25 Oct

US economic indicators continue to fall. Investors’ attention is focused on tech giants’ reports

October 25, 2022

By JustMarkets

The US stocks continued to rise on Monday. Weaker economic data on business activity caused Treasury yields to fall slightly and pushed stocks higher on the background that the Federal Reserve may consider a less aggressive monetary policy after a 75 basis point rate hike next month. Stocks also rallied ahead of a wave of quarterly results from major tech companies.

As the stock market closed yesterday, the Dow Jones Index (US30) increased by 1.34%, and the S&P 500 Index (US500) added 1.19%. The NASDAQ Technology Index (US100) closed by 0.86% on Monday.

Forecasts from HSBC Holdings Plc suggest markets are still underestimating the likelihood of a return to ultra-low US interest rates as the Federal Reserve’s hawkish stance risks bringing down the economy. There is a “fairly high” probability that the US Central Bank will need to cut rates near zero over the next three to five years.

The US Treasury is taking steps to make the Treasury debt market, the private money market, and bond funds more resilient, but according to US Treasury Secretary Janet Yellen, the US financial system is functioning well despite the heightened global volatility.

Companies reporting today include Alphabet (GOOGL), Visa (V), Coca-Cola (KO), Texas Instruments (TXN), United Parcel Service (UPS), NextEra Energy (NEE), Lockheed Martin (LMT), HSBC ADR (HSBC), General Electric (GE) and 3M (MMM).

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Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 1.58%, France’s CAC 40 (FR40) added 1.59%, Spain’s IBEX 35 (ES35) increased by 1.79%, and the British FTSE 100 (UK100) closed Monday with 0.64%.

In the UK, heightened political and economic uncertainty has led to a drop in business activity to 2009 crisis levels. A government report released Friday showed that retail sales fell by 1.4% in September, and consumer confidence is near its worst level ever, as inflation returned to a 40-year high. And all of these problems will now have to be addressed by the new Prime Minister Rishi Sunak. Financial experts believe the new prime minister’s key focus should be a credible fiscal responsibility plan that can guarantee that the national debt will shrink in the medium term.

Oil declined Monday as data showed Chinese demand remained sluggish in September, while weak US business data eased expectations for more aggressive interest rate hikes and limited price cuts.

Asian markets traded flat on Monday. Japan’s Nikkei 225 (JP225) jumped by 0.31% on the day, Hong Kong’s Hang Seng (HK50) ended the day sharply down by 6.36%, and Australia’s S&P/ASX 200 (AU200) was up by 1.54%.

Shares of Chinese technology companies fell sharply on Monday after Chinese President Xi Jinping’s leadership reshuffle raised fears of increased regulatory scrutiny of tech stocks. Investor sentiment also remains tense as markets fear further disruptions to the economy by the government, especially after Beijing reiterated its commitment to its strict zero COVID policy. Concerns about US restrictions on semiconductor exports to China are also having an impact.

S&P 500 (F) (US500) 3,797.34 +44.59 (+1.19%)

Dow Jones (US30) 31,499.62 +417.06 (+1.34%)

DAX (DE40) 12,931.45 +200.55 (+1.58%)

FTSE 100 (UK100) 7,013.99 +44.26 (+0.64%)

USD Index 112.01 0.00 (0.00%)

Important events for today:
  • – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
  • – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
  • – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
  • – FOMC Member Waller Speaks at 20:55 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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