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Global Markets: Investor Caution Amid Calm Before Volatility

Global Markets: Investor Caution Amid Calm Before Volatility: Global markets are witnessing a state of cautious anticipation,
With notable fluctuations in equities, oil, and precious metals amid the military escalation between Israel and Iran,
accompanied by political developments, including conflicting statements
from U.S. President Donald Trump and indirect Iranian diplomatic efforts to de-escalate and resume nuclear talks.

 

Contents
Equity Markets Recover

Trump and Iran

Regional Conflict

Oil and Gold

Escalating Tensions

The Federal Reserve

 

 

 

 

Equity Markets Recover Despite Geopolitical Risks

U.S. equity indices rebounded significantly after sharp declines,
With the S&P 500 rising around 1% and climbing above the 6,000-point mark,
benefiting from reduced fears of conflict expansion.
Asian markets were relatively stable,
With gains in Japanese and South Korean stocks and declines in Hong Kong and Chinese shares.

Meanwhile, the U.S. dollar remained steady against most G10 currencies.
At the same time, long-term Treasury bonds continued to underperform,
despite a successful auction of 20-year bonds worth $13 billion with an expected yield,
an improvement over last month’s disappointing auction that had triggered a widespread sell-off.

 

Trump and Iran: Mixed Messages and Diplomatic Hopes

President Donald Trump sparked controversy by calling for the evacuation
of Tehran during his participation in the G7 summit in Alberta,
while simultaneously stating that Iran is seeking negotiations.
The White House announced Trump would cut his trip short to return to Washington.

According to a Wall Street Journal report citing unnamed Middle Eastern and European officials,
Tehran has hinted at readiness to resume nuclear talks with the U.S.
Provided that Washington does not participate in Israeli strikes.
Reuters reported similar messages transmitted via Saudi Arabia, Qatar, and Oman.

 

Regional Conflict Threatens Economic Momentum

Despite the relative return of optimism, the military escalation has cast a shadow over financial markets,
hindering the positive momentum of the S&P 500 and causing investor caution.

Tom Essaye of The Sevens Report noted:

“Markets remain focused on geopolitical developments,
but unless the conflict spreads, the impact on equities will remain limited.”

Chris Larkin of E*TRADE, a Morgan Stanley subsidiary,
Added: “Tariffs aren’t the only potential source of volatility.
The market expects the Middle East to remain contained, but any surprise could significantly shift sentiment.”

 

 

 

 

Oil and Gold: Rising Amid Uncertainty

WTI crude fell below $70 per barrel on Monday evening before rebounding to around $73 by Tuesday.
Gold rose due to safe-haven demand following Trump’s remarks.

Morgan Stanley economists, led by Chetan Ahya,  attributed rising prices to supply concerns.
However, they noted that the impact on Asian economies may be limited due to decreased dependence on oil.

They warned: “If oil surpasses $85 per barrel and the dollar continues to strengthen, it could delay interest rate cuts.”

 

Escalating Tensions and No Signs of De-escalation

No clear signs of de-escalation have emerged.
Iran reportedly launched several drone and missile attacks in the last 24 hours,
while Israel retaliated by targeting senior Iranian military leaders,
striking the state TV complex during a live broadcast, and hitting the South Pars gas field.

Yet, key oil export infrastructure remains intact, and the Strait of Hormuz,
through which nearly one-fifth of global daily oil supply passes, has not been closed.

According to Mehr News Agency, Tehran is preparing a significant strike against Israel.
Meanwhile, Israeli Minister of Strategic Affairs Ron Dermer told Bloomberg:
“We will proceed with our mission to eliminate the nuclear and missile threats.”
adding that Iran’s willingness to negotiate does not change Israel’s position.

 

Federal Reserve in the Spotlight

Investors continue to monitor central bank decisions amid complex geopolitical and economic pressures.
In Japan, Trump’s meeting with Prime Minister Shigeru Ishiba failed to yield a trade agreement,
raising fears of a potential economic recession.
Conversely, UK Prime Minister Keir Starmer secured a trade deal with Trump,
cutting U.S. tariffs on key British exports and increasing quotas on U.S. agricultural products.

In the U.S., all eyes are on the Federal Reserve’s Wednesday meeting.
Markets expect no change in interest rates, with attention focused on remarks from Fed Chair Jerome Powell.

David Doyle of Macquarie said: “Powell might call recent inflation data encouraging,
but he will likely caution against overinterpreting it due to ongoing uncertainties from tariffs, fiscal policy, and rising oil prices.”

He concluded: “Ultimately, monetary policy risks for 2025 may skew toward a more hawkish stance.”

 

Global Markets: Investor Caution Amid Calm Before Volatility

Strong Recovery in U.S. Markets Despite Pressures… Stock Indices Rise for the Second Day

Strong Recovery in U.S. Markets Despite Pressures… Stock Indices Rise for the Second Day:
At a time when many believed that U.S. markets were entering a downward spiral,
the indices rebounded for the second consecutive day, defying the recent correction wave that drove investors toward caution.
With industrial and energy stocks improving and recession fears easing,
Wall Street regained momentum amid an atmosphere of cautious optimism and anticipation regarding upcoming economic policies.

 

Contents

Broad-Based Rally in U.S. Stocks

Optimism Supported by Retail Sales Data

Market Movements

Signs of Market Stability

Conclusion

 

 

 

 

Broad-Based Rally in U.S. Stocks as Confidence Improves

U.S. stock indices continued their upward trajectory for the second straight day,
reinforcing the market’s recovery after a sharp 10% drop last week.
Gains in the industrial and energy sectors fueled the rally, as economic data,
Though weaker than expected, it eased concerns of an imminent recession.

