The RoboMarkets Weekly Review and Outlook – DAX Bumps Along the Top – Dance Into May With the Fed

Jürgen Molnar, Capital Market Strategist RoboMarkets

28 April 2023

The market seems bumped at the top, good news can no longer lure buyers onto the floor. Some investors certainly want to wait for the Fed meeting next week.

Whether their results can provide the necessary positive impulses, however, is questionable. Much hope for a pause in the interest rate hike cycle already seems to be priced in, so selling on facts could also usher in the correction that is in the air. The question then inevitably arises whether this year, true to the stock market bon mot “Sell in May and go away”, the less profitable stock market phase will now begin.

The Four Big Ones Could Convince

In addition to good quarterly figures, Google’s parent company Alphabet’s announced share buyback programme of 70 billion dollars provided for share price fantasy. Microsoft was also a convincing performer, with the share price rising by double digits. A quarterly profit of 18 billion dollars, nine percent more than in the previous year, was clearly more than expected. Both companies now want to invest more of the profits from their core business in the artificial intelligence business.

The share price of Facebook parent company Meta also rose significantly. Rising sales and the general hype around AI pushed the share to a new high for the year. The fact that profits fell compared to the previous quarter due to high investments was not a cause for concern. Online retailer Amazon, on the other hand, was somewhat out of line. Despite a surprising increase in turnover, the share turned negative again after an initial positive reaction. Overall, however, it was a strong week for the big four, and next week Apple will have its say.

Snap With Flop

The Snap share, however, plummeted by 20 per cent after disappointing results. The only slight increase in user numbers is likely to have been the main trigger for the sales. A look at the long-term chart reveals why. One and a half years ago, the share price was still over 70 US dollars, and the rapid growth in users was worth it to investors. This is now missing, and there is no real strategy to monetise the users. If the company cannot avert this trend, it could soon disappear from the stock exchange.

Viessmann Becomes American

A 12 billion euro acquisition is currently taking place off the stock exchange in Germany. The heating manufacturer Viessmann is selling its heat pump business in the USA to Carrier Global. The sale of a German company is nothing special, but the timing is. This is because the German government’s decision to change the heating system means that this business sector in particular can be expected to generate significant sales in the next few years.

Either the Americans’ offer was so good or Viessmann cannot cope with the increasing demand on its own. The company expects sales of four billion euros for the division in the current year alone. Should they be able to meet all the demand, the Americans’ investment should pay for itself quickly.

Dance into May with the Fed

After numerous Fed representatives have dispelled any sense of uncertainty in recent weeks, a rate hike of another 25 basis points next Wednesday should be a foregone conclusion. But will it be the last one in this cycle? There is still a tentative optimism in the stock market that the Fed can achieve a soft landing for the economy, i.e. a return to normal inflation and no recession. If Fed Chairman Powell destroys this optimism with a continued overly aggressive tone, May is likely to live up to its reputation this year.

DAX – Current Supports and Resistances

Supports: 15,750/15,700 + 15,550/15,500 + 15,400/15,350

Resistances: 15,850/15,900 + 16,000/16,050 + 16,200/16,250

This article is from RoboMarkets.