Interactive Investor

US shares trading offer lands at heart of Q4 2022 earning season

31st January 2023 15:23

Jemma Jackson from interactive investor

interactive investor comments on US earnings season.

With Q4 2022 US earnings season well under way and approaching its busiest period, interactive investor, the UK’s second-largest investment platform for private investors, starts a three-day trading offer* on 1 February for US shares only.

ii will remove trading fees (which are usually £5.99 to buy and sell) on all US shares executed within the offer period. Further details below, and terms apply, see notes to editors.

The offer takes place at the heart of the latest US earnings season, when some of the most well-known global companies will be sharing their quarterly results; including Meta (NASDAQ:META) (aka Facebook), Alphabet (NASDAQ:GOOGL) (the parent company of Google), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL).

All eyes will also be on central banks, with rate decisions from the Federal Reserve in the US, the European Central Bank and the Bank of England coming up, too. The Fed (alongside other central banks) is expected to raise interest rates as their mission to curtail above-target inflation levels continues.

Why look overseas?

Lee Wild, Head of Equity Strategy, interactive investor, says: “Broadening your investment horizons geographically can be a powerful diversifier. This can help build a robust and weather-proof portfolio, which is able to exploit pockets of growth outside an investor’s home market wherever and whenever they appear.

“This is a pivotal time for US shares, and scrutiny is high. None of us have a crystal ball, but the US market is dominated by large technology companies, which UK investors don’t have access to on their home market. And some of these huge US companies are more attractively valued now following such a difficult time for them over the last year. While life is no less complicated than it was a year ago, the US is too big a market to overlook, and much less underestimate.”

Victoria Scholar, Head of Investment, interactive investor, adds: “With the US dealing with rampant inflation and slowing growth, investors are paying close attention to the current earnings season to see how these macroeconomic headwinds are impacting corporate America. The US tech sector, which sharply outperformed in the years before the turn of 2021-22, had an extremely difficult year last year, weighed down by slowing ad revenues, a strong US dollar, cost inflation pressures, and rising borrowing rates.”

A deep dive into Big Tech

The US market is home to some of the world’s largest technology companies, which are due to announce their earnings.

Looking at their recent performance, Victoria Scholar, Head of Investment at ii, explains: “US equities have got off to a flying start in 2023, with the S&P 500 on track for its best January since 2019 and the tech-heavy Nasdaq reclaiming lost ground after last year's slide. The first month's price action is potentially paving the way for a much stronger outlook after a torrid 2022 for investors. 

“The tech-heavy Nasdaq underperformed the S&P 500 and the Dow Jones last year, shedding more than a third of its value last year. Job cuts have been a key theme lately for US tech, with most of big tech axing payrolls in an attempt to prepare for the economic downturn. The move to reduce headcounts has been welcomed by investors, with tech stocks enjoying a strong start to the year so far. Apple Inc (NASDAQ:AAPL) is the only tech giant to refrain from major job cuts, but it has paused most hiring. 

“US streaming giant Netflix Inc (NASDAQ:NFLX) issued an upbeat set of quarterly results in January. Although the company saw a drop in subscribers in the first quarter of last year, results for the October to December quarter saw a resurge in customers, partly thanks to its new more economically resilient ad-supported cheaper subscription offer. But it is still facing stiff competition within the streaming wars, most notably from The Walt Disney Co (NYSE:DIS)

“After a torrid 2022 for EV giant Tesla Inc (NASDAQ:TSLA), which was negatively impacted by a number of factors such as supply chain issues, China’s covid lockdowns, and the Fed’s rate-hiking path, the stock surged 33% last week, its best weekly performance since 2013 after its earnings topped expectations and CEO Elon Musk issued a rosy forecast for vehicle deliveries this year.

Microsoft Corp (NASDAQ:MSFT) reported a mixed bag of earnings, with weakness in its PC business offset by strength in the Cloud. While the stock is in positive territory so far in 2023, it has sharply underperformed other tech names like Apple, Amazon and Meta which have enjoyed double-digit percentage gains since the start of January.

Intel Corp (NASDAQ:INTC) saw $8 billion wiped off its market value after the chipmaker issued some gloomy forecasts for revenue and earnings, resulting in a series of price target cuts from the analyst community on the stock.”

Banking on banks?