Nearly 95% of companies listed on the S&P 500 posted gains despite
some pressure on significant tech stocks like Tesla and Nvidia.
The equal-weighted version of the index,
which gives companies like Target the same weight as Apple and outperforms the benchmark index.

 

Optimism Supported by Retail Sales Data

While recent economic data did not significantly alter investors’ expectations regarding the path of monetary policy,
mixed retail sales results provided relief, as consumer spending appeared resilient despite escalating trade tensions.

David Lefkowitz from UBS Global Wealth Management commented,
“Pullbacks during a bull market often present good buying opportunities.”
He added, “Recent volatility has been driven by heightened political uncertainty
at a time when investor positioning and sentiment were quite elevated.
However, we believe much of this has now been priced in.”

U.S. Treasury Secretary Scott Bessent, a former hedge fund manager,
also played down concerns over the recent market downturn, primarily as the U.S. works to reshape its economic policies.

Bessent stated on NBC’s “Meet the Press”: “Having worked in investing for 35 years,
I can tell you that corrections are healthy and normal.”
He added, “I’m not worried about the markets.
If we implement sound tax policy, deregulate markets, and ensure energy security,
the markets will perform exceptionally well over the long term.”

 

Market Movements

The S&P 500 rose by 1%, the Nasdaq 100 gained 1.1%, and the Dow Jones Industrial Average advanced by 1.2%.
The Russell 2000 index for small-cap companies climbed 1.4%.
Meanwhile, the combined return for the “Magnificent Seven” (Apple, Alphabet, Nvidia, Amazon, Microsoft, Meta, Tesla) declined by 0.5%.

The yield on 10-year U.S. Treasury bonds remained stable at 4.31%,
while the Bloomberg Dollar Spot Index fell by 0.3%.

 

 

 

 

 

Signs of Market Stability

According to Brett Kenwell of eToro, despite mixed retail sales updates,
the data could give investors some cautious optimism regarding consumer spending’s resilience in the coming months.
He noted, “If the consumer holds up, there’s a strong chance the economy will, too.”

These developments came as markets stabilized after the S&P 500 entered correction territory last week.
Traders reduced their bets on a further sharp sell-off.

Even before Friday’s strong rebound, investors had significantly unwound their hedges against further declines in the S&P 500.

Bloomberg data showed that the cost of buying protective puts against
a 10% decline in the SPDR S&P 500 ETF Trust
over the next three months, it dropped to its lowest levels since 2023,
compared to call options betting on a 10% rally.

 

Conclusion

While markets remain cautious in interpreting economic data and monetary policy expectations,
the recent rebound in U.S. indices reflects growing confidence in the economy’s ability to withstand current challenges.
As investors closely monitor retail sales trends and trade tensions,
markets are beginning to absorb recent shocks and move beyond last week’s panic.
With indices like the S&P 500 and Nasdaq continuing to post gains,
the key question remains: Are we witnessing the start of a new upward trend,
or are markets still trapped in a cycle of volatility?

 

Strong Recovery in U.S. Markets Despite Pressures… Stock Indices Rise for the Second Day

Top Economic Data & Analysis This Week

Top Economic Data & Analysis This Week: Investors and traders closely watch a series of major economic events
this week that could impact global markets.

From Eurozone inflation updates to GDP data from the U.S. and Germany,
these indicators will shape market direction in the coming period.

Additionally, currency markets are experiencing significant movements,
with the British pound and Australian dollar gaining momentum,
while the U.S. dollar and Japanese yen face challenges due to economic and political shifts.

Stock indices like the Dow Jones also react to economic uncertainty and declining retail sales.

 

 

Content
Key Economic Data

GBPUSD 
USDJPY
DOW JONES

Dollar Index

GBPUSD

AUDUSD

 

 

Key Economic Data

Tuesday, February 25, 2025

10:00 – Germany: GDP (QoQ) (Q4)
18:00 – U.S.: CB Consumer Confidence Index (February)
 Wednesday, February 26, 2025
18:00 – U.S.: New Home Sales (January)

Thursday, February 27, 2025
16:30 – U.S.: GDP (QoQ) (Q4)

Friday, February 28, 2025
12:00 – Eurozone: Consumer Price Index (YoY) (February)
16:00 – Germany: Consumer Price Index (MoM) (February)
16:30 – U.S.: Core PCE Price Index (MoM) (January)
16:30 – U.S.: Core PCE Price Index (YoY) (January)
19:00 – Canada: Government Budget Balance (YoY) (December)

 

 

GBPUSD 

The GBPUSD pair is trading around 1.2630, maintaining its position above the 1.2546 resistance level.
This stability supports the continuation of the upward movement,
with a potential target of 1.2810, especially as the U.S. dollar remains weak in recent sessions.

 

USDJPY 

The Japanese yen strengthens against the U.S. dollar,
driven by ongoing dollar weakness and the Bank of Japan’s recent rate hike.
The pair has retreated to 149.24, nearing the 148.62 support level;
a break below 148.62 could lead to further declines toward 145.87.
On the other hand, If a reversal pattern forms, the pair may see an upward correction
toward 151.00 before resuming its downtrend.

 

Dow Jones 

The Dow Jones Index experienced some declines last week,
following weaker U.S. retail sales data, which signaled a slowdown in consumer spending.
The index dropped to the 43,310 pivot zone, and if this level is broken,
further declines toward the next demand zone at 42,000 could be expected.

