​Little reason to cheer US earnings beat

2024-01-17
Summary:

US stocks fell as markets, overly optimistic about rate cuts, faced warnings. Treasury yields rose to the highest since mid-December.

US stocks retreated on Tuesday amid warnings that markets might have been overly optimistic about rate cuts. Treasury yields climbed to its highest level since mid-Dec.

US stock market

Nasdaq CEO Adena Friedman said in Davos that while “there are a lot of signals that would say that there should be rate [cuts] as we go through the year … if I were the Fed, I would be a little concerned about starting too early.”


Fourth-quarter earnings for S&P 500 companies overall are expected to have increased 4.4% from a year earlier, LSEG data showed on Friday. They are expected to rise by 11% in 2024 after increasing just 2.9% in 2023.


About 8% of S&P 500 companies have reported so far, with the majority of these firms surprising positively. But Wall Street strategists said there is little reason to cheer as earnings estimates were slashed so much over the past three months


Significant job cuts in the tech industry at the start of the new year have flashed more warning signals. With higher interest rates, many employers have re-oriented to focus on profit rather than revenue growth.


Morgan Stanley chief investment officer Mike Wilson believes fourth quarter results will be a crucial test of investors' belief that the economy will skirt recession as inflation comes down — the so-called soft-landing trade.

SPXUSD

The benchmark index is supported by its 50 EMA with medium-term upward trend intact. However, MACD diverges negatively against it, which indicates danger of deeper correction.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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