Wall Street starts the new trading week in positive territory.
At about 3.40 pm Italian time, the Dow Jones rose by 0.24%, the S&P 500 advanced by 0.31%, the Nasdaq Composite recorded a progress of 0.44%.
The Dow Jones Industrial Average rose 387.40 points (+1.17%) to 33,390.97 on Friday. The S&P 500 advanced 1.61% to 4,045.64 points and the Nasdaq Composite gained 1.97% to 11,689.01.
All three US stock indexes managed to close the week with a positive balance: on a weekly basis, the Dow Jones rose by 1.75%, interrupting the negative trail of three weeks.
The S&P 500 reported a weekly gain of 1.90%, the Nasdaq was up 2.58%.
Looking at the US stock market trend, Gabriel Debach, market analyst at eToro, takes stock of the situation:
“After a full February of corrections, the S&P 500 is back to buying. The market strength came as US 10-year bond yields hit 4% and European inflation rose more than expected. In this scenario, however, it is premature to drink a toast to optimism. It is wiser to remain cautious.”
“Indeed – continues Debach – it is not only a macroeconomic issue that generates uncertainty. By now, 99% of S&P 500 companies have lifted the veil on their fourth quarter 2022 accounts and the results have certainly not been supportive. Although the markets were already expecting a first quarter of declining earnings, downward revisions for the coming quarters are now causing concern”.
The eToro analyst points out that, “for the first quarter of 2023, analysts expect a new slowdown in growth, with profits down by 5.9%, compared to -0.3% at the end of the year”.
Specifically, “at sector level, only Utilities revise their forecasts upwards (although they are in negative territory) while the other 10 sectors record a decrease in their estimates, led by the Materials sectors (-12.6%), Health Care (- 8.6%), Consumer Discretionary (-8.5%) and Industrials (-8.2%)”.
“Overall – Debach points out – earnings estimates have also dropped substantially for the entire year 2023, going from around 4.6% at the end of the year to 2.1% today. While this was a significant downward revision, with uncertainty stemming from the upward path of interest rates and a possible economic slowdown, the earnings trough process could be a possible driver for a more sustainable market recovery ”.
In the meantime, on the US fixed income market, US Treasury rates are down: 10-year rates have returned below the 4% threshold, which had been exceeded in previous sessions.
Two-year rates also reversed, shooting last Thursday to a 17-year 2006 record of 4.937%.
10-year Treasury rates fell to 3.938% today, while US two-year yields fell to 4.852%.
Among the most important appointments of the week, the hearing in the United States Congress, scheduled for tomorrow Tuesday 7 March, of Fed President Jerome Powell, who will give investors important information on how the US central bank intends to continue pursuing its fight against inflation by raising fed funds rates.
The publication of the US employment report next Friday 10 March will also be a crucial market mover, after the previous one in February highlighted a boom of 517,000 new jobs created in the month.
For the upcoming figure, Dow Jones economists expect 225,000 new jobs were created in February.
Both appointments will be crucial to ensure that investors get a clearer idea of what the outcome of the next meeting of the FOMC, the monetary policy arm of the Fed, will be in the forthcoming meetings on 21 and 22 March.
At its last meeting on January 31-February 1, Jerome Powell’s Fed announced a hike in US interest rates by 25 basis points, to a range of between 4.5% and 4.75%, a record since October of 2007.
eToro analyst Gabriel Debach highlights that “the week’s macroeconomic agenda is challenging, with U.S. investors focusing on labor readings (NonFarm Payrolls this Friday) and Fed Chairman Jerome Powell’s two testimonials before Congress.” Adding that, “after the marked growth in new jobs last month (517,000) expectations are for an addition of 200,000 jobs, with an unemployment rate of 3.4% (minimum for over 50 years) but with a possible upward surprise on wages, expected to grow to 4.7%”.
It is recalled that “before Friday’s data, investors will be able to analyze Wednesday’s readings with the changes in employment in the private sector (ADP) and the openings of new jobs (JOLTS)”.