US open: Stocks point higher, boosted by upbeat earnings

US futures

Dow futures +0.7% at 35708

S&P futures +0.96% at 4464

Nasdaq futures +1.38% at 14945

In Europe

FTSE +0.85% at 7622

Dax +1.6% at 15494

Euro Stoxx +1.7% at 4200

Stocks extend rally

US stocks pointing to a strong open after a solid close in the previous session. All three indices closed on positive ground yesterday after a string of upbeat earnings helped distract from Thursday’s inflation data.

According to FactSet so far 60 % of companies on the S&P have reported earnings and of those 77% have beaten Wall Street estimates. Apart from a few anomalies, (Meta, Netflix the most obvious) earnings have broadly been supportive for the market. Corporate America is broadly beating forecasts, but by smaller amounts than in previous years, also 2022 estimates are not being raise as much as in 2021. However, neither of these points are surprising, we know that growth must normalize after two unique years.

Earnings will continue think and fast today with CVS Health, Disney, MGM Resorts and Uber all due to release numbers.

Inflation is the other hot topic for the markets as investors await tomorrow’s CPI data. Expectations are for inflation to continue rising to 7.3% YoY. The data is likely to drive Fed rate hike expectations – a 25 or 50 basis point move in March?

In other corporate news:

Tesla will also be in focus after recalling 27,000 cars in the US due to a software issue, which could result in problems defrosting the windshield.

Where next for the Dow Jones?

The Dow is extending its gains from the year to date low of 33145, breaking out from a symmetrical triangle formation. The 50 sma crossing above the 100 sma on the 4 hour chart, in addition to the bullish RSI, are also keeping buyers optimistic of further upside. Buyers will want to see a move above the current level of 35700, resistance from 2 Feb, but also a level of support in mid-January. A move above here could open the door to 36,000 round number and January 17 high. Failure to retake 35700 and a fall below 35380 falling trendline exposes the 50 sma at 35180. A move below 34800 could see the sellers gain momentum.

FX markets USD falls, GBP rises for 3^rd day

The USD is falling, paring gains from the previous session as treasury yields ease lower. All eyes are on tomorrow’s inflation data which could cement expectations of a more hawkish Fed.

GBP/USD is rising for a third straight day despite there being no high impacting UK data for investors to sink their teeth into. Prime Minister Boris Johnson’s mini cabinet re-shuffle looks as if it could ease the Brexit deadlocks which could bee supporting the pound today. BoE’s Pill to speak.

GBP/USD +0.22% at 1.3574

EUR/USD +0.14% at 1.1433

Oil eases from 7 year high, US – Iran talk progress eyed

Oil prices are edging lower for a third straight session as they continue to ease back from the 7-year high reached last week. Whilst tight supply and concerns over Russia – Ukraine tensions boosted oil prices last week, prices have since ease back as US – Iran nuclear talks make progress.

A deal between the two sides could see Iranian oil sanctions removed and considerably more supply in the market.

Concerns over more supply mean that oil prices have fallen despite API inventory data showing a 2-million-barrel draw in stock piles.

EIA data is due later

WTI crude trades -0.3% at $88.10

Brent trades -0.3% at $90.37

Looking ahead

15:30 EIA inventories

17:00 Fed Mester speech

17:00 BoC Macklem speech