Ongoing weakness in US equities makes the underlying tone seriously negative, especially heading into 2019.
Investors remain cautious and a bit shell shocked after the relentless selling during the month of October continued in Fridays session with new lows being made in all indices. Today we have seen some moves to push the indices higher but the general technical picture now is negative but maybe due for a bounce. A large takeover launched by IBM in the cloud computing sector will help sentiment and with limited earnings numbers out today then we may see further moves higher.
Market volatility has spiked again as earnings numbers at large cap tech stocks Amazon and Alphabet were considered to slightly missed with a weaker outlook. Analysts have mixed opinions if such a slight miss should cause a 10% fall in the stock price , but so far the weakness has continued. Stock indices around the globe have been sold down sharply as the continued worries about trade disputes and the effect on the Chinese economy , Italian banks , Brexit , Middle Eastern tensions , rising US interest rates all cause investors to be cautious.
Markets continued with the large volatility that saw strong selling across the globe. Stock indices were hit hard with most indices down up to 3% to leave the markets suffering the worst month since 2009. Investors moved out of stocks and bought bonds with the US10 yield down to 3.10% which is the bottom of recent range.
Stock indices were sharply lower on Tuesday as market fear and a poor technical outlook caused investors to sell stocks. Most US indices were sharply lower early in the session but recovered to close down by approx 0.5%. The trend does remain lower so a retest of the lows is probable. Interest rate sensitive sectors such as housings and autos and financials have been the worst sectors , while Utilities and Healthcare have been holding up well.
Stock indices around the globe are showing broad weakness and volatility is rising as fears of escalation in the trade dispute with China , fears of the EC rejecting the Italian budget and a hawkish US Fed that seems intent on continuing to raise rates is overshadowing what is looking like a strong earnings season. Generally companies are reporting strong numbers at or better than expectations , but the forward outlook is clouded by the rising cost of materials and interest rates and potentially inflation.
A big bounce in Chinese stock indices by 4% today after the officials discussed tax cuts for investors. This has seen a jump in other Asian markets , a move higher in European equities , and a push higher in US stock index futures. More than 100 US companies will be releasing quarterly earnings with expectations for strong growth.
We're pleased to share the latest market observations by Greg Tolpigin, Head of Proprietary Trading at Gleneagle Securities. Greg provides these commentaries every few months when a key theme emerges. Here Greg compares the last 5 corrections in order to develop a strategy to prepare for the next one, which he expects in 2019. Please contact us for further queries or subscribe (on the right of this page) to receive further updates.
The stock indices have been on a roller coaster ride this week with sharp weakness seen last night and a higher open projected today after Chinese market officials talked up the economy and tried to improve the sentiment.
US stock indices have struggled to hold any gains in past few sessions after the sharp rally on Tuesday . Corporate earnings have met or exceeded expectations but forward guidance has been subdued with the tariff and trade issue and the strong dollar causing a lot of large companies to reduce profit outlook. Chinese stock indices were sharply lower overnight in volatile trade. In Europe trade is mixed with Italian markets under pressure due to the budgetary concerns.