 

 

 

 

 

U.S. Dollar Index

The U.S. dollar remains under pressure, driven by uncertainty over Trump’s tariffs,
which have prompted retaliatory measures from other countries.
Additionally, weaker retail sales have heightened concerns about a slowing economic growth outlook.
The index fell to 106.58, breaking the 106.73 support level.
Further declines toward 105.49 are expected if weakness persists.

 

AUDUSD 

Signs of a trend reversal have emerged in the AUDUSD pair recently.
The pair has formed accumulation zones and successfully broke above the 0.6349 key level,
closing higher. This breakout supports the continuation of the upward movement,
with a target set at the 0.6550 resistance level in the coming period.

 

 

Key Economic Data & Analysis This Week

Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure

Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure:
 Financial markets experienced sharp volatility following U.S. President Donald Trump’s Imposes New Tariffs on China, Mexico, and Canada.
This move caused widespread disruptions in stock indices,
particularly as the increasing influence of technology weighed on markets.
The announcement comes at a time of growing concerns about a slowdown in the tech sector,
leaving investors in a state of cautious anticipation amid unexpected economic changes.

 

Contents

Trump’s Tariffs

Market Volatility

Tech Stocks Performance
Magnificent Seven

AI Hype

Deep Seek’s Impact

 

 

Trump’s Tariffs Sink U.S. Stock Indices After ‘Deep Seek’ Shock

Rapidly changing tariff news surprised traders across various asset classes on Friday,
breaking the deadlock fueled earlier by easing concerns over the tech sector.
The White House confirmed that President Donald Trump plans to impose tariffs on
China, Mexico, and Canada will start on Saturday, raising the dollar and causing stocks to decline.

The S&P 500 index gave up gains of nearly 1%, while the dollar surged,
recording its strongest weekly performance since November after confirming 25% tariffs on Mexico and Canada and 10% on China.
The U.S. government denied reports suggesting a one-month delay in implementation,
which briefly pushed the dollar lower.
The Canadian dollar fell by 0.2%,
while the Mexican peso remained relatively stable.
Meanwhile, Oil prices rose after Trump announced that tariffs would apply to crude oil.

 

Market Volatility Due to Tariffs

On Friday, President Trump stated that he would impose tariffs on a wide range of imports in the coming months,
including steel, aluminum, oil, gas, pharmaceuticals, and semiconductors.
This escalated his threats of new tariffs against trade partners. He also hinted that the U.S. might take action against the European Union.

Daniel Skelly, head of market research at Morgan Stanley, commented:
 “We warned of potential volatility linked to tariffs, and today, we see that reflected in the markets.”

He added:
 “Just like with the AI news on Monday, many questions remain unanswered,
and the landscape could change in the coming days.”

After a positive start, stock markets were affected by fears that a low-cost
AI model from the Chinese startup Deep Seek could impact the valuations of major tech companies.

Max Gokhman from Franklin Templeton Investment Solutions stated:
 “Bullish investors have done their best to hold on and push forward despite the disruptions this week,
but uncertainty prevents them from supporting stocks with confidence.”

He added:
 “As the weekend approaches, even those closest to the White House don’t have all the details,
so some bullish traders have opted for caution to avoid a potential storm.”

The S&P 500 fell 0.5%, the Nasdaq 100 declined 0.1%, and the Dow Jones Industrial dropped 0.8%.

Meanwhile, the Bloomberg Dollar Spot Index rose 0.4%,
while the 10-year Treasury yield increased by two basis points to 4.54%.

 

 

 

 

Tech Stocks Performance

Tesla shares rose after the company projected a positive outlook for car sales despite challenges in 2024,
while Meta shares rebounded after initially declining after the announcement of the announcement of earnings.
Conversely, IBM’s stock jumped on strong results, while Microsoft’s fell due to slowing growth in its cloud computing business.

Elsewhere, SoftBank shares fluctuated following reports that the company is considering a $25 billion investment in OpenAI.
The volatility in major tech stocks remains a significant concern on Wall Street,
as the performance of the S&P 500 is increasingly reliant on a small number of companies
an unprecedented trend in over 20 years.
Michael Hartnett from Bank of America noted that fewer
than one-third of S&P 500 companies have outperformed the index over the past two years.

 

From “Magnificent Seven” to “Languishing Seven”

Hartnett warned that big tech companies that have driven market gains since 2022 could soon become the “Languishing Seven,”
suggesting that investors might shift towards cheaper international stocks instead of chasing expensive U.S. equities.

He stated:
 “The American exception is now exceptionally expensive and concentrated in the hands of very few companies.”

According to Matt Maley from Miller Tabak+Co, recent developments could undermine expectations for tech earnings growth.

He explained:
 “While AI remains a positive force, it may not be as powerful as markets anticipated over the past six months.”

 

AI Hype and Its Impact on Markets

Matt Maley from Miller Tabak+Co believes that recent market developments this week
have somewhat dampened optimistic expectations regarding the growth of AI sector profits.

Maley explained:
 “We believe it won’t take long before the stock market needs to adjust to the reality that AI,
While still a positive factor, it may not be as strong as markets had anticipated over the past six months.”

A slowdown in demand for AI chips, along with the emergence of Deep Seek technology,
AMD, Qualcomm, and Arm Holdings are expected to dominate the landscape as they release their financial results.

Meanwhile, Alphabet (Google) faces questions about reducing the costs of developing its AI tools
amid increasing competition from Deep Seek and low-cost AI technologies.
However, strong demand for cloud services is expected to support Alphabet and Amazon,
which remain among the most influential companies in the sector.

