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Is everyone being too pessimistic about the economy?
08.08.2022

The stock market continues to maintain momentum with the bullish trend continuing pre-market. Most economists continue to advise that the increase in stock prices, which originally started towards the end of June, is a result of strong economic performance within certain industries, a strong employment sector, and a positive earning season in the US.

The earning season had been predicted to be poor ever since the first quarter earnings were confirmed. This was also illustrated in the price as the stock market took a massive hit for multiple reasons. However, the performance of most companies has actually been better than predicted; although not as positive as in the previous years. This has resulted in many traders turning their focus back on the stock market as they try to buy at discounted prices.

However, the market does remain uncertain, as safe haven assets also continue to perform well and confidence indices remain extremely low. In addition to this, the Federal Reserve has advised that they are still not done with increasing interest rates and that inflation has spread to other areas of the economy. It is for this reason that traders are contemplating whether the stock market will be able to maintain its bullish trend.

The SNP500 futures increased by 0.62% so far today and the index itself has increased by 0.80% over the past 5 trading days. The NASDAQ, on the other hand, has performed slightly better in the futures market illustrating a 0.79% increase and the index increasing by 2.57% over the previous 5 days.

Alcoa

Alcoa stocks have witnessed an increased amount of volatility within the last trading session as the company released its quarterly earnings figure. The stock had been trading within a major downtrend, but will it continue to see a rise in prices with better than expected earnings?

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One of the positive factors regarding the earnings report is that the company’s main competitors have performed poorly compared to Alcoa. This is especially true for corporations from Russia which would normally hold a large market share but have taken a hit due to the sanctions which had been introduced over the past few months.

In the second quarter, the company reported revenue of $3.64 billion, better than the $3.45 billion which had been forecasted. In addition to this, the Earnings Per Share (EPS) of $2.67 was above the $2.31 projected by economists and remains higher than the earnings figure seen in the previous year.

The company's board of directors approved a dividend of $0.10 per share, which is due on the 25th of August. The shareholder register will be closed on Tuesday, and the estimated yield could be a symbolic 0.81% per annum which again is considered positive for investors.

DAX - Earning Reports Continue

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One of the latest main developments for the German stock market is the earnings report for Deutsche Post which recorded quarterly revenue at the level of €24.03 billion. The figure exceeded the €21.83 billion which had been forecasted by analysts. The Earnings Per Share (EPS) came in at €1.17, again higher than the predicted €0.99.

One of the world's largest sports brands, Adidas AG, reported revenue of €5.6 billion, which was more or less what the market expected, while the Earnings Per Share (EPS) was confirmed as €1.88.

Also, the German airline Lufthansa recently showed income at the level of €8.46 billion against the forecast of €8.06 billion. This came amid reports of a reduction in the government's stake in shares from 20% to 10%, which seems to have affected the dynamics of the company’s quotations favorably.

The stock showing the highest growth is Deutsche Post AG which increased by 4.56% in the previous trading session, while the stock showing the strongest decline is Bayer AG which declined by almost 7%.

Key Takeaways:

  • The stock market performs well as earnings reports continue to be released but traders are cautious of confidence indexes and minor economic contractions.
  • Earning reports are better than expected compared to those released at the beginning of the year.
  • Deutsche Post AG is currently the best-performing German stock.
  • The Fed advises that they are not done with interest rate hikes.
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