Scholar adds: “Within the financial sector, Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), and JPMorgan Chase & Co (NYSE:JPM) said they are expecting a ‘mild recession,’ supporting the view that the US economy could prove to be relatively resilient amid a broader global downturn. Rising interest rates from the Federal Reserve helped to boost net interest income figures for the three lenders, which set aside increased provisions for potential soured loans amid the weakening economic backdrop. Also, to prepare for a tough economic period, Goldman Sachs Group Inc (NYSE:GS) announced plans to cut 3,200 staff or 6.5%, reduce bonuses and CEO David Solomon took an almost 30% pay cut to $25 million for 2022 after net profits fell nearly 50% last year following a record 2021.”

What’s next for the Fed?

ii’s trading offer also coincides with a rate decision from the Federal Reserve, which is expected to raise rates.

Scholar says: “The Fed is expected to raise rates by a more restrained 25 basis points at the conclusion of its two-day policy meeting on Wednesday, the smallest hike in its current tightening cycle which began last year. The US central bank carried out a series of jumbo 50 or 75 basis point hikes in 2022, tightening policy by 425 basis points last year, with its hawkish approach set to moderate as inflation eases.

“Some analysts are forecasting two further 25 basis point increases followed by a pause when monetary policymakers will assess the remaining inflationary pressures. In December, the US annual inflation rate slowed for a sixth consecutive month to 6.5%, the lowest level since October 2021. However, inflation remains considerably above the Fed’s 2% target, suggesting there is more work to be done to bring price levels back down to a more stable level.

“Price action for the US dollar reflects the expectation that the Fed is shifting towards a more dovish policy stance. The US dollar index, which measures the value of the greenback against a basket of six foreign currencies, peaked late last year and has been depreciating ever since, shedding more than 10% since the high.

“We are in an unusual situation where central banks are raising rates amid a backdrop of slowing growth. The Fed and others will need to tread carefully to raise interest rates sufficiently to help combat inflation without inadvertently causing a recession.” 

What you get with the offer:

This three-day trading offer applies to all US stocks bought and sold on the ii website and mobile app between 2.30pm GMT (when the major US stock exchanges open) Wednesday 1 February, through to 9pm GMT on Friday 3 February 2023. Terms apply, see notes to editors.

Investments can go up or down and you could get back less than you invest. The value of international investments may be affected by currency fluctuations which might reduce their value in sterling.

*US share trading offer - terms and conditions

  1. A trading fee of £0 is applicable to all buy and sell orders of US shares placed via the ii website and using the interactive investor mobile apps executed between 2.30pm (GMT) on 1 February 2023 and 9pm (GMT) on 3 February 2023 (the "Offer Period")(the "Offer"). For the avoidance of any doubt, any orders placed within the Offer Period but not executed until after the Offer Period has ended will not be eligible for this Offer.
  2. The Offer is open to new and existing customers.
  3. Before you can buy US-listed shares, you need to complete the relevant IRS W-8 form. If you are a UK resident and your account is in your individual name you can complete the form online. We cannot guarantee that the process of either opening a new account and/or enabling the account for international share dealing will be completed before the Offer closes.
  4. These terms and conditions should be read in conjunction with the Interactive Investor Services Limited ("IISL", "ii", "we" or "our") Terms of Service and the ii SIPP Terms (together, the "Terms of Service"). In the event of a conflict between these terms and conditions and the Terms of Service, these terms shall prevail.
  5. After the Offer Period, the trading fee you will be required to pay will be as set out in our Rates and Charges.
  6. Orders placed via telephone dealing are not included in this Offer and will be subject to the charge set out in our Rates and Charges.
  7. All other fees set out in our Rates and Charges, (eg foreign exchange rates for currency conversion and Government charges), are not subject to this Offer and shall continue to apply during the Offer Period.
  8. Anyone who is (in our reasonable opinion) seen to be abusing the offer may be excluded at our sole discretion.
  9. By participating in the Offer, you agree that ii will not be liable for any costs, expenses, loss, or damage sustained or incurred with regards to the Offer.
  10. We reserve the right to alter, withdraw or amend this Offer and/or these terms and conditions at any time without prior notice.
  11. All participants to this Offer agree to be bound by these terms and conditions.
  12. These terms are governed by English law.
  13. IISL is the promoter of this Offer. IISL’s registered office is at 201 Deansgate, Manchester M3 3NW.

For more info, visit ii’s website.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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