The stock market this week has improved and attempted an upward correction but has struggled to do so. On Monday and Tuesday, the US stock market rose slightly, but was forming nothing more than a corridor. However, all three of the leading US indices depreciated on Wednesday due to bond yields again significant rises. The worst-performing were the NASDAQ and SNP500, which fell more than 3.80%. The Dow Jones was the best performing, which saw a strong impulse wave due to its exposure to defensive stocks. However, the Dow Jones also ended the day slightly lower.
Both negative and positive factors are influencing the stock market. Most earnings data up to now has been positive, but at the same time, companies have given a negative outlook for the coming year. However, the main negative factor for the stock market continues to be the high bond yields and low investor sentiment due to political tensions.
SNP500
The SNP500, as mentioned above, is largely positively influenced by the positive quarterly earnings reports from seven companies within the index. However, the forward guidance by certain companies has damped investor sentiment. In addition, the US 10-year Bond has again risen to 5%, the highest since the last US recession in 2007. Most economists believe bond yields will continue growing and may stabilise above 5%. This can pressure the stock market in the medium term. The SNP500 is now trading at its lowest price since May and is trading almost 10% lower than its recent high.
The latest company to see a significant decline after earnings data is Meta. Meta’s performance was generally positive compared to expectations in the previous quarter. However, the board of directors advised shareholders that advertising demand may decline in the coming year. In addition, Meta will be taken to court for misleading the public about the risks of using its platform and contributing to a mental health crisis among youth. The claims were made in a federal lawsuit, which various US States put forward. They say the company used addictive features to “ensnare” users while concealing the “substantial dangers” of its platforms. As a result, Meta stocks fell 4% during hours and a further 3.35% after market close.
Alphabet’s earnings per share read 7% higher than expectations and higher than the previous quarter. In addition, the company’s revenue was again more elevated than the last quarter and more than investors expected. Nonetheless, the stock fell 9.50% after the release, putting some investors on the back foot. Despite higher earnings and revenue, Alphabet’s Cloud revenue read lower at $8.41bn compared with a predicted $8.64bn. This is stoking investor concerns that the company risks falling further behind competitors within the market, such as Amazon and Microsoft. However, it is unknown whether shareholders may overreact to the news, considering all other figures remain positive. Either way, as Alphabet is the third most influential company within the SNP500, if the stock continues to decline, the SNP500 can be pressured.
SNP500 30-Minute Chart on October 26th
Another issue for the SNP500 is eight of the ten most influential stocks within the index are lower than in the last 24 hours. Of the twenty most influential stocks, 14 witnessed significant declines, and only Microsoft stocks rose more than 1%.
EUR/USD
The EUR/USD continued to decline during this morning’s Asian and European session from the day before. The downward price movement is about strengthening the Dollar, which is rising across all currencies. The Euro is experiencing mixed price movement this week but is declining this morning. The price movement throughout the day will depend on the European Central Bank’s guidance for the coming months.
September business lending in the Eurozone increased only 0.2%, significantly less than the August increase of 0.6%, renewing the low of 2015, and private lending increased by 0.8% compared to 1.0% previously. According to a survey of the European Central Bank (ECB), representatives of the region’s largest banks are going to limit the access of citizens and businesses to loans further, and demand for them will decline, which increases the risks of an economic downturn in the Eurozone.
EUR/USD 30-Minute Chart on October 26th
