Wall Street Falls Despite Strong Corporate Earnings

US stocks extend previous session’s losses and European bourses fall after earnings set cautious tone. Euro sliding below $1.22 as dollar strengthens. 10-year Treasury yield at 3.02%. A raft of earnings disappointments and the 10-year US Treasury yield touching the psychological barrier of 3.0% for the first time in four years rattled investor sentiment. The S&P 500 has extended an opening decline, to stand 0.6% lower at 2,618, in spite of a more upbeat outlook from Boeing, as worries emanating from Caterpillar’s quarterly figures and Alphabet’s capital spending keep the mood jittery.

The Dow Jones Industrial Average is also down 0.6% and the Nasdaq Composite is 1% lower. The S&P 500 has extended an opening decline, to stand 0.6% lower at 2,618, in spite of a more upbeat outlook from Boeing, as worries emanating from Caterpillar’s quarterly figures and Alphabet’s capital spending keep the mood jittery. The Dow Jones Industrial Average is also down 0.6 per cent and the Nasdaq Composite is 1% lower.

On the earnings front, Facebook (NASDAQ:FB), AT&T (NYSE:T), Visa Inc (NYSE:V), Advanced Micro Devices Inc (NASDAQ:AMD),Ford Motor Company (NYSE:F) and eBay Inc (NASDAQ:EBAY) will report later in the day while Boeing (NYSE:BA) is expected to report before the morning bell.

Twitter jumped 10.56% in pre-market trading after it reported a $0.16 in earnings per share versus $0.12 expected and a monthly user increase of 3.00%.

 

Earnings Worries Fuel Dollar Growth

This morning, the US Dollar index continues to rise, fuelled by worries over US earnings and soaring treasury yields. Dollar pairs are on the back foot once again, with the AUD/USD leading the fallers. The Aussie is now down 1.2% on the week, breaking the 0.7600 level. The EUR/USD and GBP/USD both rallied yesterday.

The euro is falling harder though, with this morning’s selling erasing most of yesterday’s gains though. The EUR/GBP is unchanged this morning after follow on selling yesterday. Yields have risen continually over the last year as expectations of higher US rates have hardened with analysts expecting another two or three 0.25% hikes this year – market expectations of three further hikes currently stand at 48%.

Higher US interest rates draw money away from non-interest bearing gold. Gold is on the back foot and continues to be rangebound, with $1320 acting as support. With rising bond yields spoiling the fun and disappointment around the U.S. tech sector putting a dampener on sentiment, hopes are pinned on earnings delivering. Which are also not bright across the board for some of the industrial majors.

Coming up today: The only item worth noting today is US crude oil inventories at 15.30, BOC Poloz speaks at 21.15.

The Swiss franc has continue to slip, while the US dollar strengthens. The USD/CHF is now approaching parity, a level not seen since November last year. This could be a great trading opportunity to grasp here. Parity could be on the cards again, but it could be short lived like last time.

Oil Prices Continue Higher As Focus Shifts to U.S. Supply Data

Global government bonds were hit by a renewed bout of selling — driving the yield on the 10-year US Treasury to within a whisker of the 3 per cent mark — as the recent strength of commodity prices helped sustain rising inflation expectations.

Indeed, Brent oil reversed an early fall to climb above the $75 a barrel mark to a four-year high late in the session.

The rally for crude came even as the latest increase in US yields put the dollar index on course for its highest close since mid-January. The gauge rose for a fifth straight day amid mounting speculation that the pace of US interest rate rises could be faster than had been expected earlier this year.

Oil prices tumbled early on fears that oversupply could return. Iran’s oil minister Bijan Zanganeh said there would be no need to extend a pact between the Organization of the Petroleum Exporting Countries and non-OPEC producers if oil prices strengthened, the ministry’s official website SHANA reported.

US stocks surrendered modest early gains, with the tech sector once again coming under pressure, although losses were limited by optimism regarding the US earnings season and a further easing of geopolitical tension and fading worries about a US-China trade war.

That said, the oil prices remain bid primarily due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

Dollar Climbs To Its Strongest Level For Nearly Two Months

Rising US government bond yields are supporting a jump for the dollar, the US currency having its best session for nearly a month. The dollar index was climbing 0.4% to its highest level since the beginning of March. Treasury yields are continuing to stand out as investors continue to sell government debt, as investors refine their outlook for global monetary policy ahead of two major central bank meetings this week.

Expectations that the Federal Reserve would raise interest rates three more times in 2018 was also supporting the greenback. The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.4% to 90.44, the strongest level since March 1.

