Fund managers will turn their attention to tomorrow’s major earnings announcements and significant economic reports due tomorrow. Stock market investors will look at the upcoming earnings reports and the global Purchasing Managers’ Indexes. The Purchasing Managers’ Index will be released tomorrow morning for the Eurozone and the UK, while the US will make public their data once the US trading session opens. Investors will scrutinize the data to determine if a recession is likely and if another interest rate hike is possible.
The second factor, significant for the NASDAQ and SNP500, is the quarterly earnings reports. The following companies will publicize their quarterly figures tomorrow:
- Microsoft – Expected Earnings Per Share $2.65 – After Market Close
- Alphabet – Expected Earnings Per Share $1.45 – After Market Close
- Visa – Expected Earnings Per Share $2.23 – After Market Close
- Cola Cola – Expected Earnings Per Share $0.69 – Before Market Opens
- Verizon Communications – Earnings Per Share EPS $1.17 – Before Market Opens
- NextEra Energy – Expected Earnings Per Share $0.88 – Before Market Opens
- General Electric Company – Expected Earnings Per Share $0.56 – Before Market Opens
The most influential earnings announcements for the NASDAQ will be Microsoft and Alphabet, which hold a weight of 16.43%. However, the SNP500 was likely to see higher levels of volatility as all of the above stocks are part of the index. The most influential announcement for the SNP500 after Microsoft and Alphabet is Visa, the 14th most influential stock.
SNP500
During this morning’s European Open, the SNP500 fell to its lowest since October 6th. Investors are concerned about the recent decline after falling for four consecutive days last week. However, investors also have hope as the asset trades at a previous support level. In addition, the Federal Reserve indicates that the monetary policy is likely to remain unchanged, which is also positive for the stock market. The President of the Federal Reserve Bank of Cleveland, Loretta Mester, advises that “rates are near or at holding point”.
The region’s inflation rate remained steady at 3.7% in the previous month, instead of declining to 3.6%. Additionally, the Core CPI, which excludes volatile prices, slowed to 4.1%, marking its lowest reading since September 2021. For another 0.25% interest rate hike to become likely, the market would most likely require inflation and the Core CPI to rise next month by at least 0.1%. Another interest rate hike would disappoint investors and cause another selloff. If tomorrow’s PMI data in Europe and the US read higher than expectations, investors may sell equities due to a higher possibility of hikes in November or December.
The SNP500 will be the most affected instrument from earning reports tomorrow. The index will be affected by more than seven companies releasing their earnings. However, the most influential stocks will be Microsoft, Alphabet and Visa. Microsoft has beaten Wall Street’s expectations over the past four quarters in terms of Earnings Per Share and Revenue. Both figures are again expected to rise. However, if the data reads from the expectations, the stock can experience a decline. During this morning’s pre-market hours, Microsoft stocks have risen 0.36%. On the other hand, Alphabet has not performed as well compared to Microsoft over the past year, and revenue is expected to be slightly lower than the previous quarter. However, the stock has still risen 52% so far this year. Its future outlook will depend on the company’s earnings and revenue will exceed expectations.
Lastly, investors were concerned about the bond market, which continues to witness yields rise to their highest level in 2023. The 10-year bond yield rose by 0.065% on Friday and could significantly pressure the stock market if the 10-year yield rises above 5.000%. Another concern for investors is that the SNP500’s 14 most influential stocks declined in value. Tesla stocks witnessed the most substantial decline, falling 3.69%. 69% of the SNP500 ended the day lower on Friday. Buy and sell signals depend largely on tomorrow’s earnings data and PMI releases.
15-Minute Chart SNP500 on October 23rd
Technical analysis on Monday indicates a retracement but continuing the downward trend. Technical analysts advise the only positive factors are the support level from October 4-6th and the discounted price, which may prompt investors to buy the dip. The price is trading below the 140-bar moving average and in the lower half of the RSI. Technical analysis will indicate another downward wave if the index forms another bearish crossover in the 5-15 minute timeframe.
USD/JPY
In the currency market, traders primarily concentrate on the Dollar against the Japanese Yen as markets speculate whether the Japanese Federal Government will again intervene in the currency market. It is believed the Japanese Federal Government has intervened on two occasions over the past year, and has happened when the exchange rate rose above 150.00. The exchange rate has increased for three consecutive weeks and is now very close to trading above 150.00. If the exchange rate rises above 150.000-151.000, the possibility of an intervention becomes more likely and will trigger a quick and sizeable downward price movement.
Meanwhile, Bank of Japan Governor Kazuo Ueda called on the nation’s lending institutions to tighten risk controls, citing the banking crisis that rocked the US financial system earlier this year and uncertainty in the nation’s economy amid unprecedented inflation. Such rhetoric could serve as a signal of a likely interest rate increase as early as next year. However, this is not likely to support the Yen unless the Fed become more dovish and these signals from the Bank of Japan become more concrete.
USD/JPY 6-Hour Chart on October 23rd
Summary:
- Investors will scrutinize the upcoming PMI data to determine if a recession is likely and if another interest rate hike is possible.
- The President of the Federal Reserve Bank of Cleveland, Loretta Mester, advises that “rates are near or at holding point”. However, the FOMC’s views may change if inflation rises in November.
- Investors will primarily concentrate on the data from Alphabet, Microsoft and Visa.
- Microsoft has beaten Wall Street’s expectations over the past four quarters in terms of Earnings Per Share and Revenue. Both figures are again expected to rise.
- Investors speculate whether the Japanese Federal Government will again intervene in the currency market.
