Mixed messages keep US stock gains contained

Financial markets were forced to digest some counterbalancing information last night.

Source: Bloomberg

Powell’s dovishness countered by stronger CPI

Financial markets were forced to digest some counterbalancing information last night. US Fed Chair Jerome Powell wrapped-up his two-day testimony before US Congress, with market participants satisfied that all the “uncertainties”, identified by Chair Powell, confronting the US economy will require a Fed interest rate cut this month. But there was a spanner thrown into the works during overnight trade: US CPI data was released, and revealed consumer prices grew at a much stronger rate than forecast – at around 2.1% year-on-year. The implication here: maybe inflation isn’t subdued enough to give the Fed the scope to cut rates as aggressively as the market expects.

US remain near all-time highs

To be sure: the narrative hasn’t changed, and US equities are still hovering around their all-time highs. The Dow Jones Industrial Average, it will be highly publicized today – Presidential Tweets, and all -- hit 27,000 for the first time in history; while the better benchmark, the S&P 500, is wavering around the key psychological level of 3000 still. However, expectations of rate cuts from the Fed beyond this month were unwound slightly, supporting a big climb in global bond yields overnight. The developments were good for financial stocks, which lead the US market higher last night, but dulled the potential gains in the broader market.

US stocks edge towards overbought levels

On balance, the stock market is still being juiced by two-days of dovish-chat from US Chair Jerome Powell. The lingering question now is with the money taps to be slowly turned on, where can stocks head from here? At-the-moment, momentum in the market still points to the upside, however price patterns and the RSI suggest an emerging pull-back is afoot. Not that this would mark something resembling a correction; more that the weeks of enthusiastic buying of stocks on the basis of easier monetary policy is growing tired. A return to hard fundamentals is likely necessary; which conveniently ought to come as US earnings season heats-up.

US earnings season moves to centre stage

With technicals suggesting rally-fatigue, and valuations looking a little less attractive here, US Q2 reporting season is shaping up as being, on balance, a reasonably negative earnings period, too. Earnings-per-share growth is forecast to fall by -2.7% on annualized basis, as the US, and at that, global economic slowdown begins to crimp US corporate profits. And – perhaps to the chagrin of US President Donald Trump, who clear uses the stock market as a Presidential Key-Performance-Indicator – forecasts suggest it is trade-war sensitive areas of the market, such as materials, energy and I.T stocks, that will be the biggest drags on the overall market.

Markets to focus on forward guidance from US corporates

The bar is set low for this US reporting season, and given corporates’ propensity to under-promise and over deliver during reporting season, positive surprises, in principle, should be easy to achieve for the US market. However, a caveat against this is that there is a prevailing trend, right now, of downgrades to the earnings outlook for US companies, seemingly as the deteriorating economic outlook only gradually plays-out in analyst projections. The forward guidance provided by American companies will therefore take even greater importance this quarter, as investors infer whether the 12% projected growth in earnings-per-share in the 12 months ahead is materially likely.

Investors looking for fundamental justification

Historically speaking, the market looks for roughly 70-75% of companies beating estimates to qualify an earnings season as being “positive”. Any number at or above that mark ought to inspire bullish sentiment in US stocks market; while any number at or below that mark out to either dull sentiment, or turn it relatively bearish. With the US Fed all but certain to set-off on its rate-cutting cycle at the end of this month, and capital, subsequently itching to chase yield in risky assets, investors will be aching for an overall positive earnings season, in order justify putting money to work in equity markets.

Aussie data in the week ahead

There will be more to watch in the week ahead than just the slew of US corporates reporting. The Australian economy, and financial markets, will come into sharp focus – with the RBA’s interest rate outlook the central concern. RBA Minutes will be released Tuesday; and domestic labour market data will be printed on Thursday. As it stands, the markets are assuming the RBA will keep rates on hold, more-or-less, until December this year. For the RBA, the economy’s central problem remains “spare capacity”: both data releases next week will cast light on that subject, and whether current market-pricing for rate cuts is accurate, or not.


Deze informatie is opgesteld door IG Europe GmbH en IG Markets Ltd (beide IG). Evenals de disclaimer hieronder bevat de tekst op deze pagina geen vermelding van onze prijzen, een aanbieding of een verzoek om een transactie in welk financieel instrument dan ook. IG aanvaardt geen verantwoordelijkheid voor het gebruik dat van deze opmerkingen kan worden gemaakt en voor de daaruit voortvloeiende gevolgen. IG geeft geen verklaring of garantie over de nauwkeurigheid of volledigheid van deze informatie. Iedere handeling van een persoon naar aanleiding hiervan is dan ook geheel op eigen risico. Een door IG gepubliceerd onderzoek houdt geen rekening met de specifieke beleggingsdoelstellingen, de financiële situatie en behoeften van een specifiek persoon die deze informatie onder ogen kan krijgen. Het is niet uitgevoerd conform juridische eisen die zodanig zijn opgesteld dat de onafhankelijkheid van onderzoek op het gebied van investeringen wordt bevorderd, en dient daarom als marketingcommunicatie te worden beschouwd. Hoewel wij er niet uitdrukkelijk van weerhouden worden om te handelen op basis van onze aanbevelingen en hiervan te profiteren alvorens ze met onze cliënten te delen, zijn wij hier niet op uit. Bekijk de volledige disclaimer inzake niet-onafhankelijk onderzoek en de driemaandelijkse samenvatting.

Live prijzen op de populairste markten

  • Forex
  • Aandelen
  • Indices
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
Verkoop
Koop
Bijgewerkt
Verandering
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Bovenstaande koersen zijn onderhevig aan de Algemene Voorwaarden van onze website. Koersen zijn uitsluitend indicatief. Alle aandelenkoersen lopen ten minste 15 minuten achter.

Mogelijk bent u geïnteresseerd in…

Dankzij onze transparante kostenpagina ziet u gemakkelijk de kosten die met uw trades gemoeid kunnen gaan.

Ontdek waarom zoveel klanten ons kiezen en wat ons de grootste CFD-provider ter wereld maakt.

Blijf op de hoogte van gebeurtenissen die de markten kunnen opschudden dankzij onze aanpasbare economische kalender.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 74% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder. Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren. Opties en warrants zijn complexe financiële instrumenten. Uw vermogen loopt risico. U kunt uw geld snel verliezen. CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.