John Belton from Gabelli Funds stated:
 “Deep Seek will remain a key focus in the sector.
It has achieved significant engineering breakthroughs that could help other AI labs develop more efficient models.
However, many of the figures associated with these discoveries may be misleading.
This is more of an evolution than a groundbreaking revolution,
aligning with the natural progression of computing efficiency over time.

The Impact of ‘Deep Seek’ on Markets

The emergence of Deep Seek rattled markets earlier this week,
However, a Bloomberg Market Live Pulse survey showed that most investors expect only a limited impact on major tech players.
Among 260 investors surveyed, 88% believed that the new AI technology
which erased $784 billion in market value from S&P 500 companies on Monday
will have little to no effect on U.S. tech giants in the coming weeks.

Retail investors continue to pour money into U.S. stocks,
injecting $8.1 billion into equities over the past week—the most significant inflow in two years, according to an analysis by J.P. Morgan.

Solita Marcelli from UBS Global Wealth Management stated:
 “The new low-cost algorithms are expected to enhance economic productivity,
supporting the broader stock market.
With a strong U.S. economy, growing earnings, lower borrowing costs,
and increased capital market activity, stocks may continue their upward trend through 2025.”

 

Trump Imposes New Tariffs: Markets Shake, Tech Under Pressure

Wall Street Breathes a Sigh of Relief After Positive Inflation Data

Wall Street Breathes a Sigh of Relief After Positive Inflation Data:
Wall Street experienced a wave of optimism after inflation data came in better than expected,
leading to a significant rise in stocks and a drop in bond yields.
This development has bolstered hopes that the Federal Reserve remains on track to continue cutting interest rates this year.

 

Content

Performance of Indices

Inflation Data

Broad-Based Stock Gains

Interest Rate Cut Probabilities

 Market Volatility

 

 

 

 

Performance of Indices

Stock indices managed to erase their 2025 losses, with the S&P 500 rising by approximately 2%,
marking its biggest jump since the U.S. elections in November.
Treasury bonds also posted notable gains, pushing 10-year yields down by 15 basis points,
alleviating concerns about yields potentially reaching 5% soon.
According to trading fund data from Bloomberg,
this was the best market response to a Consumer Price Index (CPI) release since late 2023.

 

Inflation Data Reshapes Market Expectations

December’s data showed that the U.S. Consumer Price Index increased slower than expected,
reviving expectations that the Federal Reserve could begin cutting rates sooner than anticipated.
Swap markets quickly moved to price in rate cuts by July fully.

This shift followed strong job data released the previous Friday,
which led some to believe that the Fed might delay any monetary easing until September or October.
Analysts also noted the possibility of rate hikes.

Steve Sosnick of Interactive Brokers commented,
“The market’s exaggerated anxiety led to a strong response to the recent inflation data.
Today’s gains reflect better-than-expected monthly core CPI numbers and highlight the tense sentiment dominating the markets.”

Tina Adatia from Goldman Sachs added that the latest CPI data may not be sufficient
to spark discussions about rate cuts in January.
Still, it strengthens the notion that the Fed’s rate-cutting cycle isn’t over yet.

 

Broad-Based Stock Gains and Renewed Risk Appetite

U.S. stock indices saw widespread gains, with the S&P 500 climbing 1.8%,
followed by a 2.3% rise in the Nasdaq 100. The Dow Jones Industrial Average added 1.7%.
Meanwhile, Bloomberg’s “Magnificent Seven” index
featuring Apple, Alphabet, Nvidia, Amazon, Meta, Microsoft, and Tesla—surged by 3.7%.

In the small-cap sector, the Russell 2000 index gained 2%,
while the KBW Bank Index saw strong gains of 4.1%,
coinciding with the start of earnings season for major banks like Citigroup,
Goldman Sachs, Wells Fargo, and JPMorgan Chase.

On another note, the VIX index, often called the market’s fear gauge,
fell to its lowest level this year, reflecting a decline in investor anxiety.
Heavily shorted stocks experienced strong recoveries,
with Goldman Sachs’ basket of underperforming tech stocks jumping 3.2%.
Meanwhile, stocks under significant short-selling pressure added 3.8% to their value.

In the cryptocurrency market, Bitcoin approached a record high of $100,000.
The 10-year Treasury yield fell to 4.64%, while Bloomberg’s spot dollar index dropped by 0.2%.
Oil prices remained elevated despite a ceasefire agreement
between Israel and Hamas, providing a temporary halt to the conflict in Gaza.

 

 

 

 

Interest Rate Cut Probabilities

Some analysts believe that the recent inflation data could trigger short-covering activity.
John Kirchner of Janus Henderson Investors noted
that markets are now more comfortable with the diminishing likelihood of interest rate hikes.

Meanwhile, Krishna Guha of Evercore stated that the CPI reading
underscores how the market has overreacted to inflation stories this year,
boosting the likelihood of two rate cuts by the Federal Reserve this year, with a possible third cut in March.

Rajiv Sharma of Key Wealth remarked that the data might not
be sufficient to prompt the Fed to accelerate rate cuts,
as the strength of the labor market remains a key factor in decision-making.

 

Expectations for More Market Volatility

Despite the relative calm following the inflation data release,
analysts warned of potential market volatility as further economic data is published.
Seema Shah of Principal Asset Management noted that current inflation data
doesn’t provide enough support for an immediate rate cut but could
pave the way for such a move if inflation readings continue to improve.

Solita Marcelli of UBS predicted that U.S. equities would remain attractive for long-term investors,
adding that easing inflation would support corporate earnings growth.

