Daily Stock Market News

LIVE MARKETS Earnings season at midpoint: Glass half-full or half-empty?


  • All three major indexes green; chips outperform
  • Comm svcs lead S&P sector gainers; cons disc down most
  • Dollar, bitcoin, crude red; gold up
  • U.S. 10-Year Treasury yield falls to ~1.75%

Feb 2 – Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

EARNINGS SEASON AT MIDPOINT: GLASS HALF-FULL OR HALF-EMPTY? (1221 EST/1721 GMT)

Fourth-quarter reporting season is rounding the far bend, approaching the halfway mark as investors digest a mixed bag of results and a slowly brightening picture for the quarter as a whole.

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So far, 214 of the companies in the S&P 500 (.SPX) have posted earnings. Of those, 77% have beaten consensus, according to Refinitiv data.

The past few weeks were rocked by notable misses from big banks read more and lockdown darling Netflix Inc read more , along with some disappointing guidance among industrials such as Caterpillar (CAT.N) read more and Boeing (BA.N) read more .

But upbeat results from high profile megacaps such as Apple (AAPL.O) read more and Alphabet (GOOGL.O) read more have helped boost analyst estimates.

In aggregate, annual S&P 500 earnings in the October-December period are seen growing 26.3% year-over-year, brighter than the 22.3% forecast at the beginning of the year, per Refinitiv:

Fourth quarter earnings estimates

Regarding topline growth, the quarter is running better than the long-term average, but well below the average over the last year, when investors were spoiled by easy comps.

“In aggregate companies are reporting revenue 2.8% above expectations,” writes Refinitiv’s senior research analyst Thomas Alonso. “This compares to a long-term (since 2002) average of 1.2% above estimates and average of 4.0% for the prior four quarters.”

After Wednesday’s closing bell, results are expected from, among others, Meta Platforms (FB.O) (née Facebook) and insurance companies MetLife (MET.N), Aflac and Allstate (ALL.N).

(Stephen Culp)

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EUROPE REBOUNDS FURTHER, VOLATILITY RECEDES (1155 EST/1655 GMT)

European equity markets pulled off another session of gains and have rebounded about 5% from their January 24 lows.

The pan-European STOXX 600 is now down only 2.2% since the beginning of the year and volatility has clearly receded since the market turmoil of last week.

Europe’s VIX equivalent is now below is 50-day moving average and no longer very far from the 100-day moving average either:

sd

The earnings season is gently cruising toward full speed with beats coming in at a higher rate than usual.

Analysts have revised their expectations upwards to a 55% year-over-year rise in profits, from 51% last week, Refinitiv data showed.

European banking stocks are definitely enjoying this new tightening cycle and at one stage during the session, hit their highest level since 2018.

Talking about rates going up, all eyes will be on the BoE’s meeting tomorrow when a 25 basis points hike is widely anticipated.

Nothing is much expected out of the European Central Bank on Thursday, but data showing euro zone inflation rising up much more than expected leaves the door open for at least some kind of a hawkish tone during the press conference.

Last, but not least, a Reuters exclusive sent the shares of France’s Atos at the top of the STOXX 600 with a 8% rise.

Have a read:

EXCLUSIVE-France’s Thales considers move for Atos cybersecurity arm BDS -sources read more

(Julien Ponthus)

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U.S. STOCKS TRY TO SCORE FOUR-STRAIGHT DAYS OF GAINS (1050 EST/1550 GMT)

Major U.S. indexes are fighting to rise for a fourth-straight session on Wednesday. As it stands, the S&P 500 (.SPX), and Nasdaq (.IXIC) are posting modest gains, while the Dow (.DJI) is roughly flat.

Thanks to Alphabet (GOOGL.O), communication services (.SPLRCL) is the top performing major S&P 500 sector on the day, and on the back of gains in Advanced Micro Devices (AMD.O), the Philadelphia Semiconductor Index (.SOX) is handily outperforming the market.

However, in the wake of ADP’s big miss read more , more economically-sensitive groups, such as banks (.SPXBK), small caps (.RUT), and energy (.SPNY) are being hit.

With this, S&P 500 value (.IVX) / S&P 500 growth (.IGX) ratio is falling to its lowest level since January 12.

Meanwhile, all three of the major indexes are so far backing away after nearing resistance hurdles at their January 10 lows. For example, the SPX hit a high of 4,578.43 in early trade, which was just shy of its 4,582.24 January 10 low – click here: read more .

