Will Above-Expected GDP Growth Fuel a New Rally in U.S. Stocks? [Learn Premium Weekly Review]

Invest With Cici wrote a column · Jan 26 04:14

Will Above-Expected GDP Growth Fuel a New Rally in U.S. Stocks? [Learn Premium Weekly Review]

Market Overview: Q4 GDP Beats Expectations, the US Economy Shows Its Toughness!

This Thursday, the US dished out the preliminary Q4 GDP annual growth of 3.3% for 2023, sailing past the expected 2%, with a robust annual growth rate of 2.5% for the year, besting Wall Street's earlier forecast of 1.9%.

That's seriously impressive data. It's not just the GDP numbers that highlight the strength of the US economy—this week also showed better-than-expected durable goods orders and new home sales. The economy is demonstrating remarkable resilience, even with such high interest rates.

Following these numbers, the market has shifted focus away from the chances of a recession to concerns over whether this red-hot economy could make inflation harder to tame. The December CPI released earlier this month already exceeded expectations, which led to slashed hopes for a rate cut in March. And now, all eyes are on the December PCE data coming out this Friday night for a clearer picture.

Market Hotspots: Tech Earnings Mixed as Tech Giants Report

Following last week's bank earnings, this week the tech behemoths started rolling out their financial reports. The tech sector, with its hefty market cap, is in the spotlight as the market anticipates potential surprises to support the continuous rally of US stocks. The performance, as we've seen from the reports released so far, is varied:

📺 On Tuesday, the streaming giant $Netflix (NFLX.US)$ reported after the bell and blew past expectations, adding 13.12 million new subscribers—the highest quarterly addition ever—taking its total subscriber count to 260 million. Its revenue hit $8.83 billion, exceeding market forecasts of $8.71 billion. The company predicts double-digit revenue growth for the full year of 2024. Post-earnings, Netflix's stock price soared over 10% the following day. Comments say: Netflix has won the streaming war.

🚗Wednesday saw $Tesla (TSLA.US)$ earnings release, with the company's Q4 profits tumbling by 12%. Tesla's stock had already dropped 16% since the start of the year before the earnings report, underperforming the Nasdaq's 3% gain over the same period, suggesting the market had anticipated disappointing results.

However, the primary reason for Tesla's stock dive after hours was its bleak outlook for the future, which left the market both disappointed and confused. Tesla warned that production and delivery growth in 2024 would slow and did not announce delivery targets for the year—a rather unusual move that unnerved the market. Tesla had a 2023 delivery goal of 1.8 million vehicles and squeaked past that goal with just over 1,805,000 deliveries. Considering Q4's year-over-year delivery growth of 20% and the expected slowdown, 2024 deliveries may not surpass 2.16 million. Major banks have also lowered their price targets for Tesla following the earnings report.

Tesla currently faces challenges like waning demand, fierce competition, and cost pressures. However, Musk reiterated that as the Fed starts cutting rates, consumers' ability to afford Tesla vehicles will increase. The company is also working on a next-generation "low-cost" model expected to start production in late 2025.

💻On Thursday, $Intel (INTC.US)$the world's largest computer processor manufacturer revealed its latest earnings. Despite Q4 revenue and earnings per share surpassing expectations, revenue from the highly anticipated, lucrative data center segment fell short, with a 10% decline year-over-year to $4 billion. The company's outlook for the new quarter isn't bright either, its stock plummeted post-earnings, dropping over 10%.

This year, chip stocks, led by Nvidia and AMD, have seen astonishing gains within a month, reaching new highs driven by expectations for AI penetration in the PC and mobile hardware sectors and continued data center growth. Intel's report undoubtedly put a damper on the optimistic expectations, with $NVIDIA (NVDA.US)$ and $Advanced Micro Devices (AMD.US)$ stock prices both taking hits after hours. It's a signal that investors might need to watch out for a potential short-term pullback in chip stocks.

Week's Premium Learning materials

Trading Lessons: This week we learned another technical analysis tool based on the Fib sequence, the Fibonacci extensions. Similar to the Fib Retracement (Golden Section), both use ratios such as 38.2% and 61.8% to explore support and resistance levels.

However the application scenarios are different: retracement lines are used to predict retracement points, while expansion lines predict the extent of the original trend after a retracement. Combined with wave theory, RSI, etc., it can help better identify market trends and set targets.

Opportunity Mining: In 2023, AI became the hottest topic for investors. AI PCs, as computers equipped with high-performance chip modules and capable of running AI models locally are expected to trigger a super replacement cycle for PCs in 2024. Various chip manufacturers such as $Intel (INTC.US)$, $Qualcomm (QCOM.US)$, $Advanced Micro Devices (AMD.US)$, and $NVIDIA (NVDA.US)$ will launch corresponding products, and device manufacturers such as Lenovo, $HP Inc (HPQ.US)$, and $Dell Technologies (DELL.US)$ are also actively deploying the market. Although AI PC needs to overcome the potential risks of high cost and supersaturated practicality, institutions and enterprises are still optimistic about its market prospects.

Trading Insights from Learn Group

@ZnWC
I bought $Alphabet-C (GOOG.US)$stock using the Stock Regular Saving Plan (RSP). The trading strategy is similar to Dollar Cost Average (DCA).

According to market news, the Internet search leader is expected to post quarterly earnings of $1.60 per share in its upcoming report, which represents a yoy change of +52.4%. Revenue is expected to come in at $70.71 billion, up 12% from the year-ago quarter. Recent analyst ratings and price targets are also within my risk appetite ($140 - $180). Based on indicators, 12 are bearish (overbought), 2 are neutral and 1 is bullish. The stock price may show short-term volatility, but this risk is within my acceptable range. There is a high probability that the stock price will spike after the Q4 earnings release (January 30, 2024) and continue to trend higher in Q1. Market sentiment is also upbeat about Google's recent launch of several new AI tools for retailers to improve the online shopping experience and other retail operations. At the same time, competition from rivals such as Microsoft continues to pose a threat to its search engine and cloud businesses.

To avoid emotional trading - panic selling and fomo buying - Stock RSP is used. My investment plan is set at $50 per day for 1 month. The estimated number of purchases is 20 and the required budget is $1,000. Since I use DCA, the price of the stock I buy changes daily. The P/L percentage target is revised after 1 month to a more practical range. The preliminary stop loss is set at -10% and the target profit is +10% and the stock is to be held for a maximum of one year.

Learn more about RSP

@Bull Todd
I bought in $PayPal (PYPL.US)$ at $60.5 along the uptrend line, and after the box broke through at $65, it showed signs of weakness in the following uptrend, so I decisively stopped the profit at 66.1. The gain was about 9.5%. Its price reached a high of $68 that day but quickly fell back and failed to go higher. This PayPal deal is a textbook case of box breaking. The same strategy also applyed in $Micron Technology (MU.US)$.

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Invest With Cici OP : Welcome more partners to contribute trading insights hah, learn from each other's trading ideas!

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Bull Todd : Cici has worked hard

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