Mark Hackett of Nationwide emphasized the upcoming earnings season,
suggesting positive surprises could provide additional market support.

 

Wall Street Breathes a Sigh of Relief After Positive Inflation Data

Wall Street’s Enthusiasm for Tech Stocks Lifts Market Indices

Wall Street’s Enthusiasm for Tech Stocks Lifts Market Indices:
Stock markets rallied Wednesday as investors flocked to major U.S. tech companies,
breaking a two-day losing streak.
This came after an inflation report boosted expectations that the Federal Reserve would continue cutting interest rates.
Meanwhile, Treasury bonds recorded a decline in value.

 

Contents

Substantial Gains in Tech Stocks

Inflation and the Future of Interest Rates

Market Expectations and Risky Assets

Central Banks and Monetary Policy

 

Substantial Gains in Tech Stocks Drive Market Indices to Record Highs

The Nasdaq 100 index rose by 1.9%, reaching a new record high,
while the S&P 500 climbed by 0.8%, nearing its peak.
Broadcom led the gains following a report indicating a new AI deal with Apple.
Additionally, shares of the “Magnificent Seven” (Meta, Amazon, Tesla, Nvidia, Apple, Alphabet, Microsoft) surged,
with Tesla, Amazon, and Meta (Facebook’s parent company) hitting all-time highs.

 

Inflation and the Future of Interest Rates

A Bureau of Labor Statistics report showed that the Consumer Price Index (CPI)
increased by 0.3% in November for the fourth consecutive month.
The core CPI, which excludes volatile food and energy costs,
rose by the same amount, aligning with forecasts.
According to Skylar Winand, Chief Investment Officer at Regan Capital,
this report gives the Federal Reserve a “green light”
to reduce interest rates by 25 basis points at its December meeting.

Traders expect a quarter-point rate cut in the upcoming meeting.
There is ongoing debate over the number of potential cuts in the coming year.
However, U.S. government policies could contribute to inflationary pressures.

 

Market Expectations and Risky Assets

Upcoming inflation data, such as producer prices and personal consumption expenditures,
is expected to offer additional insights into the economic trajectory.
Meanwhile, the VIX index, a measure of market volatility, fell below 14 points, signaling near-term market calm.

Jeff Schulz from ClearBridge Investments noted that declining inflation supports
risky assets and boosts stocks during one of the most substantial seasonal periods of the year.

 

 

 

 

Central Banks and Monetary Policy

The U.S. dollar strengthened following reports that Chinese leaders are
considering allowing their currency to weaken, anticipating higher tariffs under a second Trump administration.
The Canadian dollar also rebounded after hitting a four-and-a-half-year low,
as policymakers signaled readiness to slow the pace of monetary easing.
On Wednesday, the Bank of Canada cut interest rates by 50 basis points, marking its second significant reduction.

Other central banks are also expected to lower interest rates,
with some potentially cutting them faster and more profoundly than the Federal Reserve.
The European Central Bank and the Swiss National Bank will likely follow suit on Thursday.
Meanwhile, China’s two-day Central Economic Work Conference is expected to outline next year’s policies,
following signals of stimulus plans from top leaders in Beijing.

Separately, oil prices rose after reports of potential new U.S. sanctions
on the Russian oil trade, which could tighten market supply.

 

Wall Street’s Enthusiasm for Tech Stocks Lifts Market Indices

Company Earnings Bets Push Wall Street to New Record Highs

Company Earnings Bets Push Wall Street to New Record Highs: U.S. stock indices have reached new record highs
as investors focus on corporate performance and remain optimistic about a potential “soft landing” for the U.S. economy.
Without significant economic data this week, Wall Street focuses on earnings reports to drive market sentiment.

 

 

Content

Stock Indices Reach Record Levels

Surpassing Expectations

Solid Gains for Major Companies

The Start of Earnings Season

Support for AI-Related Stocks

Economic Data Supports Cyclical Stocks

Preparing for a Potential Setback

Warning of a Future Setback

Bull Markets and Historical Shifts

Long-Term Bull Market Volatility

Weak Market Returns in the Third Year

 

 

 

 

Stock Indices Reach Record Levels

The S&P 500 index surged nearly 1%, marking its 46th record high.
Despite lower expectations for third-quarter earnings,
investors are betting on the potential for positive surprises during this earnings season.

 

Surpassing Expectations

Expectations indicate that companies in the S&P 500 may post their weakest results in the last four quarters,
with a year-on-year increase of only 4.3%.
However, corporate guidance suggesting a 16% increase indicates the potential for surpassing market expectations.

Kali Cox from Ritholtz Wealth Management noted that “Wall Street has underestimated American companies lately”
stressing that the most significant risk lies in missing out on the final gains and market recovery.

 

Solid Gains for Major Companies

The S&P 500 neared 5860 points amid low trading volumes.
The Nasdaq 100 climbed 0.8%, while the Dow Jones Industrial Average rose 0.5%.
Nvidia led the gains among major companies, with Apple benefiting from positive analyst calls,
while Tesla recovered after a dip last week.
Goldman Sachs and Citigroup shares also advanced in their earnings announcements.

While the dollar slightly strengthened, Bitcoin surged 5%.
In contrast, oil prices declined due to a lack of new incentives
from the Chinese Ministry of Finance to boost consumption in the world’s largest crude oil importer.

 

The Start of Earnings Season

Earnings season unofficially kicked off on Friday,
led by major financial firms like JPMorgan Chase and Wells Fargo.
Alongside other big banks set to report this week,
traders will closely watch results from key companies such as Netflix and J.B. Hunt Transport Services Inc.

