2023.02.27 4,200 to be the major resistance

Data released by the U.S. Department of Commerce showed inflation-adjusted GDP increasing 2.7% YoY during 4Q22, lower than the expected 2.9%. The GDP data showed the PCE price index increasing 3.7% YoY in the fourth quarter. The core measure that excludes food and energy rose 4.3% YoY. The U.S. economic growth in the fourth quarter was weaker than estimated, reflecting a downward revision to consumer spending. S&P Global Manufacturing PMI for the U.S. increased to 47.8 in February of 2023, beating forecasts of 47.4. The Non- Manufacturing PMI was 50.5, higher than the expected 47.3 and hit an eight-month high. Overall, U.S. business activities recovered in February, but the manufacturing activities are still contracting.

According to data from the Mortgage Bankers Association (MBA), the 30-year fixed mortgages rate increased by 23bps to 6.62% in the week ended February 17th 2023, the highest level since mid-November. Mortgage applications in the US plunged 13.3% WoW. Applications to refinance a home loan were down 2.2% WoW and those home loan for purchases sank 18.1% WoW. Under high interest rates, the weakening of the US housing market has also dragged down economic growth. However, according to the Labor Department, initial jobless claims fell by 3,000 to 192,000 in the week ended Feb 16th, which is a sign of a strong labor market. The market expects that the possibility of raising interest rates by 50 basis points at the next Fed meeting is around 20%, and the interest rate is expected to increase to 5.35%. Under the influence of rising interest rates and inflation, we expect the U.S. stock market to have a higher chance of correction in the short-term. The S&P 500 index is expect to trade between 3,500 points and 4,200 points.

Technology stocks are expected to outperform in 1H23, and the market further expects that the semiconductor and SaaS sectors to enter an upward cycle. Investors can pay attention to companies with results beating expectations.

Cisco (CSCO) reported better-than-expected 2Q23 results and lifted its forecast for the full year. Revenue was $13.6 bn, higher than market expectations of $13.43 bn; net income fell about 7% to $2.77 bn; full-year revenue is expected to grow by 9%-10.5%, higher than market expectations of 5.7%.

Mgmt announced that the company achieved better-than-expected performance in the second quarter due to the continuous upgrade of supply measures, and mgmt would expect the company to continue maintaining a low order cancellation rate. In 2Q23, the revenue of Cisco’s largest business unit Secure, Agile Networks reached $6.75 bn, +14% YoY. In addition, the company announced an update to its AppDynamics cloud software and disclosed a restructuring plan that includes adjustments to its real estate portfolio, which may optimize the company’s capital structure. Based on the company’s positive guidance for the FY23 performance, it is recommended to buy at US$47.0, target at US$53.0, and stop loss at US$44.0.

Nvidia (NVDA) recently announced its financial results for the fourth quarter and full year of 2022. The company’s revenue in the fourth quarter was US$6.05 bn, -21% YoY but +2% QoQ; net profit was US$1.41 bn, -53% YoY but +108% QoQ; the company’s adjusted net profit in 4Q22 was US$2.17 bn, -35% YoY but +49% QoQ.

Compared with competitors such as Intel and AMD, Nvidia currently has the fastest GPU Hopper H100 and Ampere A100 architectures. The company and Dell launched the 15th generation of Dell PowerEdge systems, enabling enterprises to effectively leverage AI for transformation. The company is partnering with leading cloud service providers to offer AI-as-a-service, NVIDIA AI Cloud Service, in which customers can engage each layer of NVIDIA AI, including the AI supercomputer, acceleration libraries software, or pre-trained generative AI models. Generative AI is expected to create a significant opportunity, and the company is expected to benefit from the popularization of AI applications. It is recommended to buy at US$225.5, target at US$253.0, and stop loss at US$212.0.