US open: Stocks extend gains as earnings impress

US futures

Dow futures +2% at 30825

S&P futures +2.2% at 3760

Nasdaq futures +2.5% at 11340

In Europe

FTSE +1.3% at 7011

Dax +2% at 12912 

Netflix is due after the close

US stocks are set to head higher, extending gains from the previous session as earnings remain in focus.

Stocks posted strong gains yesterday, with the Nasdaq rising 3,4% and the S&P500 booking gains of 2.6% after upbeat banking results and as investors positioned themselves for tech earnings.

Corporate earnings are stealing the show and overshadowing recession concerns. Those same recession fears had meant that the bar was low heading into earnings, raising the likelihood of beating estimates.

The macroeconomic calendar is quiet, with just US industrial output due to be released.

Even though stocks are rising, as earnings provide a welcomed distraction, this move higher is still a bear market rally rather than anything more meaningful. Cheap valuations and positive results have seen investors jump back into the market.

However, with inflation, hawkish central banks, and recession fears still providing headwinds to the market, there are questions about how high this rally can go. Inflation has proved to be stickier than initially expected, and the Fed could still take the terminal interest rate higher, making any meaningful recovery in stocks unlikely at this point.

Corporate news:

Goldman Sachs is rising over 2% pre-market after earnings and revenue beat forecasts. The investment bank also announced that it would be reorganizing its business into three units as part of a significant restructuring.

Netflix is due to report after the market close. Expectations are for 1 million new subscribers. EPS is expected to fall to $2.75 from $3.19 a year earlier. Revenue is expected to rise to $7.84 billion from $7.48 billion a year earlier.

Where next for the S&P500?

The S&P has risen out of the falling channel within which it has traded since mid-August. The break above the falling trendline, and the 20 sma, combined with the RSI moving back up to the 50 level keeps buyers hopeful of further upside. Buyers will now look to re-take the 3800 October high to expose the 50 sma at 3910. Meanwhile, sellers could look for a move below 3690 to re-entre the falling channel, bringing 3560 The October 3 low back into play.

FX markets – USD rises, GBP falls

The USD is rising after losses in the previous session. The upbeat market mood hit demand for the greenback. However, any falls southwards could be seen as buying opportunities. While the Fed intends to hike rates aggressively and for longer, the USD is likely to remain supported.

EUR/USD is falling as ZEW German economic sentiment remains weak in October. Sentiment did tick higher from September to 59.2, up from 61.9. However, this remains weak on a historical basis as fears over surging energy prices continue to weigh on sentiment.

GBPUSD is coming under pressure to snap a two-day winning as investors start to reprice the possibility of a large rate hike in November after the Chancellor’s U-turn on tax cuts. Earlier in the month BoE Governor Andrew Bailey had said that the central bank could raise rates by 1%, this may not now be necessary. Following high levels of volatility in the pound and the gilt market, things are starting to calm. That said, the outlook for the UK economy is still weak

GBP/USD  -0.5% at 1.13

EUR/USD  -0.14% at 0.9827

Oil slips for a third day

Oil prices are slipping lower for a third straight session. Oil has fallen around 5% over the past 3 sessions. While OPEC+ cutting oil output has helped to support the price, rising fears of a recession is hurting the demand outlook.

The fall in the USD yesterday failed to lift the price of oil. A weaker USD makes oil cheaper for buyers of other currencies.

Instead, China’s fuel demand outlook was also dragging on the price after the world’s largest oil importer announced that it would not be releasing Q3 GDP, retail sales or trade data. This is most likely due to the 20^th Communist National Congress taking place this week.

US crude oil stockpile data is due to be released later and is expected to have risen for a second straight week.

 

WTI crude trades -1.1% at $84.90

Brent trades -1.2% at $91.10 

Looking ahead

N/A

US futures

Dow futures +2% at 30825

S&P futures +2.2% at 3760

Nasdaq futures +2.5% at 11340

In Europe

FTSE +1.3% at 7011

Dax +2% at 12912

Learn more about trading indices

Netflix is due after the close

US stocks are set to head higher, extending gains from the previous session as earnings remain in focus.

Stocks posted strong gains yesterday, with the Nasdaq rising 3,4% and the S&P500 booking gains of 2.6% after upbeat banking results and as investors positioned themselves for tech earnings.

Corporate earnings are stealing the show and overshadowing recession concerns. Those same recession fears had meant that the bar was low heading into earnings, raising the likelihood of beating estimates.

The macroeconomic calendar is quiet, with just US industrial output due to be released.

Even though stocks are rising, as earnings provide a welcomed distraction, this move higher is still a bear market rally rather than anything more meaningful. Cheap valuations and positive results have seen investors jump back into the market.

However, with inflation, hawkish central banks, and recession fears still providing headwinds to the market, there are questions about how high this rally can go. Inflation has proved to be stickier than initially expected, and the Fed could still take the terminal interest rate higher, making any meaningful recovery in stocks unlikely at this point.

Corporate news:

Goldman Sachs is rising over 2% pre-market after earnings and revenue beat forecasts. The investment bank also announced that it would be reorganizing its business into three units as part of a significant restructuring.

Netflix is due to report after the market close. Expectations are for 1 million new subscribers. EPS is expected to fall to $2.75 from $3.19 a year earlier. Revenue is expected to rise to $7.84 billion from $7.48 billion a year earlier.

Where next for the S&P500?

The S&P has risen out of the falling channel within which it has traded since mid-August. The break above the falling trendline, and the 20 sma, combined with the RSI moving back up to the 50 level keeps buyers hopeful of further upside. Buyers will now look to re-take the 3800 October high to expose the 50 sma at 3910. Meanwhile, sellers could look for a move below 3690 to re-entre the falling channel, bringing 3560 The October 3 low back into play.

FX markets – USD rises, GBP falls

The USD is rising after losses in the previous session. The upbeat market mood hit demand for the greenback. However, any falls southwards could be seen as buying opportunities. While the Fed intends to hike rates aggressively and for longer, the USD is likely to remain supported.

EUR/USD is falling as ZEW German economic sentiment remains weak in October. Sentiment did tick higher from September to 59.2, up from 61.9. However, this remains weak on a historical basis as fears over surging energy prices continue to weigh on sentiment.

GBPUSD is coming under pressure to snap a two-day winning as investors start to reprice the possibility of a large rate hike in November after the Chancellor’s U-turn on tax cuts. Earlier in the month BoE Governor Andrew Bailey had said that the central bank could raise rates by 1%, this may not now be necessary. Following high levels of volatility in the pound and the gilt market, things are starting to calm. That said, the outlook for the UK economy is still weak

GBP/USD -0.5% at 1.13

EUR/USD -0.14% at 0.9827

Oil slips for a third day

Oil prices are slipping lower for a third straight session. Oil has fallen around 5% over the past 3 sessions. While OPEC+ cutting oil output has helped to support the price, rising fears of a recession is hurting the demand outlook.

The fall in the USD yesterday failed to lift the price of oil. A weaker USD makes oil cheaper for buyers of other currencies.

Instead, China’s fuel demand outlook was also dragging on the price after the world’s largest oil importer announced that it would not be releasing Q3 GDP, retail sales or trade data. This is most likely due to the 20^th Communist National Congress taking place this week.

US crude oil stockpile data is due to be released later and is expected to have risen for a second straight week.

 

WTI crude trades -1% at $84.90

Brent trades -1.2% at $91.10

Learn more about trading oil here.

Looking ahead

N/A