US Open: Wall Street Extends Gains, Earnings from Microsoft and Alphabet Ahead!

• Wall Street opens higher
• Strong conference board reading do not suggest recession
• Earnings from GE and GM

Wall Street opened higher on Tuesday, the most intensive day during the most intensive week of the earnings season. Today, investors were served with earnings from General Electric and General Motors. Quarterly earnings were decent, and for General Electric, they were even much better than expected. After today's market session, quarterly earnings from Alphabet and Microsoft will be published, which are highly anticipated reports. Positive sentiment was also supprted by the Conference Board reading. Consumer survey showed a strong rebound, lowering the risk of a recession - at least based on pure data analysis.

The Conference Board Consumer Confidence Index for July 2023 rose to 117.0, up from 110.1 in June, representing the highest level since July 2021. This increase was attributed to an improved consumer outlook towards the present situation and the future, particularly in the labor market conditions. Interestingly, expectations for future business conditions and job availability also improved significantly. However, expectations for future income saw a slight dip, possibly due to slower wage growth compared to a year ago. Although consumers projected a slightly increased likelihood of a recession, the fear of an economic downturn has lessened compared to earlier in the year. Overall, consumers signaled still-healthy family finances, although their expectations for their financial situation six months from now softened slightly.

Strong data from the Conference Board Survey show a growing divergence between consumer expectations and hard industry data. ISM points to further economic contraction, while in the meantime, the Conference Board indicates an improvement in sentiment and a strong market.

The S&P 500 index (US500) is currently trading at 4588 points, up by 0.07% today. The index continues to exhibit a bullish trend, staying within a solid ascending channel, and is presently near its upper boundary. This suggests a strong positive momentum in the short term. The next key resistance level to watch is at 4633 points. If the index manages to break through this level, we could see further upside momentum. On the downside, the immediate support lies at 4550 points. Traders should observe this level carefully, as a breach could signal a potential reversal of the current uptrend.

Company News:

• Alaska Airlines Group Inc. (ALK.US) shares drop 4.4% after the airline’s warning of pressure on third-quarter results from declining ticket prices and softening demand for domestic travel overshadowed second quarter results.

• General Motors (GM.US) shares are falling 3.2% after the company reported Q2 earnings. Tuesday's report revealed that despite a surge in revenue and per-vehicle transaction prices, the automaker is grappling with mounting costs and challenges in ramping up production of electric vehicles. This has resulted in a decrease in adjusted pre-tax profit and margins in its vital North American market from the first quarter.

• General Electric (GE.US) shares are gaining 5.17% after company reported robust second quarter results for 2023, with total orders increasing by 59% to $22.0B and total revenues (GAAP) up by 18% to $16.7B. Its profit margin (GAAP) was 8.3%, a growth of 1,510 bps, and it recorded a continuing EPS (GAAP) of $0.91. The company attributes its strong performance to double-digit growth in orders and revenue, led by robust services growth across its portfolio, increased demand at GE Aerospace, and record Renewable Energy orders. CEO H. Lawrence Culp, Jr. announced that GE is raising its full-year guidance due to market strength and significant profit and cash improvement. He also mentioned that GE Aerospace and GE Vernova are preparing to launch as two independent companies in early 2024.

• Spotify Technology (SPOT.US) shares are down 10.7% after the audio streaming company reported second-quarter revenue that missed expectations. It also gave a revenue forecast that is below the analyst consensus, even as its forecast for monthly active users was better than expected.