SPX 500, US 100 at record highs - Tesla earnings in focus

• Tesla shares in focus - Tesla announces plans to build a new EV model with full self-drive technology hours before releasing the company’s Q4 earnings results.
• SPX 500, US 100 remain near record highs as Netflix and chip stocks climb
• IBM, Service Now and Lam Research are also expected to report after the close

Earnings and the anticipated impact of tech giants

In recent times, the US stock market, particularly the SPX 500 and US 100, has reached unprecedented heights, showcasing a remarkable resilience that has caught the attention of investors and analysts alike.

This bullish trend, defying the turbulent political and geopolitical landscape, can be largely attributed to robust corporate earnings.

As we dissect the financial reports of various US companies, the 2023 Q4 earnings and revenue forecasts paint an illuminating picture of the market's health and potential trajectory.

The driving force of corporate earnings

2023 Q4 Performance Overview

The final quarter of 2023 witnessed US companies across various sectors exceeding expectations. A major theme that has carried through into the new year is the incremental increase in the demand for AI and resilient consumer spending in the world’s largest economy.

This performance has been a cornerstone in bolstering market confidence, indicating that despite external uncertainties, corporate America remains on a solid financial footing. Verizon, Netflix and are prime examples, having already reported results that reflect the market's vigour.

The enthusiasm that some of the above-mentioned candidates and Netflix provided in yesterday’s session boosted the tech-heavy index to its second, consecutive all-time high which remains in place as imminent resistance at a level of 17450. US 100 daily chart with 20 - day MA

US 100 daily chart with 20 - day MA

Source: TradingView

The resilience of the US stock market, marked by record highs in the SPX 500 and US 100, is a testament to strong corporate earnings amidst a challenging external environment.

Tech Giants: The market movers

However, the spotlight is now on the technology sector, where the anticipation is building around the earnings reports of the 'Magnificent 7' – Apple, Amazon, Microsoft, Alphabet, Meta, and Tesla.

These tech behemoths are not just pivotal players in their respective fields but are also significant contributors to the indices of SPX 500 and US 100, making their financial disclosures a potential market-moving event. Tesla earnings in focus

Among the 'Magnificent 7', Tesla, the trailblazer in electric vehicles, is poised to release its Q4 earnings later today (24/01/2024), drawing immense attention. Tesla's influence extends beyond its product line; it's a barometer for market sentiment, especially given the current US-China tensions and supply chain constraints.

After a rather tumultuous start of the new year, the EV car maker has faced several headwinds, including rising competition from Chinese EV manufacturer BYD and increasing strike action across Northern Europe. With BYD reporting record EV sales in the fourth quarter, Tesla has now revealed plans to build new electric vehicles in mid 2025, hours before the release of its Q4 earnings.

Tesla technical levels

At the time of writing, Tesla shares are trading at a price of $210.96 in the pre-market session, just below the midpoint of the 2020 - 2021 move, currently providing resistance around the key psychological level of $218.

Tesla Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

After suffering four weeks of consecutive losses, a robust earnings report may just offer Tesla bulls the opportunity to regain confidence and drive prices higher.

In contrast, if optimism fades and bears remain in control, further price depreciation and a move below $200 may leave the door open for a retest of the October 2023 low of $194.04.

Q4 Earnings expectations:

Why Tesla's earnings matter

• Index weightage: Tesla's significance is further underscored by its position as the ninth largest component of the SPX 500 (1.44% of the index) and the seventh largest in the US 100 (3% weighting).

When Tesla released its 2023 Q3 earnings report after the market closed on 18 October 2023, the US 100 lost 1.41% in the next trading session, dragged down by a 9.30% decline in the price of Tesla shares.

• Market volatility: Tesla's earnings have the potential to induce volatility. A deviation from expectations could trigger significant price swings, compelling market participants to recalibrate their expectations for the EV industry and the broader tech sector.

As we await the Q4 results from the 'Magnificent 7', with Tesla in the limelight, it's clear that these tech giants are more than just corporate entities; they are market influencers whose performance can sway market dynamics. Their reports will not only provide insights into their own prospects but also set the tone for market expectations and sentiments in the coming months.

Past performance does not guarantee or predict future performance. This article is offered for general information and does not constitute investment advice. Please be informed that currently, Skilling is only offering CFDs.