US Stocks Seem To Flatline As Traders Digest Friday's Gains: Key Earnings To Dominate Sentiments This Week

Zinger Key Points
  • Earnings take center stage in the next couple of weeks as a slew of high-profile companies are set to report.
  • LPL chart strategist says collective technical evidence suggests the S&P 500 index is in a better field position for a trend reversal.

Trading in the U.S. index futures suggests stocks may start the week on a nervous note as fourth-quarter reporting season begins in earnest. 

What To Watch Today 

Tech, railroad operators, payment processors, defense contractors and airlines are among the companies lined up to release their quarterly earnings scorecard this week.

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With the Fed entering a blackout period ahead of the Jan. 31-Feb. 1 monetary policy meeting, the market focus of the week is likely to shift to earnings and economic data on the manufacturing and services sectors, first read of fourth-quarter GDP and the Fed’s favorite inflation gauge from the December personal income and spending report.

Cues From Last Week's Trading

U.S. stocks closed the abbreviated week that ended on Jan. 20 on a mixed note, as traders digested mixed earnings and a weak set of economic data. The Nasdaq Composite Index settled at its highest levels since mid-December, thanks to a rally in Tesla Inc. TSLA and Netflix Inc. NFLX.

The S&P 500 Index and the Dow Industrial Average fell in the first three sessions of the week before rebounding strongly on the final trading day.

The trading week started with a disappointing earnings report from Goldman Sachs Group Inc. GS. Two regional manufacturing surveys showed continued contraction, existing home sales fell for the 11th straight month and housing starts fell, all portending a potential recession waiting in the wings.

U.S. Indices' Performance During Week Ended Jan. 20
Index Performance (+/-)   Value
Nasdaq Composite +0.55%   11,140.43
S&P 500 Index -0.66%   3,972.61
Dow Industrials -2.70%   33,375.49

Analyst Color
Despite the S&P 500 Index falling into a downtrend in the recent week, collective technical evidence suggests the index is in a better field position for a trend reversal than last year, LPL Financial’s chief technical strategist Adam Turnquist said in a recent note.

“Buying pressure at higher lows, bullish momentum, and broadening participation in the recovery should continue to support the current drive off the October lows,” the analyst said. He sees support coming from falling and/or stabilizing interest rates, a weaker dollar and the potential end to the Fed rate hike cycles.

“But for now, we suspect a first down for the S&P 500 is likely over the coming weeks, defined by a close above 4,000 which would finally break the current downtrend resistance line and recapture the 200-dma,” Turnquist said.

“A close above the December highs at 4,100 would then confirm a new uptrend is underway.”

Source: LPL Financial

Futures Today:

U.S. Futures' Performance On Monday
Index Performance (+/-)  
Nasdaq 100 Futures -0.11%  
S&P 500 Futures -0.12%  
Dow Futures +0.02%  
R2K Futures -0.07%  

In premarket trading on Monday, the SPDR S&P 500 ETF Trust SPY slipped 0.07%, to $395.62, while the Invesco QQQ Trust QQQ edged down 0.02%, to $282.62, according to Benzinga Pro data.

Upcoming Economic Data: The Conference Board is scheduled to release the U.S. leading indicators index for December at 10 a.m. EST. The month-over-month decline in the index is expected to decelerate to 0.7% from 1% in November.

The Treasury will auction 3-month and 6-month bills at 11 a.m. EST.

Stocks In Focus:

  • Salesforce Inc. CRM shares rose over 3% in premarket trading after a Wall Street Journal report activist investor Elliott Management led by has taken a big stake in the customer relationship management software vendor.
  • Oilfield services company Baker Hughes Company BKR is due to report its fourth-quarter results at 7 a.m. EST.

Top Analysts’ Calls:

  • Microsoft Corp.’s MSFT price target upped from $270 to $280 by Jefferies ahead of Tuesday’s quarterly results.
  • E-commerce company Wayfair Inc.’s W price target increased from $39 to $44 by Jefferies.

Commodities, Bond, Other Global Equity Markets:

Crude oil futures were extending their gains, with a barrel of WTI-grade oil riding 0.44% at $82.

The benchmark 10-year Treasury note’s yield remained depressed under 3.5%, although edging up 0.011% points to 3.495%.

The major Asia-Pacific markets that remained open for trading advanced notably on Monday, tracking the strong close by Wall Street stocks on Friday. Japan’s Nikkei 225 led the gains with a 1.33% rally, while China, Hong Kong, Malaysia, Taiwanese and South Korean remained closed for Lunar New Year holiday.

The European markets are narrowly mixed in late-morning deals, as traders pause after the past week’s advances.

Read Next: JPMorgan Strategists Now See Lower Odds Of Recession, But Economists Disagree

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Posted In: EarningsNewsFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasDow Industrial AverageFed rate hikeInflationNasdaq Composite Indexquarterly earningsRecessionS&P 500 IndexU.S. Federal Reserve Monetary policy
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