UoM reading provides beat, Twitter slumps as user growth slows

Summary:

• UoM consumer sentiment revision beats consensus

• Mixed beginning of session on Wall Street

• Twitter (TWTR.US) slumps on the back of slowing user growth

In the early afternoon the US GDP report for the second quarter of the year was released and it could named downbeat after the headline measure missed the estimates. In turn we saw USD sink against most of its peers. However, 90 minutes later the final UoM consumer sentiment reading for July saw daylight and it has let USD bulls catch a breath for a while. The beginning of the stock trading session on Wall Street was mixed with a special interest paid to Twitter as it slumped on the back of slowing user growth.

The UoM consumer sentiment reading for July was revised higher from 97.1 pts to 97.9 pts. Source: Macrobond, XTB Research

Let us begin with the UoM reading. It was the final (second) reading for July and one should keep in mind that the second reports rarely tend to show any major deviation from the initial release. However, in this case we saw quite a significant upward revision. While the market consensus expected the consumer sentiment gauge to remain at 97.1 pts signalled by the first release the actual reading saw an increase to 97.9 pts. The current condition subindex moved from 113.9 pts to 114.4 pts. The expectations gauge ticked higher from 86.4 pts to 87.3 pts. The 1 year and 5-10 year inflation expectations remained on prior levels of 2.9% and 2.4% respectively. US Dollar index saw a minor uptick immediately after the release but this gain was quickly erased.

The resistance level at 2850 pts may be a hard nut to crack for the US500 bulls as price action in the vicinity of this handle (both few days ago and prior to reaching ATH at the beginning of the year) suggested that bears may be looming there. Upcoming earnings report may be crucial in terms of break or bounce. Source: xStation5

The beginning of the Wall Street trading was mixed. Dow Jones (US30) is the only benchmark of the major three to trade above yesterday’s close thanks to Boeing (BA.US) and 3M (MMM.US) as they perform well enough to offset Intel (INTC.US) drag. Nasdaq (US100) is trading some 0.2% lower at press time. S&P 500 (US500) fluctuates around yesterday’s close. The index of the 500 largest US companies may be poised to retest the 2850 pts handle. Do notice that the benchmark failed to break above this hurdle prior to the tremendous Facebook (FB.US) slump. Moreover, let us recall that prior to reaching the ATH around 2880 pts at the beginning of the year the index needed three repeated attempts to break above this level therefore this time bulls may also find it hard to do so.

Twitter (TWTR.US) opened significantly lower on the back of the slowing user growth. Do notice that the stock is trading not far away from its uptrend line therefore a continue downward pressure may doom the company from the technical point of view. Source: xStation5

One stock of a particular interest today is Twitter (TWTR.US). The company has reported its earnings today prior to the session opening. The earnings report can be generally named upbeat as the company managed to beat both earnings and revenue estimates. Speaking of earnings we saw a 5.47% beat as the EPS came in at 0.17 while the consensus pointed for a 0.161. The revenue data showed 710.5 million revenue in the second quarter of the year against expectations of 697.3 million, implying a 1.89% beat. In turn, the net profit jumped to almost 134 million against expected 120.7 million (10.93% beat). However, as one can notice the company is trading substantially lower on the day. The reason behind this could be the fact that the user growth has flattened. The company itself blames new European privacy regulations as well as its effort to reduce to amount of fake accounts. Nevertheless, the investors were not happy with this course of action and rushed to sell their stakes in the company. Do notice that for the social media companies, like for example Twitter or Facebook, the user growth is still the most important metric.