Here is where markets stand in mid-morning trading:

morningtrade02022022

(Terence Gabriel)

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THANKS FOR NOTHING, OMICRON: PRIVATE SECTOR JOBS SINK FOR FIRST TIME IN 21 MONTHS (1013 EST/1513 GMT)

Data released on Wednesday provided stark evidence that Omicron infected the labor market in the first month of 2022.

According to payrolls processor ADP, private employers unexpectedly shed 301,000 jobs in January, marking the first monthly headcount decrease since April 2020, when abrupt shutdowns to contain the pandemic caused 22 million+ jobs to evaporate overnight. read more

The number widely missed the 207,000 gain analysts expected, with spiking infections of the COVID-19 Omicron variant the likeliest disrupter.

“Omicron effects will likely distort the January BLS data given a high number of infections caused widespread disruptions,” writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “Depending on the magnitude, the Fed is likely to look through any weakness given virus-related disruptions are viewed as temporary.”

“Even so, coming months data bear watching for any changes in underlying conditions in the labor market,” Farooqi adds.

It’s worth noting that ADP’s National Employment data (USADP=ECI) is not a reliable predictor of the Labor Department’s more comprehensive jobs report. Still, it doesn’t bode well for Friday’s numbers, which economists, on average, anticipate will show 150,000 private sector job adds.

But the estimates range widely, from -150,000 to +310,000.

The graphic below shows how closely (or not) the ADP data tracks Labor Department private payrolls:

ADP

Meanwhile, mortgage demand saw a 12% upward bounce last week, even as interest rates continued their upward climb, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate (USMG=ECI) inched 6 basis points higher to 3.37%. But applications for loans to purchase homes (USMGPI=ECI) and refinance existing mortgages (USMGR=ECI) both rose, by 4% and 18%, respectively.

Are hopeful borrowers looking to hop on the low-rate ship before it finally sails?

Nancy Vanden Houten, lead U.S. economist at Oxford Economics, believes they might be.

Noting that mortgage rates have gained 60 basis points since early November, Houten says “perhaps borrowers are seeking to obtain mortgages before rates move higher, although the MBA said application counts have recently been volatile due to holidays.”

The affordability ship has already left the harbor for many potential homebuyers, particularly at the lower end of the market.

Along with climbing rates, pandemic-driven demand have sharply depleted inventories of homes on the market, launching home prices to the moon.

Even with today’s bump, overall mortgage demand is down 37% from the same week a year ago:

MBA

(Stephen Culp)

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NASDAQ COMPOSITE: LIFTOFF FROM A LAUNCHING PAD? (0900 EST/1400 GMT)

From its November record high to its January low the Nasdaq Composite (.IXIC) was smashed. read more With this, one measure of internal strength may have reached washed-out levels, and may now be signaling potential for a surprisingly large recovery.

The Composite collapsed nearly 17% on a closing basis from its November 19 peak to its January 27 low.

Meanwhile, the Nasdaq New High/New Low (NH/NL) index, which had been diverging for eight months into the IXIC’s November high, fell to 6% on January 28 read more :

IXICNHNL02022022

Now, with the Composite’s rolling three-day jump of more than 7%, its largest such rally since November 2020, the NH/NL index has risen to 9.1%. read more

Of note, last week’s 6%-NH/NL index reading, and subsequent turn higher, sets up the potential for it to be the seventh-lowest trough in the midst of a major IXIC decline since late-November 2008.

Admittedly, the average of the six major troughs from late-2008 to early-2020 is 1.7%, so deeper than last Friday’s low. Still, 6% is historically depressed, and may therefore be sufficiently washed out. read more

From the prior six major NH/NL index troughs, the average reaction saw the measure rise to a reading of 71% before a more significant setback occurred. With this, the Composite, on average, advanced 22% from the date of the NH/NL index trough to the reaction high.

Major indexes still have important chart hurdles to overcome read more , and this analysis is based on averages, but if the 6%-NH/NL index trough holds, and it sees an average thrust into a reaction high, accompanied by an average Nasdaq advance, the surprise would be new record highs for the Composite.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

Our Standards: The Thomson Reuters Trust Principles.



Read More: LIVE MARKETS Earnings season at midpoint: Glass half-full or half-empty?

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