Market Recovers as Positive Earnings Boost Investor Sentiment

Positive earnings are influencing investors at last as investors turn away from the banking crisis story. The NASDAQ ended the day almost 2% higher than the market open. The instrument has also fully corrected the decline over the past eight days. The bullish price movement in the stock market is likely related to the earnings reports from the past week. The latest earnings report was from Amazon, which uploaded its latest earnings overnight. 

The last Friday of the month is likely to have high levels of volatility throughout the European and US trading sessions. The EU this morning will be releasing the French Gross Domestic Product data for the quarter, French inflation, Spanish inflation, and German Prelim inflation. The four largest economies in the EU will release their Consumer Price Index, providing investors with greater insight into future interest rates. The US will release the latest PCE Price Index and Employment Cost Index this afternoon. 

The region’s CPI inflation data will strongly influence the Euro this morning. The Spanish inflation data was 4.1%, lower than the 4.4% economists expected.  French CPI read higher than expected, but French Consumer Spending experienced a significant decline. So far, the Euro is declining against the Dollar, Pound, and Franc, but investors will be monitoring if this will change once German inflation is confirmed this afternoon. 

EUR/USD 15-Minute Chart on April 28th 

Nonetheless, the currency experiencing the strongest trend and highest volatility is the Japanese Yen. Let’s take a look at exactly why?

USD/JPY - Dovish Regulator Applies Further Pressure on the Weakening Yen

The USD/JPY jumped 1.45% within the last 3-hours of the Asian trading session. Investors were quick to react to the latest governor’s forward guidance. The Bank of Japan is known to be one of the most dovish regulators and has, over the past 2-years, shied away from removing yield curb control and higher interest rates. As a result, the Yen shaved off up to 32% of its value in the first ten months of 2022 as investors opted for higher-yielding accounts. 

USD/JPY 3-Hour Chart on April 28th 

The new governor is now advising the market the bank will review its policy in the long term; analysts are advising this may take up to 1-year. In the governor’s speech, it is confirmed he would not hesitate to ease more if needed. This was the primary concern for investors, which resulted in the selloff. After investors sold the Yen in favour of the Dollar, the USD/JPY looks on track to complete its third consecutive week of bullish price movement.

When monitoring the trend since March, the longer-term price movement is following a clear upward trend. Each impulse wave peak is higher, and retracements also end on a higher low. This morning's price has crossed again onto a higher high, and the regression channel has pointed upwards. The only concern for traders is the price may witness a retracement, as the price is far above the regression channel; the RSI is above 80.00 and 0.60% higher than the previous high. Therefore, technical analysis indicates a bullish trend, a bullish market but a retracement risk. 

NASDAQ - Positive Earnings Boost Investor Sentiment

The NASDAQ ended its 3-day bearish trend with a strong surge in buyers, pushing the price back up to a new high. This morning's price illustrates a price range between $13,104 and $13,156, which can act as breakout levels once the US stock market opens. European indices are also increasing within the first 1-hour of trading, which is a possible indication of global investor sentiment.

NASDAQ 2-Hour Chart on April 28th 

However, this morning's price will depend mainly on the PCE Price Index. If the PCE Price Index reads lower than 0.3%, the Federal Reserve will be better positioned to hold interest rates. US GDP data released yesterday was significantly lower, and a lower PCE Price Index would put a 0.25% hike in doubt. This would be positive for the stock market, but only if the Fed does follow through. 

Amazon’s earnings report had some robust positive data and negative factors concerning investors. The earnings report was released after yesterday’s market close. The Earnings Per Share for the first quarter of 2023 read $0.31, 42% higher than what markets expected and $0.28 higher than the previous quarter. The company revenue also read 2.20% higher than investors were expecting. The stock had increased by 4.60% during yesterday’s session but is declining after trading hours. 

Growth in its cloud computing sector is still “cooling”, which is a disappointment for investors. The Sales Revenue in the sector remained at $21.3 billion, which is the first time the cloud computing department has not shown quarter-on-quarter growth. After hours, the stock declined 2% regardless of the highly positive earnings data. Analysts advise this is mainly due to the company’s warnings of a “cooling Cloud market”. In April, cloud activity declined by 5%.

Summary:

• The NASDAQ ends the day almost 2% higher than the market open. The instrument has fully corrected the decline witnessed over the past eight days.
• Amazon’s Earnings Per Share for the first quarter of 2023 read $0.31, 42% higher than what markets. The company revenue also read 2.20% higher than investors were expecting.
• The Japanese Yen significantly declined as the new governors confirmed the regulator might loosen policy if necessary. 
• If the PCE Price Index reads lower than 0.3%, adding to the lower GDP from yesterday, the Federal Reserve will be in a better position to hold interest rates for now. This is positive for the stock market.