Daily Brief - 22 Apr 2024

Earnings from the "Magnificent Seven" hit as stocks reach pivotal point

As the stock market navigates a challenging phase, the tech giants known as the "Magnificent Seven" are set to report their earnings, coming at a critical time for the S&P 500.

This group, including leaders like Microsoft and Google, is expected to significantly outperform the broader market's earnings growth. After, a tech selloff, all eyes are on these companies, especially Nvidia, which has recently suffered a sharp decline.

With substantial expectations hinging on AI-driven growth, the upcoming earnings could either revitalize investor confidence or heighten market tensions.

Bond traders eye record auction to gauge if 5% yield has topped out

Bond traders are eyeing this week's record-setting $69 billion treasury auction, wondering if the 5% yield has hit its peak after a tough month for Treasuries.

There's a mix of anticipation and concern as the Federal Reserve seems slow to cut rates, with Jerome Powell indicating a steady approach to tackling inflation. This atmosphere has investors poised for potential bargains, especially with key inflation data due this Friday.

The upcoming auctions and economic indicators will test if the bond yields, which have already touched new highs for 2024, will climb further or stabilize, making this a critical week for market watchers.

UK economists suggest markets are misjudging likelihood of interest rate cuts

The Bank of England (BOE) finds itself at a crossroads, with its economic outlook more aligned with Europe than the US, contrary to what investors betting on interest rate cuts believe. Mixed economic signals and market participants have scaled back from expecting six rate cuts to just two for the year.

This uncertainty is heightening concerns within the UK government as it faces upcoming elections with high borrowing costs. Albeit differing views, some economists still foresee the BOE initiating rate cuts by summer.

BOE officials continue to stress the UK's economic similarities with Europe, suggesting a potential deviation from the aggressive US rate policies.