Traders and investors have all eyes on the European Central Bank and another wave of US corporate earnings.
Q3 earnings
Yesterday, after the close, Facebook parent company Meta became the latest big tech company to deliver poor results with earnings plunging by half and sales slowing more than expected.
Big tech earnings wrap up today with results from Apple and Amazon due after markets close. Key earnings results are also due from AnheuserBusch InBev, Caterpillar, Check Point, Comcast, Gilead Sciences, Honeywell, Intel, Keurig Dr Pepper, Mastercard, McDonald’s, Merck, Northrop Grumman, Shell, Shopify, Southwest Airlines, Starbucks, TMobile, and T. Rowe Price.
Overall, Q3 earnings have revealed a clear trend of businesses preparing for an economic downturn amid conditions that are already challenging corporate profits in most sectors. Bears believe that the headwinds are only going to intensify in the quarters ahead as central bank rate hikes further reduce liquidity and credit access.
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Most bears also believe inflation will be much slower to come down than Wall Street anticipates, meaning higher costs will also continue to eat away at corporate margins as consumer spending dips.
Central banks
Bulls are still pinning bets on a less aggressive turn by the Federal Reserve by the end of 2022, a belief boosted by the Bank of Canada yesterday announcing a smaller-than-forecast rate hike of 50-basis points, versus 75-basis points projected by analysts.
The bank yesterday said it was getting close to the end of its hiking cycle as it also predicted the economy would stall over the next three quarter.
Many bulls believe the Fed is approaching a similar decision. That view could be reinforced today if the European Central Bank similarly backs off a bit on its tightening plans. At the same time, investors are concerned that recession fears could also be reinforced if the first read on Q3 Gross Domestic Product (GDP) disappoints later today when it is released.
Wall Street insiders forecast the economy grew at a +2.3% annualized rate versus a contraction of -.06% in Q2. Some economists consider two consecutive quarters of economic contraction to be a clear indicator of recession.
Other economic data today includes Durable Goods Orders and the Kansas City Fed Manufacturing Index.
Investors Have All Eyes On The European Central Bank
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