Equity bullish traders enjoyed one of the best months in couple of years with major U.S. stock indices posting their biggest monthly gains since October 2011 after steep declines in August and September.
Investors found their best friends “Central Banks” backing them by China’s PBOC easing further through cutting borrowing rates for the sixth time in 12 months and European Central Bank indicating it would take more steps to loosen monetary policy further by extending its quantitative easing program and cutting deposit rates. The Fed ruined the party, issuing a hawkish statement, opening the door for a rate hike in December’s meeting but stocks managed to hold on gains.
From the 340 S&P 500 companies that announced results, about 72% managed to beat on earnings but less than 43% beat on revenues, which is well below the 58% average for the index, an indication of how strong dollar is hitting U.S. corporate sales.
Recovery in oil prices lead energy stocks higher, with the sector gaining 10% in October although the industry is going through tough times as major oil companies continue to cut capex and fire employees, with Chevron the latest to announce that it may cut 6,000 to 7,000 jobs as it looks to cut expenses.
The week ahead also looks busy; with big corporates continue to announce results and tech traders will be interested to know if Facebook will surprise on Wednesday after the markets close. Although the stock looks expensive in terms of valuations; however if the stock managed to beat the expected 52 cents EPS and $4.4 billion on revenue, this means the company is growing EPS at 21% YoY and revenues at 36% YoY, numbers that could provide further potential to the upside.
Other Companies on the Radar:
Monday: AIG, VISA, HSBC, FOX Inc, NISSAN Motors, Rayan Air, Estee Lauder
Tuesday: Tesla, UBS Group, Santander, Imperial Tobacco Group, Duke Energy
Wednesday: Facebook, PetroChina, Allergan, Qualcomm, Softbank Corp, Time Warner. ING, Prudential Financial Inc
Thursday: Toyota Motors, Walt Disney, Astrazeneca, Kraft Heinz, Societe Generale, Deutsche Telekom, Celgene, Zurich Insurance
Friday: Allianz SE, Telefonica, Cigna, Humana, Telecom Italia
Currency traders’ biggest event next week is the release of U.S. Non-Farm Payrolls report on Friday & and it is very important to get clues on why the Federal Reserve looked more aggressive than expected. Since the release of the statement on Wednesday, economic data from the U.S. did not impress. The U.S. economy grew at 1.5% third quarter vs 1.6% anticipated, pending home sales dropped 2.3% vs 1% increase expected and the preferred inflation index for the fed (Core PCE Price Index) increased 0.1% vs 0.2% expected.
A strong U.S. NFP is vital for the dollar to continue the rally. A figure close to 200K could send the dollar index to 98.33 (July 7 High). However, strong wages are required to provide further evidence that the Fed could hike rates in December.
Some economic releases may possibly provide early indications on whether a strong number could be released on Friday:
- Mondays ISM Manufacturing
- Wednesday ADP Nonfam Employment, ISM Non-Manufacturing Employment
- Thursday’s Jobless Claims
Next week also includes several Fed speakers. On the top of the list would be Chair Janet Yellen who testifies before Congress on Wednesday. Fed Vice Chair Stanley Fischer, William Dudley and Dennis Lockhart all scheduled to deliver speeches.