Stock bulls are cautiously optimistic and highly anxious to see earnings results from tech giant Microsoft today. The tech sector is actually off to a good start this week as investors approve the recent spate of painful but necessary cutbacks. Investors will be paying particular attention to the company’s forward guidance for clues that margin pressures and other headwinds may be letting up for not only Microsoft but the overall tech industry.
Other earnings due today include 3M, Capital One, Danaher, D.R. Horton, General Electric, Halliburton, Johnson & Johnson, Lockheed Martin, Raytheon, Texas Instruments, and Union Pacific. Bulls this week are also pointing to signs that global monetary policy tightening may be nearing a peak.
For what it’s worth, the number of central banks hiking rates right now higher than the number that were hiking in 2008 when they were attempting to head off the global financial crisis.
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Most bulls are pointing to a growing divide between central bank officials in both the US and Europe as to the size and scope of interest rate hikes. Bulls view this as an early indication that “hawkish” consensus is fading and an end to tightening is near.
Bulls today are anxious to see the Bank of Canada’s latest policy decision. Many on Wall Street expect the bank to announce an end to its hiking campaign with a final 25-basis point increase either this month or next. If they do, the COB would be the first major central bank to end its rate hikes and bulls believe the US Fed would likely be influenced by their lead. It would also be notable because Canada’s inflation rate is still around +6%, versus the central bank’s target rate of +2%, the same as the US Fed.
One of the big fears among US investors is that Fed will tighten policy too much and push the economy into recession, and even a few Fed officials have noted that risk. Removing that potential pitfall could obviously be bullish for stock prices. On the other hand, if the Bank of Canada leans more hawkish and fails to signal an end to rate hikes ahead, bulls may again retreat to the sidelines.
US Fed officials are currently in the “blackout” period before their meeting at the end of the month so that puts some added attention on global central banker activities this week.
Key economic data today includes Flash PMI and the Richmond Fed Manufacturing Index, both of which are expected to show further easing of price pressures but also a slowdown in manufacturing activity.
What Will Move Markets Today?
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