US open: Futures fall as Q4 earnings season kicks off

US futures

Dow futures -0.86% at 33915

S&P futures -0.98% at 3944

Nasdaq futures -1.02% at 11320

In Europe

FTSE +0.34% at 7833

Dax -0.18% at 15054

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Banks start earnings season

US stocks are set to open lower after a recent run of solid gains and as investors digest earnings from the major U S banks.

While stocks are heading lower today, they are still set to record gains across the week, boosted by cooler inflation and optimism that the Federal Reserve will show more restraint with raising interest rates in the next meetings. Investors are expecting, and 25 faces point rate hike in February, down from 50 basis points, as inflation dropped to its lowest level in over a year.

Optimism from earlier in the week is today being replaced with caution and stocks could end of the week on a sour note as traders digest a slew of earnings from the major banks.

JP Morgan Is falling 3% pre-market after net interest income missed expectations. Revenue beat forecasts, but the bank also warned that it was setting aside more money for possible bad loans as it considers a recession in the US its base case scenario.

Wells Fargo & Co, also declined after the earnings reports, as did Bank of America, despite reporting better-than-expected Q4 earnings.

JPMorgan appears to have spooked the markets as investors continue to weigh up the likelihood of a recession in the US, which is hitting risk sentiment.

Corporate news

Tesla falls 5% pre-market after announcing that it will cut the price of its mass-market Model 3 and Model Y SUV in what appears to be an effort to sustain sales after missing delivery expectations in Q4.

Delta Airlines falls 4.4% after reiterating full-year profit forecasts despite better-than-expected quarterly profits.

Where next for the S&P500?

The S&P500 extended its rebound from 3790, the 2023 low, and pushed higher towards 4000. The index has risen above its 50 sma, which combined with the bullish RSI keeps buyers optimistic of further gains. That saud the index has come across tough resistance around 4000, the psychological level and the 100 & 200 sma. A rise above here and 4020, the multi-month falling trendline, is needed to extend the bullish run towards 4150, the December high. Failure to retail the 100 & 200 sma could see the price rebound lower to 3910, the 50 sma and early December low, ahead of 3790.

FX markets – USD falls, JPY rises

The USD is rising, paring earlier losses but continues to hover around a 7-month low after yesterday’s cooler inflation print. With inflation falling, the Fed is expected to act less aggressively to raise rates. However, after the recent big selloff in the USD, bears are pausing for breath amid questions that the selloff could be overdone.

GBP/USD is fooling, pairing early again after the UK economy unexpectedly grew in November. UK GDP rose 0.1% MoM in November, ahead of the -0.2% contraction forecast. the stronger than expected data reduces the chance that the UK economy has already slipped into a recession. That said, the outlook for 2023 remains dire, keeping pressure on the pound.

USD/JPY continues to fall, and is set to lose 2.5% across the week. The yen is surging on speculation that BoJ, the most dovish major central bank, could revise its ultra-accommodative monetary policy.

GBP/USD -0.3% at 1.2175

USD/JPY -0.5% at 128.60

Oil set to jump 7% this week

Oil prices are all rising and are on track to book a strong weekly gain amid hope of an economic rebound in China and on expectations of a less hawkish Federal Reserve.

Oil prices are set to rise almost 7% this week, pairing losses from last week.

Recent data from China has shown that crude purchases have picked up, and road traffic is also rising, fuelling hopes of a demand recovery as the Chinese economy ramps up after strict zero-Covid restrictions.

Additionally, oil prices are being supported by the large decline in the dollar, which trades at a 7-month low after US inflation data, which fuelled bets that the Fed will slow the pace of rate hikes.

WTI crude trades +0.25% at $78.83

Brent trades at +0.25% at $83.80

Learn more about trading oil here.

Looking ahead

15:00 US Michigan consumer sentiment

18:00 Baker Hughes rig count