Fingers tapping nervously

Stephen Innes SPI Asset Management

Markets

With fingers tapping nervously amid the calm before the profit storm and uncertainties centred around the upcoming US CPI data, U.S. stock markets showed a mixed performance overnight, with the S&P 500 and Dow Jones Industrial Average experiencing losses as the Nasdaq Composite recorded marginal gains.

At the same time, broader markets remain tied to the hip of the 10-year Treasury yield amid growing concerns the bullish narrative may flip, questioning whether bets on Federal Reserve rate cuts are overdone. We should have a more conclusive read on that after Thursday’s US CPI data.

After a recent stock market dip, attention gradually shifts to the upcoming earnings season to gain insights into companies' growth trajectories. Mega-cap technology firms, part of the Magnificent 7 group, are under close scrutiny due to their significant influence and substantial weight in the S&P 500. Their earnings outcomes will be crucial in determining the stock market's overall direction. Investors are keen to discern whether recent declines are justified or whether companies' profits remain robust enough to revive the end-of-year rally.

The impact of the Federal Reserve's rate hike policy, cautious consumer behaviour, macro uncertainty, and signs of economic contraction in Q4 have raised concerns about the forthcoming fourth-quarter corporate earnings season. High valuations and thoughts of a broader economic slowdown may cast a shadow on corporate earnings, even if profits exceed expectations—a situation that stock market operators likely aim to avoid.

Oil markets

Brent crude settled around $78 per barrel, and traders are assessing factors such as disruptions in the Red Sea, a critical shipping lane, and an unexpected decrease in Russian seaborne exports amid weakening demand.

Seaborne tracking data indicates that Russia has reduced exports by 500,000 barrels, aligning with quotas and demonstrating a notable level of compliance from Russia, which has triggered a short-covering rally. However, few believe Russia will remain compliant when they need Petrol revenue to fight the war.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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