Stock Market Outlook
2022-11-04
U.S. stocks ≫ There is a risk of significant market development.
European stocks ≫ Cautiously assess the sustainability of stock rallies
The S&P 500 continued to rise and the Dow Jones Industrial Average gained for four consecutive weeks.As earnings reports from large U.S. companies come into full swing, stocks that beat market expectations are being bought. The Dow Jones Industrial Average rose for the sixth consecutive day over the weekend, despite earnings results from major high-tech companies that missed expectations.
As of the end of last week, 263 of the S&P 500 constituents reported earnings, with 73% of those companies reporting earnings per share*¹ above market expectations. With 163 companies set to report financial results this week, price action will continue to be centered on individual stock trades. In addition to the FOMC*² (November 1 and 2), the US ISM manufacturing index for October and US employment statistics for October will influence the pace of US rate hikes. There is a risk of substantial market development.
The Euro Stoxx 600 continued to rise, and in addition to the idea of a slowdown in the pace of interest rate hikes in the U.S., it also rose sharply in the first half of the week after former Chancellor of the Exchequer Snark was elected as the new head of the Conservative Party in the U.K. and is expected to take office as the next Prime Minister. The European Central Bank (ECB) decided to raise interest rates by 75 basis points on June 27, but the index was trading high and low at around 410 points, supported by signs of a slower pace of future rate hikes.
While the ECB has indicated that it has slowed the pace of interest rate hikes, it has not relaxed its vigilance on rising prices and should not be optimistic that it is relaxing its tight monetary stance. With the official release of the third quarter results of the Stoxx Europe 600, it is possible to buy on the back of positive results, but the sustainability of the stock market rally needs to be carefully watched.