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Earnings Boost Stocks Ahead of CPI, Fed, ECB

US markets opened slightly higher, as investors largely stayed away from the markets ahead of today’s CPI report and Wednesday’s Fed meeting, reversing some of Friday’s late sell-off. Will the ECB indicate the need for additional rate increases?

  • The US Bureau of Labor Statistics said on Tuesday that annual inflation, as measured by the Consumer Price Index (CPI), fell to 7.1% in November from 7.7% in October. This number was lower than the market expectation of 7.3%.
  • According to the report, the annual Core CPI, fell to 6% in November from 6.3% in October. 
  • The monthly Core CPI was 0.2%, compared to 0.3% predicted by experts.
  • The US Dollar was under severe selling pressure as a result of the initial reaction. 
  • The US Dollar Index recently traded at 103.95, its lowest level since late June, losing roughly 1% on a daily basis.

Investors showed a return to safety equities as well as an aversion to risky assets this past week. 305.02 points, or 0.9%, were lost by the Dow Jones Industrial Average on Friday, bringing its session-ending value to 33,476.46. Among the Dow’s notable gainers were Microsoft, Intel, and Apple (AAPL) (MSFT).

Coupa Software Incorporated (COUP) announced a loss of $84.7 million for the third quarter of its fiscal year on Monday. The San Mateo, California-based business reported a loss of $1.11 per share. After one-time profits and expenses were taken into account, earnings per share were 15 cents. 

The outcomes were better than Wall Street had anticipated. Additionally, Oracle Corporation (ORCL) released its Q2 financial results

To reach $12.3 billion, total quarterly revenues increased by 18% and 25%, respectively, in terms of USD and constant currency. Shares increased 2% in extended trading after the software company’s top and bottom lines for the fiscal second quarter exceeded analysts’ expectations.

There aren’t many factors except general market sentiment that can boost stock prices now that earnings season is all but forgotten. 

Stocks are likely to rise in the new year if the rate increase is 50 basis points, as expected.Here are the companies to watch as the earnings reports continue in the week. 

BHP Group Limited

BHP Group Limited (BHP) is involved in the mining of iron ore, copper, silver, zinc, molybdenum, uranium, gold, energy, and metallurgical coal. The production of steel depends heavily on metallurgical coal. The earnings report for BHP Group Limited is due on December 13, 2022.

Centrais Electricas Brasileiras S.A.- Eletrobras

Eletrobras (EBR.B) is the world’s fourth-largest sustainable energy firm and a significant electricity provider in Brazil. The company is expected to report quarterly earnings on December 13, 2022.

Legend Biotech

Legend Biotech Corporation (LEGN) is a clinical-stage biopharmaceutical company. On December 13, 2022, the corporation is anticipated to release earnings. Based on analyst projections, the consensus EPS expectation for the quarter is $-0.7. The reported EPS for the same quarter the previous year was -0.43 dollars. 

Adobe (ADBE)

On Thursday, December 15, Adobe (ADBE) is anticipated to release financial results following the market close. Wall Street anticipates Adobe will generate $4.53 billion in revenue and earn $3.50 per share. This contrasts with the prior-year quarter’s $3.20 per share earnings on $4.11 billion in revenue. 

Despite benefiting from the large secular digitalization trend that is anticipated to stay strong over the next two years, Adobe shares have been penalized during the current drop in technology companies. 

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Key CPI Data and Fed Meeting

In anticipation of this week’s important CPI report and Fed decision, the US currency has been relatively volatile. Has all of the bad news been appropriately priced in? is one of the key queries that keeps coming to mind while analyzing recent price behavior and stock market movements. 

Following trading action over the previous few weeks that appeared to indicate that the bottom had been achieved, stocks concluded the week on a negative note on Friday. However, this week’s most recent inflation data was too much to overcome, sending investors back into risk-off mode.

Investors are anticipating what the Federal Reserve will do at its meeting next week on December 13 and 14 as the Federal Reserve seeks to combat increasing inflation. 

The most recent producer pricing index (PPI) report, which was released on Friday by the U.S. Bureau of Labor Statistics, revealed that wholesale prices increased by 0.3% sequentially in November, more than the 0.2% Dow Jones projection and 7.4% yearly.

As previously mentioned, the Fed will meet on December 13 and 14. Investors had been anticipating — or praying for — a rate increase of only 50 basis points to result from that meeting. 

Since May, the Fed has not increased rates by less than 75 basis points. The Fed might need to continue being aggressive, given the recent hot inflation figures. 

Will ECB Hike Rates?

Investors altered their views on whether another treble hike by the ECB is necessary following the slowing in euro area inflation during November, hoping for a peak in sky-high prices to let them decide that a 50bps increase may be more acceptable.

It would be interesting to see if speculators are correct or incorrect when the ECB meets on Thursday at 13:15 GMT. What signals officials will give about their future objectives and how the euro might respond may be a bigger concern. Investors think a 50bps increase could be appropriate.

ECB Deposit rate vs Market forecasts

While chief economist Philip Lane recently stated that they will need to hike rates many more times, even if inflation is now close to its top, ECB President Christine Lagarde previously stated that inflation has not peaked. These statements provide some credibility to the hawkish thesis.

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  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.