US and European stock futures are trading cautiously as investors absorb the Fed’s comments and focus on the US earnings season.
Risk Sentiment
Risk sentiment is now again focused on the Fed’s next monetary policy action. Fed officials continue to offer contradictory signals, adding to the already confused picture. For example, if we pay heed to James Bullard’s remarks, it is evident that the Fed has not completed its mission of increasing interest rates. He said unequivocally yesterday that the interest rate should be raised much higher. He expects the terminal rate to be about 5.50% to 5.75%. Furthermore, he feels that funds from the good times are still available to give an additional cushion, which is particularly concerning for traders. When the truth is that those savings are long gone, as we have witnessed a fall in consumer activity in the US, as seen by retail statistics or consumer confidence.
Fed To Hike More
Given where the dollar index is now trading, traders know that the Fed will raise interest rates a few more times before taking a break, which is counter to the expectations of many market participants. Investors fear the US economy is headed for a recession, and a major Wall Street bank confirmed this yesterday.
Crisis Not Over
Another significant issue is that traders are still concerned about the financial crisis, and they are aware that we are not yet out of the woods. This is because, according to the most recent Bank of America fund managers’ poll, they are primarily short on the US banking sector while favouring the technology industry.
Stock Market and Strong Gains
Nonetheless, with half of the trading month now over, the US stock market is still on course to post some substantial gains. In terms of seasonality, April is the greatest month for the Dow Jones since 1950. So far this month, the index is up 2.1%, and 14 trading days have elapsed. The Dow Jones index remains the market leader; the S&P 500 index is up 1%, and the Nasdaq is up 0.7%.
Bitcoin’s Price Action
All eyes in the crypto market are still focused on Bitcoin’s price movement. The fact that the price of cryptocurrency has begun to consolidate is both positive and negative. It is negative because traders are concerned that the positive momentum may dissipate. It’s a good thing since no one wants to see bitcoin rise exponentially because it raises the chances of a sudden death in the price motion. The ideal case would be to see sustained higher highs, which we haven’t seen since the price moved beyond $30,000.
Netflix’s Stellar Earnings Number
Today will be dominated by the earnings released by Netflix in the technology sector. The corporation reported yesterday night that it would not take a strong stance against password sharing, which has displeased investors. What is critical to focus on, though, is discretionary money, which has fallen dramatically—consumers are making cuts. Nobody has extra money, and everyone is thinking about reducing down. Overall, things are difficult, and Netflix’s subscriber levels remain susceptible. Nonetheless, Netflix’s earnings per share (EPS) were higher than predicted. This is obviously a nice conclusion in the face of everything else being bad, and if investors continue to concentrate on this and less on its sales, we may see some positive movement.
Tesla’s Earnings and Price Cut
Tesla will report profits today, and the business announced more price reduction for its vehicles ahead of reporting. It demonstrates that the firm has recognised that its competitive advantage has eroded, and that in order to fight for a larger part of the market, it must first comprehend the mechanism of competition. Of course, lowering prices implies lowering profit margins, and the issue now is: how do we know which will support its future earnings?
