Indices Market. Can chipmakers take the pressure?
Stock markets yesterday were in a slump after the White House announced boundaries on Chinese telecoms equipment maker Huawei Technologies Co Ltd.
The news mostly affected the technology sector in the US but at the same time raised concerns that the trade tensions between the US and China could escalate further.
Also, the majority of market participants were skeptical on US stocks that are partners of Huawei and how they would be affected.
The Nasdaq Composite dropped 1.46%, to 7,702.38 while Dow Jones Industrial Average dropped by 0.33%, to 25,679.9 and the S&P 500 lost 0.67%, to 2,840.23.
US Sino matter on Google, Huawei and Intel
On Sunday, Alphabet Ink the mother company of Google, announced it was limiting its ties with Huawei and the services it provides to it, including the transfer of hardware, software and technical services.
However, they did also say that users with services on Google play and the protection the app offers, will continue for the existing Huawei users.
But what happens to the newcomers that are planning to buy Huawei phones? Of course this has the potential of hurting the future of Huawei revenues and potential clients.
This could also have a negative effect on Google as it has been basically forced to cut out a strong phone maker that until now supported its applications.
Could this be the reason for a new application provider to replace Google? Huawei has made a tremendous run in the past 10 years and its products are shipped almost everywhere around the world, so it could have boosted further Google’s services, along with own reputation.
Now that they are on separate paths can the effect be evident on both companies? Chipmakers were significantly affected negatively by Huawei’s news and yesterday some of the biggest names including Intel Corp were forced to a selloff, dragging the technology sector even lower.
Many analysts believe the company is undergoing a difficult period due to a mixture of disappointing earnings and the trade war fears that have put external pressure on the company.
Yesterday’s market reaction sent Intel’s stock even lower marking approximately a $15 USD drop since its highest price reached in 2019 .
The highest price Intel reached in the current year is at $59.59 while today is trading at $43.56.
Is this an opportunity for Investors to jump in at a bargain price? The US Sino matter has obviously affected the company negatively.
The matter may continue to be a thorn for China and the US as tariffs maybe here to stay for some time.
Tariff-sensitive Tech and Auto Stocks
Today, European shares moved up on Tuesday after the United States temporarily eased their stance towards China’s Huawei, easing trade tensions and lifting tariff-sensitive tech and auto stocks, while the banking sector also gained.
The trade-sensitive DAX was outperforming after the U.S. Commerce Department said it would allow Huawei Technologies to purchase American made goods.
The news helped the markets restore some confidence and lifted European chipmakers, which had dropped after reports suggested they may pause shipments to the
Chinese telecoms tech giant.
Concerns about U.S.-China trade war
Separately from the trade wars and its market reactions, news that German Daimler is taking small steps towards better managing its costs, sent the automaker somewhat higher during today.
Handelsblat, a popular economic German newspaper released the news to the public and went as far as indicating Daimler aims at a 20% reduction in its administration costs.
The company’s annual general meeting is on May the 22nd and Ola Kaellenius will be taking over the CEO position from Dieter Zetsche and so the upward effect may be continued in the next days.
As a conclusion, after touching record highs at the beginning of May, Wall Street’s main indexes have been under strong selling pressure on mounting concerns about a prolonged U.S.-China trade war.
We must say the US is currently enjoying being the dominant power making the decisions.
Yet, the US government decision to fight back on Chinese business methods could backfire if the action is too aggressive.
Evidence is HSBC’s warning that higher prices following the latest increases in tariffs could reduce demand as the comment was made for Apple Inc.’s future performance.
The stock was down approximately 3% yesterday on fears of reduced demand for IPhones.
US500 Technical Market Outlook
At the moment the index is moving in a sideways motion between the (R1) 2874.00 resistance level and the (S1) 2836.96 support line.
In our opinion there is a very strong resistance level at 2874.00 which has been tested various time in May and could be considered a make or break level.
Yet above that level we could see the index making a small stop at (R2) 2892.15 resistance level and if surpassed may see the index head for the (R3) 2911.30 resistance line.
In a selling trend we may see the index drop to the (S1) 2836.96 support level and move even lower for the (S2) 2819.21 support line.
Even lower we could find the index making a stop at the 2804.55 support barrier.