FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
Libertex information and reviews
Libertex
91%
FxPro information and reviews
FxPro
90%

US Q1 earnings preview - our guide to movement in equities


6 April 2022 Written by Chris Weston  Pepperstone Head of Research Chris Weston

We head to US Q1 corporate earnings with inflation, geopolitics and a central bank hiking cycle still very much front of mind. With the market considering how much further corporates can absorb price pressures, amid an already worrying decline in consumer confidence.

While expectations for full-year 2022 and 2023 earnings have held up, we’ve seen consensus earnings expectations for Q1 22 decline by 0.7% - this isn’t huge by historical standards, but it does represent the first decline in consensus earnings expectation since Q220. Most of the earnings downgrades have been seen in industrials, consumer discretionary, financials and staples – much of which won't surprise given the backdrop.

Market players are directing capital into the ‘value’ (over growth) areas of the equity markets. In a rising interest rate environment, high dividend-paying ‘bond proxies’ have attracted investor capital over long-duration assets and money managers want to be in high-quality defensive areas of the equity markets.

US Q1 earnings preview - our guide to movement in equities

We see this as classic mid to early late business cycle investing behaviour, but as we’ve seen in the recent bounce in US equity indices from mid-March, there's still a strong appetite to be invested – funds are well hedged and rotating into specific areas of the market that typically outperform at this part of the business cycle.

CFD traders eye movement above all

In the CFD space, trader flow will be less influenced by factor or style investing and are far more directed at companies making headlines or that are seen as an expression of a major market theme – for example, trading Alibaba or Baidu on potential regulatory changes for US-listed Chinese stocks. Trading Twitter as Elon Musk becomes the biggest shareholder and we question if there's more to come, or going short a name like DR Horton (home builder) because US 30-year mortgage rates are moving higher at an explosive clip and construction costs are on the rise.

Trading news often becomes a momentum trade as these names typically exert some of the strongest rate of change (ROC) in price, which is compelling to short-term traders who can trade long and short.

When we consider movement, tech and some areas of discretionary are generally where we see the flow of trader capital – largely because they are higher beta and move more aggressively relative to the S&P 500 and other areas of the market, like utilities or staples. Traders want the highest volatility names and that can have the propensity to trend - Names like Nvidia, Tesla, Robinhood, GameStop, AMC, Alibaba, Facebook, and Apple for example.

The consideration that makes trading share CFDs over earnings compelling is that as we see the reality of the current operating landscape marked against current expectations, and with the vision of CEOs on the outlook portrayed, we can often get outsized moves. What’s more, while the market works efficiently to discount news in real-time, the initial move can continue for days especially if the market is surprised and the stock has had a big rally or sell-off into earnings and sentiment is at extremes. Movement is therefore key and not just for swing traders but also for day traders and scalpers.

We’ve put together a schedule of the core stocks Pepperstone clients typically trade above others – we’ve looked at historical moves on the day of reporting to offer a sense of how volatile it can be over earnings. We’ve then looked at options pricing to see the implied move (higher or lower) on the day of earnings – we can see names like Twitter, Facebook, and Netflix have particularly high expected movement and should get attention from clients.

Short interest is another catalyst, potentially promoting outsized moves if a large percentage of the free float has been sold short and we see a genuinely positive shock. We also look at the earnings pedigree and its propensity to beat on consensus sales. Of course, this is just one gauge and importantly we look forward in markets and often it’s the outlook that's far more influential to the share price reaction.

Whatever your strategy, whatever your directional view or timeframe, there's a number of reasons to look at share CFDs with Pepperstone.

#source

Share:


Related

Penny Stocks: What Are They?
Penny Stocks: What Are They?

Locating penny stocks with buy ratings is getting more and more challenging. The markets become less adventurous as interest rates rise. That indicates that penny stocks, which are riskier by definition...

20 Sep 2022

Bitcoin and Ethereum: Inflation Brought Down The Prices
Bitcoin and Ethereum: Inflation Brought Down The Prices

Strong inflation brought down the price of bitcoin yesterday from $22,800 to the $20,000 support level. This morning, the price of Ethereum formed a new seven-day low at the $1550 level...

15 Sep 2022

Cooler USD & Stocks Higher Ahead of CPI
Cooler USD & Stocks Higher Ahead of CPI

USDIndex – Slips (108.00 tested) for a 5th straight day, lifting EUR & GBP. Fed Funds Futures back to 90% chance of 75 bp (third consecutive) hike...

14 Sep 2022

Copper’s Price: What’s happening?
Copper’s Price: What’s happening?

In this article, we will discuss what has happened to the price of copper. When your money loses some of its purchasing power, you stop caring about supply and demand...

14 Sep 2022

The Inflation Monster Strikes. Better One Small Fish Than An Empty Dish
The Inflation Monster Strikes. Better One Small Fish Than An Empty Dish

London Mayor Sadiq Khan says that millions of Britons won’t be able to afford heating or basic food this winter if things remain as they are now. The present state of affairs has no precedents in the past...

9 Sep 2022

After a recent selloff, Wall Street is expected to rise
After a recent selloff, Wall Street is expected to rise

Expectations that the Federal Reserve might lower interest rates to combat inflation. This idea did not have a chance because of the labor market data. Investors are concerned...

7 Sep 2022


Editors' Picks

HFM information and reviews
HFM
89%
IronFX information and reviews
IronFX
88%
FXCM information and reviews
FXCM
87%
NordFX information and reviews
NordFX
85%
Vantage information and reviews
Vantage
84%
FP Markets information and reviews
FP Markets
81%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.