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24.01.2023 02:46 PM
US premarket on January 24: US stock market fears corporate earnings reports

On Tuesday, European and US stock index futures are trading lower, struggling to hold on to the previous day's rally as investors prepare for important earnings and expense reports from many leading technology companies.

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European bonds rose and the four-day euro growth streak came to a halt after business activity data increased but was worse than economists' forecasts. The market did not react either to today's strong data on the S&P Global PMI Composite in the EU, which rose to 50.2 points in January, much better than economists' forecasts of 49.8 points. For the first time since June 2022, the indicator moved above the 50-point threshold separating growth from contraction.

The Stoxx 600 index lost early gains and went into the red zone, while the Nasdaq 100 and S&P 500 futures are trading at -0.2%.

An upcoming wave of corporate earnings reports from tech giants such as Microsoft Corp. and Texas Instruments Inc. as well as industrial companies such as GE will test the recovered demand for risky assets. Some traders are preparing for the worst drop in tech earnings since 2016. For example, Microsoft is predicted to report its smallest sales growth in six years. However, there are also those who believe that lower inflation and cost-cutting measures helped to avoid a deeper downturn.

Traders expect that the US Federal Reserve is nearing the end of its rate hike cycle. They also believe that the US central bank will raise rates by only 25 basis points at its February meeting, the first meeting of the year.

Yields on German and UK 10-year government bonds fell. The latter was under pressure from poor business performance.

Oil prices stabilized as traders awaited new inventory data. Copper was trading near its highest level in seven months and gold continued to rise for the fourth straight week.

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As for the S&P 500 index, bulls continue to control the market. The index may continue to grow. However, they need to protect the support of 3,986. At the same time, bulls should return the level of $4,010 under control. Only after that, the trading instrument may soar to $4,038. The level of $4,064 will be difficult to reach. If the index declines and we see low activity from bulls at $3,986, they will have to protect $3,960. Breaking through this level from above, the trading instrument may be pushed to $3,923.

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