But will the weakness once again be bought? I think it will.
European stocks and US index futures have dropped noticeably in the first half of today’s session, along with other risk-sensitive assets, while the US dollar has rebounded. Sentiment has been hurt in part due to concerns about the vaccine delays in Europe, while profit-taking ahead of key technology earnings reports and the conclusion of the Federal Reserve’s policy meeting also weighed on asset prices.
Fed to dismiss QE taper talks
The Federal Reserve will almost certainly leave interest rates and the pace of asset purchases unchanged at the conclusion of the FOMC meeting at 19:00 GMT (14:00 ET). While hopes for a strong recovery have sent US stock indices to record highs, Fed Chair Jerome Powell is likely to remain cautious and dismiss talks of an exit from stimulus.
Apple, Facebook, Tesla, Microsoft… and GameStop
On a micro level, strong quarterly sales from Microsoft sent its shares higher overnight, with the market also busy keeping an eye on GameStop’s wild swings. The latter saw its shares surge another 60% or so in pre-market following news that Melvin Capital and Citron had closed out their short positions, before dipping again.
But surely the focus is going to turn to the bigger players today with Apple, Facebook and Tesla are all due to report earnings after the close.
Earnings and revenue expectations:
- Apple: Wall Street analysts expect Apple to break the $100 billion barrier in quarterly revenues. Specifically, on average they predict a 12% jump in revenue to $103 billion, with an earnings per share of $1.41.
- Tesla: Analyst expect the electric car maker to post its first-ever quarter of achieving $10 billion in revenue and sixth straight quarterly profit, after a poster year for the company. Its Adjusted earnings per share (EPS) are expected to come in at $1.01 compared with $0.43 from a year-ago period, while revenues are seen climbing to $10.33 billion vs. $7.4 billion last year.
- Facebook: The social network has been among the major beneficiaries of the pandemic as millions of people worked from home. Analysts estimate an EPS of $3.16 for Q4 2020 vs. $2.56 in Q4 2019, while quarterly revenue is seen rising to $26.3 billion from $21.1 in previous year. The key Monthly Active User metric is expected to climb to 2.7 billion.
Given the prospects of these tech companies beating expectations and the Fed remaining dovish, don’t be surprised if stock markets were to bounce back and the dollar to resume lower later in the session.
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