Stock Market Outlook
2022-08-30
■ U.S. stocks ≫ Be wary of further declines in stock prices
■ European stocks ≫ ECB rate hike acceleration weighs on stock prices
Both the S&P 500 and the New York Dow continued their sharp losses. Downward pressure on share prices has increased due to fears of monetary tightening. US long-term interest rates took a pause, and the rate of decline slowed down. On the weekend, US Federal Reserve (Fed) Chairman Jerome Powell reiterated his policy of continuing to raise interest rates, giving top priority to curbing inflation, causing further economic deterioration. Concerns have led to a significant drop in prices.
There is growing speculation that fears of monetary tightening will put downward pressure on the price-to-earnings ratio (PER), and fears of an economic downturn will put downward pressure on earnings per share (EPS). Important economic indicators such as the U.S. August ISM manufacturing index and employment data will be released this week, and many Fed officials will have the opportunity to speak, so there is a risk of further stock price declines. In this regard, a warning is raised here.
The STOXX Europe 600 index continued to fall sharply. In addition to heightened uncertainty over Russian gas supplies, deteriorating indicators of business confidence in Germany and the eurozone weighed on shares. There were reports over the weekend that some European Central Bank (ECB) policymakers wanted to further accelerate the pace of rate cuts by discussing a 75 basis point rate hike at the ECB Governing Council meeting in September.
Of the 324 companies scheduled to report earnings for the April-June quarter, 278, or 86 percent, have done so, according to financial information firm Refinitiv, with 62 percent of those companies reporting EPS that beat market expectations. With the energy sector supporting shares, the market's attention is turning to accelerated rate hikes by the European Central Bank and uncertainty about the future of the economy.