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U.S. Stock Futures Rise Ahead of Earnings Report

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U.S. stock futures are on the rise early Thursday as investors anticipate earnings reports from three major companies: Apple, Amazon.com, and Meta Platforms.

Yesterday, the Dow Jones Industrial Average (DJIA) experienced a drop of 317 points, or 0.82%, closing at 38,150. The S&P 500 (SPX) also declined by 79 points, or 1.61%, ending at 4,846. Furthermore, the Nasdaq Composite (COMP) dropped by 346 points, or 2.23%, to close at 15,164.

Over the past two sessions, the S&P 500 has witnessed a 1.7% decrease as investors expressed their disappointment with the earnings results from major tech companies and concerns over future monetary policies.

These factors are expected to continue influencing market sentiment throughout the rest of the week.

Following the underwhelming earnings news from Microsoft (MSFT), Alphabet (GOOG), and Advanced Micro Devices (AMD) on Tuesday, which failed to meet the high expectations driven by AI-related optimism, three more tech giants await their turn to present their financial results after the market closes on Thursday. These companies are Apple (AAPL), Meta (META), and Amazon.com (AMZN).

According to Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, “most investors have been waiting for an opportunity to sell off the overextended tech rally.” She warned that if Apple, Amazon, and Meta’s results fail to impress investors, it is likely to trigger a further selloff in the tech sector.

The pricing of Apple options suggests that traders foresee a potential move of approximately plus or minus 3% for the stock by the end of this week.

In addition to Apple, Amazon, and Meta, several other companies are set to report their earnings on Thursday. The list includes Altria (MO), Peloton Interactive (PTON), Merck (MRK), and Honeywell International (HON) before the opening bell. Following the market close, Atlassian (TEAM), U.S. Steel (X), and Skechers (SKX) will also release their earnings reports.

Overall, investors are eagerly awaiting the outcome of these earnings reports and closely monitoring the performance of tech companies as they continue to play a significant role in the stock market.

Traders Keep Watchful Eye on Banking Sector

As the regional banking sector faces challenges in commercial real estate, investors are closely monitoring the situation. New York Community Bancorp’s shares have observed a significant decline as the lender emphasized the difficulties in this sector. Similarly, Aozora, a Japanese bank, issued a profit warning following the reduction in the value of its U.S. office portfolio and losses on U.S. and European bonds.

Federal Reserve’s Rate Cut Considerations

Investors are also assessing the timing of the Federal Reserve’s decision to lower borrowing costs. Although Fed Chair Jay Powell stated during the post-meeting press conference that a rate cut in March is not the most likely scenario, market participants expressed disappointment. However, fixed income futures markets now anticipate an even higher certainty of rates falling at the subsequent Fed meeting in May. Additionally, traders foresee approximately 150 basis points of cuts occurring throughout the year.

Train Delayed, Not Cancelled

While the delay in rate cuts may have disappointed some investors, it is important to note that the train has not been canceled. Steve Clayton, head of equity funds at Hargreaves Lansdown, describes the current situation as a “train delayed, not cancelled” scenario. However, investors may become less forgiving if there is any emerging data suggesting that the economy still has the potential to sustain inflation.

Market Anticipation for U.S. Economic Updates

Market participants are eagerly awaiting several U.S. economic updates. On Friday, the nonfarm payrolls report will be crucial, with hopes of signs indicating that wage growth is not accelerating. In addition, Thursday’s releases include the weekly initial jobless claims report, fourth quarter 2023 productivity data, the final reading of the S&P manufacturing PMI survey for January at 9:45 a.m., and the January ISM manufacturing report along with December construction spending at 10 a.m. Eastern.

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