Bank of America strategists said that in early third-quarter results last week,
U.S. companies benefited from lower interest rates at the start of the Federal Reserve’s easing cycle.

A Bank of America team led by Ohsung Kwon and Savita Subramanian noted that
easing interest rate pressures were evident in increased debt underwriting,
mortgage applications, and refinancing activity, alongside signs of stabilization in manufacturing.

 

 

 

Support for AI-Related Stocks

Solita Marcelli from UBS Global Wealth Management emphasized that third-quarter
results should confirm strong earnings growth for large-cap companies in a resilient economic backdrop.

Marcelli stated, “We maintain a positive outlook for U.S. equities,
supported by healthy economic growth, earnings expansion, and the Fed’s easing cycle, alongside the AI growth narrative.
” She added, “Although valuations are elevated, we believe they are justified given the favorable backdrop.”

Marcelli reiterated her price target for the S&P 500 at 6200 points by June 2025,
continuing to favor AI beneficiaries and high-quality stocks.

 

Economic Data Supports Cyclical Stocks

Mike Wilson from  Morgan Stanley   predicted that the improvement in U.S. macroeconomic data
would continue to support cyclical stocks tied to economic momentum.
Goldman Sachs strategists, led by Christian Mueller-Glissmann,
also noted that better U.S. data and supportive policies reduced near-term downside risks.

 

Preparing for a Potential Setback

Craig Johnson from Piper Sandler stated, “Last week, the S&P 500 surpassed our year-end price target of 5800 points,
and we are leaving it unchanged.
However, we recognize that some fine-tuning may be necessary,
as we expect stocks to continue their upward trajectory after the U.S. presidential election.”

 

Warning of a Future Setback

Despite solid gains in the first two years of this bull market,
Sam Stovall from CFRA cautioned investors to prepare for a potential setback in the next 12 months.
His analysis is based on historical data,

showing that the average return after 11 bull markets celebrating their second anniversary was just 2%
(5.2% excluding those that turned bearish before the end of the third year).

 

Bull Markets and Historical Shifts

Additionally, all past bull markets experienced a 5% decline,
with five enduring sell-offs exceeding 10% but less than 20%.
Three markets succumbed to new bear waves.
Despite these unsettling fluctuations, three bull markets posted double-digit gains.

 

Long-Term Bull Market Volatility

Bull markets that lasted this long tended to persist before finally facing a 20% decline.
However, according to Bespoke Investment Group, that doesn’t mean there were no hurdles along the way.

 

Weak Market Returns in the Third Year

According to Bespoke’s analysis, the S&P 500 saw weaker-than-average returns in the third year of bull markets.
On average, the index gained only 3.7% in the 12 months after the 503rd day of previous bull markets,
with positive returns in just 55%. By comparison, the average 12-month return for all markets was 9.26%.

Bespoke added that of the 11 bull markets analyzed, only two ended within the 12 months following day 503.
Thus, the period between the second and third year

of a long-term bull market has often been more of a consolidation phase than an endpoint.

 

 

Company Earnings Bets Push Wall Street to New Record Highs

U.S. Stocks Reach Record Levels Ignoring Trump’s Assassination Attempt

U.S. Stocks Reach Record Levels Ignoring Trump’s Assassination Attempt: U.S. stocks surged to all-time highs as market volatility expectations
failed after the assassination attempt on Donald Trump, which boosted his chances of reaching the White House.
Trump has chosen Ohio Senator J.D. Vance as his running mate for the presidential election.

Contents

Jerome Powell’s Statements

A New Generation of Republicans

Major Stock Indices Rise

U.S. Bonds Rise

Analysts Reactions

Performance of Major Companies

Neil Dutta’s Comments

Greater Focus on Inflation Data

Electoral Impacts

Impact of the Assassination Attempt on Winning Chances

Republican National Convention

 

 

 

 

Jerome Powell’s Statements

Traders also closely monitored statements from Jerome Powell,
who noted that recent inflation readings had bolstered confidence and that the economy was performing “extremely well.”
He also pointed out that the labor market was heading towards better balance and that
the time lag between adopting monetary policy and its effects meant that the Fed could intervene before inflation reached 2%.
The Fed Chairman also clearly refused to signal any timing for interest rate cuts, stating that the policy was tight “but not overly so.”

 

A New Generation of Republicans

Vance, 39, is nearly four decades younger than the 78-year-old Trump.
He is a fresh voice contributing to the Republicans’ efforts and enhancing their appeal to the working class,
which previously formed a core base for the Democratic Party in battleground states like Michigan, Wisconsin, and Pennsylvania.

 

Major Stock Indices Rise

All major stock indices rose, with the S&P 500 achieving its 38th record high this year.
Trump Media & Technology Group Corp’s stock jumped by 30%.
The candidate’s chances boosted the positions of oil producers, weapons manufacturers, and private prisons.
His support for cryptocurrencies raised the value of Bitcoin and companies in the industry.
Tesla’s stock soared as Elon Musk endorsed Trump.
Solar energy and marijuana company stocks fell as Democrats became more supportive of these sectors.

 

U.S. Bonds Rise

Yields on 30-year U.S. bonds rose above those of 2-year bonds for the first time since January,
betting that Trump would adopt an expansionary fiscal policy if he won the U.S. presidential election in November. The dollar rose slightly.

