US Stocks look to Corporate Earnings to Sustain Rally

From 12th to 28th October, most S & P 500 constituent companies report corporate earnings. The outperformers so far, include Netflix, Goldman Sachs, Bank of New York Mellon, Johnson and Johnson, and American Airlines. The overall better-than-expected results, lifted US indices. The S & P 500 and the Dow Jones index rose by 1.6% and 1.64% respectively in a week.

McDonalds, Hyundai, Moodys, GE, and Aluminum Corp of China will also release their reports today. With better than expected results, it will likely lift the US indices. Yet the S & P 500 and Dow Jones indices are currently trading below the short term major resistance levels at 2150 and 18250 respectively, be aware of selling pressure above the levels.

The ECB president Draghi stated yesterday that the Eurozone economy is in a sustained and moderate recovery.

Draghi’s statement helped the Euro to rally, yet it retraced subsequently as Draghi re-stated that the large-scale, 80-billion-euro a month asset purchase programme is schedule to end in March 2017. If necessary, it will last longer until the inflation reaches the ECB’s target. Consequently, EURUSD fell to the post-Brexit referendum low of 1.0886.

If the ECB cuts interest rates further into negative territory, it will dwindle the profits of Eurozone banks, increasing the struggle for the Eurozone banking industry.

The New York Fed President Dudley commented on Thursday, that the Fed will likely raise interest rates later this year if the US economy remains on track. The US initial Jobless Claims released the same day was 260K, although slightly higher than expectations of 250K, it marked consecutive 85 weeks of claims lower than 300K, the longest streak since 1970. Besides, the increase in claims was partly caused by the Hurricane Matthew, which lashed North and South Carolina states. Essentially, the US labour market still remains strong.

The Initial Jobless Claims and the outperforming Philadelphia Fed Survey figures escalated market expectations of a rate hike. The dollar index rallied to its highest level, at 98.54, since this March. According to the CME FedWatch tool, the chance for a December rate hike has risen to 68.0%. Whereas the chance of a November rate hike is only 8.3%, as markets assume that it is unlikely for the Fed to raise rates before the outcome of the presidential election.

The Japan Import, Export, and the Trade Balance figures for September, will be released at 23:50 GMT on Sunday 23rd, it will likely influence the strength of the yen. The German and Eurozone Manufacturing and Services PMIs, will be released between 07:30 to 08:00 GMT on Monday 24th, they will likely influence the strength of the Euro and the trend of DAX index.