Olymp Trade experts explain what’s going on and comment on the behavior of oil and the stock market using Visa as an example, which is a giant in the American financial sector.
The strongest stock movements over the past week:
- Exxon Mobil -6.29%. With $100 and a X20 multiplier, you could have easily made $125.80.
- NVidia -9.42%. With $100 and a X20 multiplier, you could have easily made $188.40.
- Chevron -5.43%. With $100 and a X20 multiplier, you could have easily made $108.60.
The week of July 12-16 was a flat week for the U.S. market. The Dow Jones failed to move above 35,000 points, the Nasdaq Composite stayed below the key 15,000 point level, and the S&P 500 failed to break through 4,400 points.
During the week, the following companies reported:
- JP Morgan Chase. The company reported second-quarter revenue growth of $31.4 billion with earnings per share (EPS) of $3.78. Against this background, the share price soared by a full percent. However, market bears quickly took theirs back by “shorting” the stock.
- Goldman Sachs Group. Revenue for the second quarter amounted to $15.39 billion, and EPS rose to just above $15 per share. As with the case of JP Morgan, the share price rose to $385 but then returned below $380.
- Morgan Stanley. The stock price fell to $91.34.
Visa reports on 27.07. The revenue forecast is at $5.84 billion and EPS at $1.34. Let’s look at the company’s financial results:
- In 2020, the company’s revenue fell by 4.9% to $21.8 billion. A year earlier, revenue was $22.9 billion. The net income also fell to $10.8 billion.
- The 5-year average ROE (return on equity) for the company is over 31%. In the industry, the ROE norm is 28.28%.
- The company pays stable dividends with a profit rate of 0.52%.
How will the market react to Visa’s statement? Most likely, we’ll see a decrease in capitalization because the revenue for the second quarter is not much higher than the financial results of the company during the first quarter, which means investors will likely prefer to “short” the stock.
OPEC+ countries have finally agreed on a gradual increase in oil production. Starting this August, oil production will increase by 400,000 barrels per day until OPEC+ revisits the production question in December.
Adjustments have been made for some countries’ base production levels. For the UAE in particular, the production level has been raised from 3.17 to 3.5 million barrels per day, which means the country will make more money. The group plans to reexamine the plan in December of this year.
With the news of the agreement between the countries, the price of Brent crude oil dropped below $70 per barrel. In fact, the markets were waiting for the agreement to be reached, and the price rose mainly because oil traders were counting on the agreement to break down.
On the other hand, that wouldn’t have been the correct approach either because a collapse would mean a price war, which means drilling all you want, but that would collapse the price even more. As it stands now, the price can easily spiral to $60 per barrel, where there is a strong level of support.
The trend on the U.S. stock market is likely to change to bearish. The same applies to the “black gold” market. It’s probably better to wait for the price to decrease some more. In the meantime, we continue to closely follow the reporting season in the United States.