 

 

 

 

 

Analysts Reactions

John Stoltzfus from Oppenheimer Asset Management said,
“We were shocked by the assassination attempt on former President Trump,
but we believe the markets will absorb the news quickly and without much fuss.
Shocking events do not deter investors; we expect them to remain focused on economic outcomes and earnings reports.”

 

Performance of Major Companies

The S&P 500 index rose to around 5630 points. The performance of major companies varied.
Apple shares peaked after Morgan Stanley classified it as the top pick.

Nvidia shares declined. The Russell 2000 index of small companies rose by 2%.
Goldman Sachs shares rose as earnings exceeded plans to reduce the pace of share buybacks.
Macy’s Inc. shares fell after the company ended acquisition talks.

 

Neil Dutta’s Comments

Neil Dutta from Renaissance Macro Research said,
“The only reason for not cutting interest rates in July is the illogical mindset followed by institutions when they say:
‘Well, we need to prepare the markets for that.’ I don’t understand it, but that is the case.”

 

Greater Focus on Inflation Data

Mark McCormick at TD Securities believes the markets are “less concerned with the elections”
and more eager to enjoy the decline in U.S. data surprises, especially the recent Consumer Price Index reading.

 

Electoral Impacts

Peter Boockvar from The Boock Report said, “Everyone is trading on their best Trump-related strategies—
but I think we’ve seen over the past century that stock market movements are more random than a president can impose.”

 

Impact of the Assassination Attempt on Winning Chances

According to PredictIt data, the chances of the potential Republican candidate,
who was shot during a rally in Pennsylvania on Saturday, winning a second term has increased following the attack.

 

Republican National Convention

The Republican National Convention in Milwaukee, held from Monday to Thursday,
marked the culmination of Trump’s control over the party. According to a post on the social media site X,
the former U.S. president told Fox News that he would announce his vice-presidential pick today.

 

U.S. Stocks Reach Record Levels Ignoring Trump’s Assassination Attempt

Key Economic Events and Data Anticipated This Week

Key Economic Events and Data Anticipated This Week: Attention in the United States will centre around Personal Consumption Expenditures (PCE) Price Index data, alongside reports on personal income and spending and statements from several Federal Reserve officials including Chairman Powell.

 

Content:

Key Economic Events and Data Anticipated This Week

Mixed Performance in Stock Indices at the End of Last Week’s Trading

A decline in Oil Prices at the End of Last Week’s Trading

 

 

 

Key Economic Events and Data Anticipated This Week

Attention in the United States will focus on Personal Consumption Expenditures (PCE) Price Index data,
reports on personal income and spending and statements from several Federal Reserve officials,
including Chairman Powell, which is of significant interest to investors.
Other key data includes durable goods orders, the final reading of the fourth quarter GDP growth,
consumer confidence, corporate earnings, and housing market indicators including new and pending home sales.

Japan will have a busy week with the Bank of Japan’s Summary of Opinions, unemployment rate,
industrial production, and retail sales.
Finally, Canada will release its GDP growth estimates for February.

 

Mixed Performance in Stock Indices at the End of Last Week’s Trading

In Friday’s trading, U.S. stocks showed mixed performance, with some indices rising and others falling.
Gains were recorded in the technology, utilities, and healthcare sectors,
while the financial, consumer goods and telecommunications sectors suffered losses.

In New York, the Dow Jones Industrial Average closed by 0.77%,
the Standard & Poor’s 500 Index fell by about 0.14%,
and the Nasdaq Composite Index rose by about 0.16%.

Among the leading stocks in the Dow Jones Industrial Average,
Boeing’s share rose by 0.64%, Apple’s rose by 0.53%, and Amazon.com’s increased by 0.40%.

On the other hand, the number of stocks that declined exceeded the number of stocks that rose on the New York Stock Exchange,
with 1948 stocks declining compared to 917 stocks rising, while 68 stocks remained unchanged.
On the Nasdaq, stocks failed to maintain a clear direction, with some sectors rising and others declining.
Stock performance can be influenced by factors such as economic and political developments,
company results, global events, and investor expectations.

 

 

 

A decline in Oil Prices at the End of Last Week’s Trading

Oil prices fell on Friday, with no significant change over the week,
influenced by expectations of a ceasefire in Gaza while concerns related to the war
in Europe increased after yesterday’s attacks on Russia and a decline in the number of oil drilling rigs in the United States.

Brent crude contracts for May delivery fell by 35 cents to settle at $85.43 a barrel,
while U.S. crude contracts fell by 44 cents to settle at $80.63 a barrel.
Both types of crude recorded a change of less than 1% over the week.

Everyone is awaiting the results of the weekend regarding the ceasefire in Gaza,
with success in peace talks potentially allowing Houthi militants in Yemen to permit oil tankers to pass through the Red Sea.

Regarding the ongoing talks in Qatar, U.S. Secretary of State Antony Blinken,
expressed on Thursday his belief that an agreement to cease-fire in Gaza between Israel and Hamas could be reached.

 

Key Economic Events and Data Anticipated This Week

Oil jumps over $100 and the Russian-Ukrainian situation is getting worse

Oil jumps over $100 and the Russian-Ukrainian situation is getting worse: One man’s sludge is another man’s liquid gold! Oil rose to an almost 8-year high, following the geopolitical tensions currently taking place in Europe. 

Evest follows market developments in the following report.

 

Topics:
Oil above $100
European stock indices are falling
Latest Updates on the Russo-Ukrainian War
US President Joe Biden
Russian Deputy Defense Minister Nikolai Pankov
US Secretary of State Anthony Blinken
The European Union imposed sanctions

 

Oil above $100

On Thursday morning, oil prices exceeded a 7-year high, against the backdrop of rising geopolitical tensions,
and the price of North Sea Brent oil reached $100 per barrel for the first time since September 2014.