The dollar rose to more than two-month highs against the safe haven yen, with USD/JPY up 0.4% to 108.10. The euro slid to two-week lows, with EUR/USD down almost 0.5% to 1.2230. Sterling was also lower, with GBP/USD slipping 0.2% to 1.3971.

Dollar strength was pushing the euro down 0.4% to $1.2233 while the pound is off 0.3% to $1.3966. Japan’s yen is 0.5 per cent weaker at ¥108.19 per dollar.

The stronger greenback was also having an impact on commodity assets measured in the US currency. Oil prices slipped with US marker West Texas Intermediate off 0.4% to $68.11 while Brent crude was down 0.3 per cent to $73.86 a barrel.

Priced dipped on Friday after a tweet from Mr Trump calling oil prices “artificially high”.

Gold was down 0.5% to $1,328.70 an ounce after touching its lowest intraday level in two weeks earlier in the session.

This Week Ahead: Top News to Watch This Week

Fellow traders, let us have a look at upcoming week in terms of important economic news.

Below you can find short table of major economic news during this week. The week is really busy with releases of quarter reports by almost all major companies from Tech industry, so traders in CFD on stocks should be really watching closely on the developments of their respective asset class.

Monday: Google parent Alphabet (NASDAQ:GOOGL) is expected by analysts on average to report a 22% increase in revenue to $30.3 billion, with net income rising 21%, equivalent to $9.28 per share on a non-GAAP basis, according to Thomson Reuters data. Flash April PMI surveys on manufacturing and service sector activity expected too.

Tuesday:  April German business sentiment from the IFO will be published on Tuesday. United States: Earnings will be the focal point most of the week as all sectors of the S&P will be well represented from key companies. With almost one-fifth of the S&P having reported, 79% have beaten estimates. News infuencing USD movements: March existing home sales should rise 0.7% to a 5.580 mln rate, following a strong 3.0% gain in February to 5.540 mln. New home sales are also expected to rise to 0.630 mln in April from 0.618 mln in February.

Wednesday: U.S. Tech companies will start their highlight busy week of earnings reports on Wednesday. Facebook (NASDAQ:FB) is expected to report a 42% surge in quarterly revenue, to $11.4 billion. Its stock has lost 10% since the revelations about Cambridge, underscoring investors’ concerns about regulation that could crimp the leading social network’s profitability. Among reports investors should be closely looking at Twitter (NYSE:TWTR), Qualcomm (NASDAQ:QCOM), eBay (NASDAQ:EBAY) and PayPal (NASDAQ:PYPL).

Thursday: Amazon (NASDAQ:AMZN) late on Thursday is expected to report a 40% jump in revenue to $50 billion as the online retailer continues its expansion into cloud computing and brick-and-mortar groceries. Also expected to report are: Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT) and Baidu (NASDAQ:BIDU). Among non-tech reporting companies are: Boeing (NYSE:BA), Caterpillar (NYSE:CAT), 3M (NYSE:MMM), United Technologies (NYSE:UTX), Verizon (NYSE:VZ), AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Visa (NYSE:V), Ford (NYSE:F), General Motors (NYSE:GM), UPS (NYSE:UPS), Starbucks (NASDAQ:SBUX) and ExxonMobil (NYSE:XOM).

Friday: BOJ Policy Announcement with expectations to keep a pledge to maintain a short-term interest rates at minus 0.1%. Friday we also expect U.S. Advanced First Quarter GDP and UK Preliminary Q1 GDP

 

GBP/USD drops as BoE governor dampens rate hike expectations

The pound moved lower against the dollar on Friday after Bank of England governor Mark Carney hinted that market expectations for a rate hike in May could be overblown.
Late Thursday, Carney told BBC that while markets could expect gradual rate hikes in the coming years, he didn’t want “to get too focused on the precise timing. The BoE chief pointed to weak business surveys and retail sales as some of the softer data. “I am sure there will be some differences of view but it is a view we will take in early May, conscious that there are other meetings over the course of this year,” he said in the interview.

GBP/USD was last off 0.09% at 1.4073, after having hit an intraday low of 1.4036. The EUR/GBP is now set to challenge its highest levels for April as the euro holds firm in the face of general dollar selling. The GBP/JPY slightly higher today though in line with other yen pairs. Strong data has helped the US dollar rally for the last four days, topped by yesterday’s better than expected Philly Fed Manufacturing Index.

The pound wasn’t the only currency in the dollar’s firing lines yesterday. The AUD/USD slumped, while the NZD/USD is down another 0.5% this morning. The Kiwi is now down over 1.5% on the week.

The yen pairs are generally on the front foot this morning, making minor gains, though the damage has been done.

Actually, EUR has held up well recently, while its close neighbours the pound and Swiss franc struggle. The trend is firmly with the latter and this could point to further upside from here.