US stock markets are rebounding from the poor performance at the start of the week as companies continue to release better-than-expected earnings. According to CNBC, on Tuesday all three major indices were trading above their 50-day moving averages for the first time since April. And the rise continues this morning with the Dow Jones Industrial Average climbing by 0.52%, the S&P 500 by 0.58%, and Nasdaq 100 by 0.61%.
This comes a couple of days after Monday’s indecisive markets turned early gains into losses towards the end of the trading day. Of course, the dip was a direct result of Apple announcing a hiring freeze, which traders perceived as a sign that worse-than-expected earnings are underway. But as companies continue to release their earnings reports, it is becoming apparent that while some companies are reporting losses, others are exceeding expectations.
According to Fundstrat, 43 of the S&P 500 companies kicked off the earnings season on a positive note with roughly 60% of them beating profit and sales expectations. For the DJIA, Goldman Sachs blew investors away when it reported a profit of $2.9 million at $7.73 per share, against the expected $6.61 per share. For Nasdaq, Netflix took the win when its stock jumped by 7% in after-hours trading. The company announced that it lost 970,000 subscribers of the projected 2 million in the second quarter. The streaming service, which still boasts 220.67 million subscribers, also said that its planning to introduce a lower-cost ad-supported subscription tier early next year.
Advances in the stock market have led some analysts to believe that investors' risk appetite is turning. According to one of the senior marketing strategists at the NYSE, Michael Reinking, “Once again we’re seeing the risk on sentiment within equity markets.” The general assumption amongst traders is that the markets reached rock bottom, which means that they can only go upward now. The question remains: Are strong earnings enough to push the markets higher?
While the markets appear to be rebounding, the same cannot be said about the weakening US Dollar. The currency is struggling to find support despite the Federal Reserve raising interest rates in an attempt to curb high inflation. The US Dollar Index has shed over 2.60% since reaching a 19-year high just last week.
Traders will be keeping an eye out for the rest of the companies that are scheduled to release their earnings this week. These include Tesla, AT&T, Twitter, Verizon, and others. Another economic event that traders will be monitoring is the Federal Reserve hike at the end of this month. This meeting will determine how many basis points the interest rate will increase. So far the indication has been that it will be 75 basis points, however, some fear that it might be 100 basis points instead.
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