Invest in U.S. stocks with a short-sighted view! What will Twitter stock do? What does the future of the financial market look like according to tech stocks?

U.S. Stocks in the Spotlight on Microsoft Earnings!

The Dow Jones Industrial Average rebounded yesterday, rising 61 points to 33,301, after a steep drop of 809 points the day prior. While some investors bought on a rebound, hoping for a recovery, the main support remains the ongoing earnings season from U.S. companies, with some high-tech names delivering solid results.

The market's focal point was Microsoft's earnings. Revenue came in at $49.3 billion (up 18%), beating market expectations and earning high praise from analysts. As a result, Microsoft shares surged about 5%.

Recently, as tech stocks faced selling pressure due to rising U.S. long-term rates, Microsoft's stock increase can be seen as a beacon of relief rather than a mere rally.

※ When long-term U.S. interest rates (yields on U.S. Treasuries) rise, higher-yield assets attract buyers, but overvalued tech stocks tend to be less attractive since they don’t pay dividends like Treasuries. Microsoft’s strong earnings are breaking the tech sell-off trend, prompting awe and lifting investors' expectations.

Microsoft has strong competitive power in its flagship software Windows, and this earnings quarter also showed growth in cloud and security divisions. With the ongoing Ukraine situation (or economic sanctions against Russia) causing bottlenecks or supply chain disruptions to be less severe than feared, the market is saying Microsoft stock isa safe asset and a place to park capital.

Even though tech stocks are typically volatile, the possibility of them being treated as a stable asset during unstable markets suggests Microsoft may indeed be seen as a safe haven. That would be remarkable for the company!

On the other hand, Alphabet (Google’s parent company) posted results that fell short of expectations and saw a sharp decline, giving the overall tech sector a mixed impression. Today in New York time, major techs like Apple and Intel, as well as numerous other companies including McDonald’s and Merck, will continue to report earnings.

These results could significantly affect momentum in major indices like the Dow Jones, S&P 500, or the tech-heavy Nasdaq, but when these major indices move to a bullish mode, it could put upward pressure on Japanese equities and USD/JPY too, so it’s worth watching for the broader financial market sentiment.

What about Japanese Stocks and FX? The Focus Now is on USD/JPY “Breaching 130”!

With the U.S. stock market stabilizing after a large decline, Japanese stocks are rising today and investor sentiment is improving. Howeverthe real focus may be FX rather than equities.

This is because the dollar-yen rate has broken through a major threshold of 130.0 today. 130 yen sits in a high-price range not seen in about 20 years. In other words,a high-price range not seen since 2002— from around 102 yen at the start of 2022, the rate has risen by about 28 yen in just four months.

Why has the dollar strengthened so much (i.e., dollar up, yen down)? Several factors are influential, including the following.

・Inflation is driving expectations of large-rate hikes in the U.S. (a dollar-supporting factor)
・Inflation is contributing to Japan’s widening trade deficit (yen depreciation factor)
・Inflation could prolong under sanctions on Russia (dollar strength and yen weakness factor)
・Moreover, the Bank of Japan today signaled it will continue monetary easing (another yen depreciation factor)

As U.S. stocks rise, this could further fuel risk-on in the financial markets, boosting dollar buying and yen selling even more.

Some market participants had noted that after touching the psychological level of 130.00, this might be the top, but when the market opened later today, the rate rose to as high as 130.60 by early evening, with no sign of selling pressure. There are even voices in the market saying the upper target for USD/JPY could be 135.

At least for now, USD/JPY shows multiple technical rising indicators, suggesting further upside potential remains.

Next week, the May FOMC meeting, expected to deliver a substantial rate increase, will take place (similar to the Bank of Japan meeting in Japan). After this, market sentiment may shift, but until then, USD/JPY is likely to stay in a high-price range.

Elon Musk’s Buyout? What Happens to Twitter Stock?

Now, one of the biggest market storylines this week is Elon Musk’s proposed acquisition of Twitter. Given how many people use Twitter daily, many are curious about what lies ahead for this social network.

Twitter stock has been under selling pressure after reports that the acquisition would go through. It appears that
・Elon Musk has said he intends to buy more shares
・However, the unpredictable founder could change his mind and back out
・If canceled, stock could plunge
・Therefore, many are rushing to sell now
, it seems.

Meanwhile, overnight Japan time, Reuters flashed a bulletin: “Elon Musk may not buy Twitter.” This is an English-language article.

Some expect that Twitter's ownership by Elon Musk could make the platform a more freely spoken space, but since Twitter’s approval of the deal, the situation remains uncertain. For now,trading related to this news is not highly recommended.