U.S. Stock Futures Steady as Earnings Uncertainty Looms

April 21, 2023

On Thursday night, U.S. stock futures showed little movement, with the Dow Jones Industrial Average futures dropping slightly by 18 points or 0.05%. S&P 500 futures remained unchanged, while Nasdaq 100 futures rose 0.07%.

During regular trading on Thursday, the Dow decreased by approximately 110 points or 0.33%. The S&P 500 dropped 0.6%, and the Nasdaq Composite, which has a heavier focus on technology stocks, lost 0.8%. Tesla’s shares were one of the factors dragging down the Nasdaq, with a decline of nearly 10% after the company reported a sharp drop in net income for the first quarter compared to the same period in the previous year.

This week, the major U.S. stock market indices are likely to finish in the red, with the Dow and S&P 500 on track for their worst weekly performances since March. This earnings season brings more macro-level uncertainty than in the recent past.

Earnings season continues on Friday, with Procter & Gamble, Regions Financial, SLB, Freeport-McMoRan, and HCA Healthcare set to report earnings before the market opens. Investors will also keep an eye on the Purchasing Managers’ Index for the manufacturing and services sectors to gain insight into the economy.

On Thursday, all sectors in the stock market experienced a price decline of 0.60%, except for the Consumer Staples sector which increased by 0.06%. The Real Estate and Consumer Discretionary sectors saw the largest declines, at 1.19% and 1.48%, respectively. The Information Technology and Communication Services sectors also experienced significant declines, both down by over 0.75%. The remaining sectors saw smaller declines, ranging from 0.05% to 0.43%.

Major Pair Movement

On Thursday, disappointing U.S. economic data caused Treasury yields to fall, resulting in the dollar weakening and increasing the likelihood of further rate cuts by the Federal Reserve. The data included jobless claims, Philly Fed, existing homes, and the Conference Board’s Leading Economic Index, which all signaled that the battle against inflation would negatively impact growth and asset demand.

Despite a 3bp rise in 2-year bund-Treasury yield spreads, the EUR/USD remained relatively unchanged. The European Central Bank is expected to raise rates more than the Fed this year but holds hikes for a longer period.

While JGB yields remained steady, the yen advanced against the euro and sterling due to the upcoming Japanese CPI report and Bank of Japan meeting. The BoJ is likely to maintain its policy stance but may tweak its yield curve control if wage settlements remain strong. GBP/USD recovered from Thursday’s lows but still finished down 0.05%.

Friday will feature April S&P Global PMIs and retreating oil prices will also be watched as a global recession risk indicator.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD remained stable below 1.1000 due to mixed US equity markets and doubts about the market outlook. The European Central Bank’s accounts showed that the central bank would have signaled more rate hikes if not for the banking crisis, and a rate hike is expected at the May 4 meeting. US data was below expectations, with Initial Jobless Claims, Continuing Claims, and Philly Fed Manufacturing Survey lower than expected, and Existing Home Sales also dropped. On Friday, the S&P Global PMIs are due, which could affect market sentiment and benefit the US Dollar if the readings are negative.

According to technical analysis, the EUR/USD has been moving slightly flat and remains between the support and resistance levels from the previous day. The Bollinger band is also narrowing, indicating that the market is in a flat range. We are expecting better market movement today with the release of PMI data in the EU. The Relative Strength Index (RSI) is currently at 50, indicating that the EUR/USD is in a waiting condition.

Resistance: 1.0975, 1.1026

Support: 1.0923, 1.0877

XAU/USD (4 Hours)

On Thursday, XAU/USD rose above the $2,000 mark as financial markets became more cautious due to concerns about the economic future and the weak US dollar. Global stock markets traded softly, with US indexes rebounding slightly from early lows, and government bond yields falling after disappointing US data suggested an upcoming economic downturn. Initial jobless claims rose, while the Philadelphia Fed Manufacturing Survey and existing home sales both performed worse than expected in April. US Treasury Secretary Janet Yellen commented on the relationship between the US and China, stressing the importance of maintaining a constructive and fair relationship while warning of severe consequences for any violations of sanctions on Russia by Chinese companies. She also emphasized the need for the government to ensure the soundness of the banking system in light of the recent financial crisis.

Based on technical analysis, XAU/USD has risen back above the $2,000 mark but is still experiencing consolidation. It is currently trading in the middle band of the Bollinger band, indicating a neutral trend in the longer term. The Relative Strength Index (RSI) is hovering around 50, suggesting that XAU/USD is waiting for its next move.

Resistance: $2,010, $2,020

Support: $1,997, $1,990

Economic Data