The US stock market looks on track to decline for a second consecutive week, regardless of certain positive company earnings. The three leading US indices depreciated on Thursday as the US Dollar Index witnessed gains throughout most of the day and the week. The stock market remains under pressure from an expensive Dollar, which is again rising during this morning’s Asian session. Another negative factor for the stock market is bond yields, which hover at a 17-year-high. This morning, the US 10-year Bond yield is trading 0.032% higher, aiming again for 5.000%. If bond yields and the US Dollar continue to rise, the stock market may remain within the current lower price range or experience a further decline.
The NASDAQ ended the day 1.89% lower, the S&P 500 1.18% and the Dow Jones 0.75%. Investors will also monitor European indices to determine the global risk sentiment of shareholders and investors. Until now, European indices remain uncertain but pointed more to the downside. If European stocks, such as the DAX and CAC, gain downward momentum, this can be a negative indication for US indices. However, some analysts are advising the downward price movement may be an overreaction considering some positive factors from earnings. However, these analysts also recommend substantial opportunities to buy may materialize with de-escalating political tensions. This is something we analyze in the section below.
NASDAQ
The NASDAQ has been the index most under pressure due to its exposure to growth stocks and lack of exposure to defensive stocks. The NASDAQ has declined 2.70% this week and is almost 7.50% lower than the month’s highs. The index saw its 16 most influential stocks decline over the past 24 hours, and only one stock of the top 20 rose in value. The only stock that rose in value was T-Mobile, climbing 1.33%. The three stocks experiencing the most significant declines were Comcast, Microsoft and Meta, which declined 16%. As the US Dollar Index rises along with bond yields this morning, pressure continues to mount on the NASDAQ, particularly after poor performance from the most influential stocks. However, the question now is if the index is undervalued under the current market conditions.
A positive development for the NASDAQ is the latest Amazon quarterly earnings data. Amazon, the third most influential stock, made its quarter figures public after market close. The company’s earnings per share read 60% higher than expectations and $0.29 more than the previous quarter. In addition to this, the company’s revenue rose above expectations and read significantly higher than the last quarter. As a result, investor confidence in the company significantly rose, and shareholders held onto their shares while demand rose. Due to this, the stock increased 5.30% after market close. This is considered significantly positive for the NASDAQ, but only if other significant stocks see a similar price movement. Therefore, traders should be cautious of the US market open.
Investors are concerned about the current political intentions and whether these conflicts will worsen. Investors are currently monitoring the Ukraine-Russia, Israel-Palestine, and Israel-Lebonan conflicts. Some companies have also announced that this may affect their short to medium-term profitability, depending on the length of the competition and if there is any escalation. For example, Meta indicated that the market situation may worsen, and geopolitical tensions will reduce demand for advertising. The company forecasts revenue of $36.5-$40.0 billion, slightly lower than the preliminary estimates of $38.8 Billion.
EUR/USD
The Euro again declined against the Dollar this morning as the European Central Bank could not support the currency. The ECB was noted as generally more dovish than usual, and some economists also advise the central bank may need to cut hikes earlier than officials will admit. As mentioned above, the US Dollar Index is again higher this morning, potentially lowering the exchange rate. However, the Euro is seeing some positive price movement against other currencies. Therefore, investors should be cautious of the price range.
The price of the US Dollar will largely depend on the PCE Price Index, which is known to be a favorite of the Fed. The PCE Price Index is believed to be three times higher than the previous month. If the index reads higher than 0.3%, the US Dollar will likely rise, and the US stock market will fall. This will probably be the main price driver of the day.
