Financial market research and analysis

Wall Street closed flat as investors looked ahead cautiously to the start of earnings season. Whilst financial firms pushed higher on the expectation of decent figures, a more general fear that first quarter earnings will disappoint kept stocks in check.

The outlook is not that great, and it is getting worse. Q1 earnings are expected to decline -4.2% year on year, worse that -3.9% decline forecast just a week earlier. This will be the first time that earnings have declined since 2016. Wells Fargo and JP Morgan kick off earnings today. With an earnings decline on the cards, the big banks, more so than ever, will be used as bellwethers for the rest of the S&P 500.

Whilst earnings will of course be watched closely, this is of course a backward-looking measure; forward guidance will be key. This is the information that will tell us whether Q1 negative earnings are just a bump in the road, or whether this is the start of a far more sinister trend.

Solid US Labour Market Boosts Dollar

The dollar snapped a three-day losing streak, jumping 0.2% higher versus a basket of currencies. The buck rallied as US data showed that the US labour market continued to tighten. US jobless claims hit a 49-year low; just 196,000 people filed for unemployment benefits. The impressive stats come just a week after US non-farm payrolls showed job creation was alive and well in the US. A strong labour market brings inflationary pressure, an essential ingredient for the Fed to even consider raising interest rates later in the year.

Baker Hughes Rigg Count To Drive Oil
Oil has been a big story this week with decent swings in the price. Oil experienced strong gains at the beginning of the week owing to fears of supply outages in Libya, as the conflict in the oil producing North African country escalated. These fears combined with OPEC output cuts lifted oil to year to date highs. An unexpected surge in US oil inventories pulled oil back from 5 months highs. Investors will now look towards US Baker Hughes rig count.

Last week’s figures showed that the number of active oil rigs operating in the US increased by 15 to 831. That was the first increase in 7 weeks. 2 consecutive increases in active rigs, plus an upsurge in US crude stockpiles, fears will be growing that US energy producers are about to ramp up production. Crude fell 1.4% across the previous session. the price remains above its main sma’s meaning that the bull trend is still intact.  

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