The cost of Brent crude futures for April on the London Stock Exchange ICE Futures rose by $100.01 per barrel,
3.27% higher than the closing price of the previous session.

US oil futures’ prices for March in electronic trading on the New York Mercantile Exchange (NYMEX) rose by 3.74% up to $95.54 per barrel.

 

 

European stock indices are falling

European stock indices mostly declined against the background of Wednesday’s trading, except for the British index.

The composite index of the region’s largest companies, the Stoxx Europe 600, fell on Wednesday by 0.28% to 453.86 points.

The German DAX index fell by 0.42% and ends trading at the lowest level in 11 months, the French CAC 40 index fell by 0.1%,
the Italian FTSE MIB index declined by 0.34% and the Spanish IBEX 35 index declined by 0.63%.

The British FTSE 100 index added 0.05%.

Pressure is being put on European markets by the continued escalation of tensions around Ukraine.

Kyiv reported new cyber-attacks on government sites, blaming Moscow, and declared a state of emergency in the country as of February 24. 

In the meantime, Russia announced the evacuation of the country’s embassy staff in Ukraine. 

According to analysts, new reports of cyber-attacks on government sites and banks in Ukraine raise concerns that a direct Russian attack on the country is imminent.

“Markets need to deal not only with the conflict itself but also concerns about further Western sanctions against Moscow, as well as Russian retaliatory sanctions.”

German Chancellor Olaf Scholz said Tuesday that he has halted the certification process for Nord Stream 2,
and the White House is planning to announce sanctions against the gas pipeline operator,
Nord Stream 2 AG, according to US media.

On the other hand, inflation in the Eurozone reached a record high with high prices of natural gas, coal and electricity.

Consumer prices in the eurozone rose by 5.1% in January compared to the same period last year, a record high,
according to final data released on Wednesday by the European Statistics Office.

The statements coincided with both the initial estimate and analysts’ unanimous expectations.

Energy prices rose by 28.8%, and the cost of food, alcohol and tobacco products rose by 3.5%.

The inflation rate, excluding energy, was 2.5%.

Consumer price growth in January was 0.3% compared to the previous month, the lowest in six months.

 

The stock prices of European companies involved in the construction of Nord Stream 2 fell at the end of trading.

Therefore, the price of French securities, Engie, fell by 0.1%, Shell by 0.6%, OMV by 2.4% and Onyber by 9.3%.

 

 

Latest updates on the Russo-Ukrainian War

On Thursday, it became known that Russia would conduct a special military operation in Donbas in accordance with the Charter of the United Nations,
the resolution of the Council of the Union and the agreements with separate Donetsk and Luhansk. 

“I have decided to conduct a special military operation, aimed at protecting persons who have been harassed and genocide by the Kyiv regime for eight years.

We will therefore strive for Ukraine’s demilitarization,” said Russian President Vladimir Putin in his speech. 

“We must bring to justice those who committed many bloody crimes against civilians,
including citizens of the Federal Republic of Russia,” he added.

The President of Russia demanded that the Ukrainian army lay down its weapons and threatened an overwhelming response to those foreign States that decided to intervene in the situation.

Earlier, the heads of the two separate states appealed to Putin, in order to avoid civilian casualties and prevent a humanitarian disaster in Donbas,
to provide assistance in repelling aggression from the Ukrainian armed forces, as they described.

 

US President Joe Biden

In turn, US President Joe Biden threatened Russia with accountability for its actions against Ukraine. 

“The United States and its allies and partners will respond in a unified and decisive manner.

Russia will be held accountable by the world,” Biden said in a statement issued by the White House.

The Federation Council approved the use of the Russian Armed Forces outside the territory of Russia with regard to the situation concerning Donbas.

 

Russian Deputy Defense Minister Nikolai Pankov

Russian Deputy Defense Minister Nikolai Pankov said at the meeting that this had resulted from the fact that the situation in Donbas was escalating
and Russia must protect the population.

For his part, EU diplomat Josep Borrell said on Tuesday that the package of sanctions that the EU is preparing to adopt against Russia will bring severe damage to the country.

Borrell also noted that the European Union is working in coordination with the United States, the United Kingdom and Canada.

 

US Secretary of State Anthony Blinken

United States Secretary of State Antony Blinken said that if Ukraine’s situation escalated, Russia would face serious consequences.

He noted that such actions by Moscow would strengthen NATO in Europe, and Ukraine would be provided with additional security assistance,
in addition to diplomatic, political, economic and humanitarian support.

US President Joe Biden announced that he had ordered sanctions against Nord Stream 2 operator and Nord Stream 2 AG.

“Today my Administration has imposed sanctions on Nord Stream 2 AG and its leaders,” the White House said in a statement on Wednesday.

“As I said, we will not hesitate to take further action,” Biden added.

 

The European Union imposed sanctions

The European Union imposed sanctions on 351 deputies of the State Duma and 27 other dignitaries and organizations.

The measures include the freezing of assets and an embargo on the provision of funds to listed individuals and entities,
as well as an embargo on travel and transit through the European Union. 

The European Union has also imposed sanctions to limit Russia’s access to financial markets and capital.

Bloomberg, citing an American official, stated that US President Biden’s administration is prepared, if necessary, to impose sanctions on other Russian financial institutions,
particularly against Sberbank and VTB.

“No financial institution in Russia will be safe if the invasion continues,” the agency source added.