01 Feb

The stock market is rising amid expectations of good reports from major technology companies

February 1, 2023

By JustMarkets

The US stock markets rose yesterday. At the close of the stock market on Tuesday, the Dow Jones Index (US30) gained 1.09%, and the S&P 500 Index (US500) added 1.46%. NASDAQ Technology Index (US100) jumped by 1.67%. Investors have been evaluating a lot of companies’ results, and they have generally been better than expected. But US economic indicators continue to decline. Consumer confidence fell from 109 to 107.1 in January, with the report indicating that consumers have become less optimistic about job prospects and expect a softening of business conditions in the near future.

General Motors (GM) shares rose more than 7% after its fourth-quarter results beat Wall Street estimates, and the automaker’s annual outlook was less bad than feared. Caterpillar (CAT) shares fell more than 3% after the heavy equipment maker’s fourth-quarter earnings missed Wall Street estimates. PayPal (PYPL) announced plans to lay off 2,000 employees, about 7% of its workforce, as the payments company prepares for a “challenging macroeconomic environment.”

Investors await further results from the big tech companies. Meta Platforms (META) will report as early as today. And on Thursday, Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) will report.

The US Federal Reserve will hold an important monetary policy meeting today. The Fed is likely to raise the rate by 0.25%, and that increase is already in prices. Therefore, investors’ main focus will be on Fed Chairman Jerome Powell’s speech 30 minutes after the rate release. Investors will be looking for clues as to the Fed’s next move — whether the Fed will continue to raise rates or this hike will mark the end of the tightening cycle, after which the central bank will take a long pause.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.01%, French CAC 40 (FR40) closed on the opening level, Spanish IBEX 35 (ES35) decreased by 0.19%, and British FTSE 100 (UK100) closed on Tuesday down by 0.17%.

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Despite the energy crisis and the ensuing inflationary crisis, the eurozone economy once again showed resilience. Eurozone GDP grew by 0.1% in the last quarter. But most economies are now in stagnation with near zero growth. Germany and Italy, as the major industrialized countries, have seen small declines as they are hit the hardest by the energy crisis, while France and Spain have managed to achieve small growth rates. Despite the small increase, the growth momentum is downward, and the next quarter is likely to show a contraction.

The British Retail Consortium said that store price inflation accelerated to 8%, the highest since  2005. Prices for consumers have been rising steadily, even as the broader UK inflation rate is beginning to decline. Higher food prices mean that consumers are spending less on secondary goods.

The United States has expanded its sanctions list against Iranian entities that Washington accuses of being involved in supplying drones to Russia.

Natural gas prices continue to fall and have reached a 21-month low. The drop in gas prices came after an unusually warm start to the winter of 2022/23, which led to a drop in demand for heating fuel. But significantly colder temperatures are forecast for the region ahead, which will lead to increased consumption. In turn, increased consumption (demand growth) will put upward pressure on the quotes.

A weaker dollar and increased demand for crude oil and refined products, as reported late by the EIA or Energy Information Administration, supported oil prices yesterday. There will also be an OPEC+ meeting today where production quotas for the next two months will be approved. No surprises are expected, and production is projected to remain on target. However, volatility in oil will be elevated amid the release of strategic reserves data.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.39%, China’s FTSE China A50 (CHA50) lost 1.27%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.03%, India’s NIFTY 50 (IND50) gained 0.07%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.07%.

Factory activity in Japan has been decreasing for the third month in a row. Amid worsening global economic conditions, Japanese companies are facing calls for higher wage increases to counter inflation and support the recovery of the world’s third-largest economy.

New Zealand’s labor market is starting to show signs of slowing. The unemployment rate rose from 3.3% to 3.4%, with quarterly job growth falling short of forecasts. Against this backdrop, the central bank may slow the pace of interest rate hikes.

S&P 500 (F) (US500) 4,076.60 +58.83 (+1.46%)

Dow Jones (US30) 34,086.04 +368.95 (+1.09%)

DAX (DE40) 15,128.27 +2.19 (+0.014%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.17%)

USD Index 102.06 −0.22 (−0.21%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:00 (GMT+2);
  • – Spanish Manufacturing PMI (m/m) at 10:15 (GMT+2);
  • – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+2);
  • – Italian Manufacturing PMI (m/m) at 10:45 (GMT+2);
  • – French Manufacturing PMI (m/m) at 10:50 (GMT+2);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
  • – Eurozone Consumer Price Index (m/m) at 12:00  (GMT+2);
  • – OPEC+ Meeting at 13:00 (GMT+2);
  • – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
  • – US FOMC Statement at 21:00 (GMT+2);
  • – US Fed Interest Rate Decision at 21:00 (GMT+2);
  • – US FOMC Press Conference at 21:30 (GMT+2).

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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