2023.02.13 4,200 to be the major resistance

According to data from the Mortgage Bankers Association’s (MBA) data, mortgage applications increased 7.4% from one week earlier for the week ending February 3. U.S. mortgage rates fell for the fifth consecutive week, with demand for purchases and refinancing both going up. The Refinancing Index was up 18% WoW but was 75% lower one year ago. As mortgage rates continue to fall, demand is gradually picking up. The Institute for Supply Management (ISM) announced that PMI unexpectedly climbed to 55.2 in January of 2023, rebounding sharply from 49.2 in December, and beating market forecasts of 50.4. However, the ISM survey’s forward-looking new orders sub-index plunged to 42.5 in January from 45.1 in December. The data showed that none of the 18 manufacturing industries achieved growth in new orders in January.

For the labor market, the January jobs report showed non-farm payrolls increasing by 517,000, far higher than the expectation of 187,000 and the previous 223,000 and together with labor force participation rate rising to 62.4% in January, the unemployment rate fell to 3.4%, below expectations of 3.6%, the lowest level since May 1969. Jerome Powell said that U.S. inflation should drop significantly this year, however as 2022 CPI rose 6.5% YoY, more than triple the Federal Reserve’s target of 2%, coupled with the solid labor market in January, the market expects that interest rates may eventually rise to 5.5%. The Fed has still not released any signal of policy shift, and the outlook for the economy is still uncertain. We expect the S&P 500 index to trade between 3,600 -4,200 points.

ChatGPT, a chat robot model recently launched by the artificial intelligence research company OpenAI, has received widespread attention. With the continuous upgrading of products investors should pay attention to the performance of technology stocks

Microsoft (MSFT) has released 2Q23 results. Due to the decline in sales of computers and laptops, the company’s revenue in 2Q23 was US$52.75 bn (+2% YoY), but lower than the market’s consensus estimate of US$52.93 bn. The company’s net profit was US$16.43 bn, -12.5% YoY. However, in the second quarter, the company’s cloud business revenue was US$27.1 bn, +22% YoY.

Microsoft announced additional investment in OpenAI and will accelerate the integration of its products with OpenAI-related technologies. Microsoft will deploy OpenAI programs in Azure, including GPT, DALLE, and Codex programs while Azure is OpenAPI’s exclusive cloud provider. ChatGPT has advantages in text supplementation and code assisted editing, which will have a synergistic effect with Microsoft Office and other software products. After the introduction of ChatGPT technology, it will improve the search results’ matching. Looking forward, Microsoft as a leading technology company and with the introduction of OpenAI into the Azure product line, it is expected to benefit from the development of artificial intelligence. It is recommended to buy at US$255.0, target at US$286.0, and stop loss at US$240.0.

Facebook’s parent company Meta Platforms (META): Revenue in 4Q22 was US$32.17 bn (-4% YoY), above expectations of US$31.65 bn. However, the company’s net profit in 4Q22 was US$4.65 bn, -54.8% YoY. The company’s metaverse division Reality Labs had revenue of US$730 mn, -17.1% YoY. Reality Labs’ operating loss was US$4.28 bn, +29.5% YoY.

Meta has focused on the metaverse in recent years. The company launched the Meta Quest Pro product in 2022, which is expected to enhance VR experience in social, gaming and work. However, Meta Quest Pro is mainly aimed at the enterprise and the professional user markets, the weak shipment volume puts pressure on revenue growth. During the conference call, management said that AI supports many functions of Facebook and Instagram, including recommending Reels videos, photos and posts to users, and the company’s goal is to integrate these underlying AI technologies. The company estimates a capital expenditure of US$30-33 bn for its application department this year and expects an acceleration in the investment in Reality Lab in 2023. It is recommended to buy at US$169.0, target at US$190.0, and stop loss at US$159.0