U.S. stock futures climbed at the end of a turbulent week after Amazon and Intel reported strong earnings and issued solid forecasts. Crude oil prices rose after the U.S. carried out attacks on Iran-linked facilities in Syria.
Most analysts and traders sold Amazon heavily ahead of the earnings report and even more so after mixed results from Alphabet, Meta and a terrible report from Tesla. We did the opposite and expected strong Amazon results – resulting in a mega win for our community today. The Nasdaq 100 is currently trading 0.7% higher after rising as much as 1% earlier in pre-market trading. However, headwinds remain and rather mixed results in Europe (particularly from French pharmaceutical giant Sanofi) will continue to keep sentiment very cautious.
While we see a positive start from Wall Street and a strong finish from Asian markets today, we expect selling to return before the end of today's U.S. session as concerns about further escalation in the Middle East also increase. I also expect investors to be concerned about Apple's earnings report next week.
PCE data – the Fed's preferred inflation reading – was mixed. Income was slightly below expectations, but spending was higher than expected. The report doesn't say much, but I think wage inflation will moderate. We should also never underestimate the U.S. consumer – it is one of the main reasons for the strong resilience of the U.S. economy.
In Europe, I don't see any light at the end of the tunnel, as European companies are also reporting significantly worse earnings on average. According to analysts at JPMorgan, 78% of companies in the US are beating estimates, compared to 57% in Europe. Still, forecasts remain gloomy as many companies warn of a slowdown and too high interest rates – despite analysts' positive opinion of this earnings season – I disagree and see the earnings report as a driver for more caution and selling.
It would take a very bullish Apple report next week to trigger a turnaround in my opinion – but it is more likely that Apple's earnings report will show weakness in iPhone/China sales. Much will depend on how successful Apple is in growing revenue from its services.
We see risk sentiment remaining very shaky, as evidenced by rising gold and oil prices. We expect caution to continue to increase as investors remain concerned about a further intensification of the conflict between Israel and Hamas. The high death toll in Gaza will continue to generate criticism/hate against Israel and could exacerbate geopolitical tensions, especially knowing that Russia is a close ally of Iran – meaning that overall geopolitical tensions are not limited to the Middle East or Ukraine-Russia, but are global.
👁 ROB'S MARKET OVERVIEW:
October 27, 2023
🇺🇸 US Markets ↗️/↕️/↘️ (rebound attempt after strong Amazon earnings / selloff return before NYSE closing)
Cyclical Stocks ↗️/↕️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ↘️/↕️/↗️ (losses after falling earnings / recovery in second half of US trading)
Materials Stocks ↗️/➡️ (benefiting from CN gains – no more gains during US trading)
JPY ↗️/➡️ (due to expectations that the Bank of Japan will support JPY)
AUD ↗️/↘️ (benefiting from CN optimism – gives back some gains during US trading)
USD ➡️/↗️ (remains overall bullish)
EUR, GBP ➡️
⚒ Commodity Markets ↕️/↗️
Oil prices ↗️
Natural Gas prices ↗️
Metal prices ↗️/↘️ (benefiting from CN optimism – gives back some gains during US trading)
Gold ➡️/↗️ (Gold remains bullish)
⚡️Cryptos ↗️/↘️ (after solid recent performance cryptos see some interest – loses early gains as risk sentiment worsens)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)