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Earnings Season Arrives but the DowJones remains Negative
05.07.2022

The price of the DowJones has increased in its latest live trading session by 1.05% and has generally outperformed both the NASDAQ and the SNP500. The DowJones over the past month has declined by 5.52%, whereas the SNP500 has declined by 7.18% and the NASDAQ by 8.05%.

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The US market was closed yesterday and is yet to open today. However, the market has been following the outside-hours price movement. On both days the DowJones futures have declined and this week’s price action is currently down by 0.96%. The market has been influenced by various factors such as the monetary policy and the approaching Quarterly Earnings.

One of the reasons which the index has been pressured is reports from companies which have already been released. For example, microchip manufacturer Micron Technology reported a 150% increase in net income for the current quarter, its revenue was $8.64B, and earnings per share rose to $2.59 from $2.14 a quarter earlier, but the corporation does not expect the same strong results in next reporting period.

This is not unique to Micron Technology but is predicted by most companies. According to Bloomberg, most companies will either report a poor quarter or predict the next quarter to be poor. This is partially also due to the level of inflation which has affected consumers’ disposable income. In addition to this, the higher interest rates are likely to make borrowed capital more expensive and can even lower economic demand. All have the ability to pressure the performance of companies.

Another negative factor is the situation in the domestic bond market: according to yesterday's trading data, the yield of the leading securities began to rise again. So, at the end of last week, the rate on 10-year US Treasuries rose to 2.952% from 2.889%, while the indicator for global 20-year assets increased to 3.4332% from 3.3671% a few days earlier.

On the other hand, we also have some potentially positive factors in the market that traders will be monitoring over the coming days. The President has confirmed that his government is debating whether to potentially tackle tariffs put in place on China by the previous government. The move is aimed at lower inflation but it can also give companies more freedom. If the government does proceed, the move may potentially support the stock market.

Currently, the components showing the highest price growth are McDonalds increasing by 2.46%, Coca-Cola by 2.34%, and Boeing by 2.28%. Among the companies showing the strongest active decline is Intel 2.86%, Nike by 1.00% and 3M by 0.71%.

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