will be shut down because they can facilitate crime. A similar decision came from Washington D.C. Mayor Muriel Bowser.
The city banned digital assets because criminals are using them as avenues for money laundering and drug trafficking. Other jurisdictions have taken steps, including China and Japan. They have either banned or limited cryptocurrency activities. Recently, an executive order by President Joe Biden stated that federal agencies would no longer allow transfers and exchanges involving some virtual asset classes, including decentralized blockchains and noncustodial wallets. That includes transactions among individual users, institutional clients and exchange providers. Crypto exchanges must comply by Sept. 16, 2023.
Apple (AAPL) posted quarterly profits $11.3 billion, exceeding analysts predictions for $9.5 billion. Revenue beat estimates for $83.9 billion, driven by services revenue, up 21 percent. Profit margin also exceeded expectations, rising 48.8 percent to 62 cents per share. The iPhone maker now has 12 consecutive quarters of profit growth. Shares rose 3.5 percent.
Amazon (AMZN) shares opened slightly higher, climbing 6.7 percent, after reporting record sales and profits at its e-commerce platform. Its top seller was subscription package service Prime, which increased its spending growth. But revenues were lower than Wall Street predicted. For a second quarter, Amazon reported net income of $5.2 billion, beating expectations by 56 cents per share. Sales grew 4.9 percent and profit margin expanded 140 basis points to 17.8 percent. Shares rose 5 percent.
Apple Inc. (AAPL) is nearing the release of a blockbuster movie next summer. It is already working on several projects, including “The Lego Movie,” due to begin filming in September, The Verge reported. Last month, Walt Disney Co. (DIS) announced that it is developing three new live-action remakes of “Star Wars” films starring Colin Farrell, Anthony Edwards and Oscar Isaac. The first film, set to debut July 25, 2022, is called “The Mandalorian.” Disney added that fans can expect to see familiar characters along with newcomers in the upcoming movies. Shares edged up 7.5 percent to $142.30. The company has yet to disclose full production details for each remake.
Apple TV+ launched with a bang and a splash last Friday, with 23 million households signing up for subscriptions, bringing subscriber numbers to 63.6 million. Apple TV+ accounted for 28 percent of all streams during prime hours, compared to just 15 percent for YouTube and 13 percent for rival Meta Platforms. Still, the streaming service had negative growth, dropping 2.3 percent from the same time last year, which was its busiest period of the pandemic. Some experts believe that the trend may reverse in late 2022.
Apple Inc. has a lot to celebrate this month. Thursday saw the release of iOS 14, macOS Monterey, watchOS 8, iOS 14 beta, iPadOS 14 and OS X Ventura. Tuesday will mark a busy start to August as Apple kicks off its fall event schedule with keynote presentations and investor meetings. Investors will want to keep tabs this week on corporate results and Apple Watch sales numbers. Shares are down about 0.5 percent at $137.60.
Crypto demand
Bitcoin price topped $31K after hitting its highest single-day gain since early June at $31,946.69. However, bitcoin was a mixed bag, gaining less than half the amount it lost the previous session at $19,723.50. Bitcoin rallied roughly 50 percent over past months and is continuing to look solid against the dollar. The key metric for Bitcoin, which often acts as proxy for risk sentiment, showed its latest move to the upside in mid-August. By contrast, crypto enthusiasts have warned that BTC might not see any more gains until inflation drops. Bitcoin rallied above $20,000 earlier in August and then broke out above $25,000 for the first time. As such, traders are worried that the US central bank’s monetary tightening could cause an economic downturn.
As of 4:38 p.m. EDT Friday, Aug. 1, BTC rose to over $31K, up nearly 49 percent from four weeks ago. While bitcoin still has room to climb, traders are looking for resistance around $23,000. However, based on historical patterns, the bearish pressure rally may not end for long. According to data from CoinGecko, there is a 50 percent chance of bitcoin breaking out above $23,000 in the coming days, followed by breakout attempts above $22,400, $23,500, $24,100, $25,100 and finally topping $26,000.
