Wall Street is expected to open without a clear direction on Monday, with investors refraining from taking any significant positions as the quarterly results season is expected to intensify in the coming days.
At the end of the morning, the futures contract on the Dow Jones fell by 0.1%, while that on the Nasdaq Composite advanced by 0.4%, announcing an uncertain start to the session.
Driven by the Fed’s more accommodating policy, the three main Wall Street indices have just aligned a series of five consecutive weeks in the green.
The Dow Jones and the S&P 500 took the opportunity to record new absolute highs, while the Nasdaq returned to less than 2% of its historic record.
While the mood of the markets has so far varied according to the statements of Fed officials, investors will now be able to test the fundamentals of the market through company accounts.
After the publications of Bank of America, Citi and J&J tomorrow, Morgan Stanley (Wednesday), Netflix (Thursday) then AmEx and P&G (Friday) will publish their results over the coming days.
Overall, earnings for the companies that make up the S&P 500 index are forecast to rise 7% in the third quarter, which would mark their fifth straight quarter of growth, according to FactSet.
Stakeholders are all the more sensitive to company results as Wall Street valuations are now considered high.
The price-to-earnings ratio (PER) of the S&P 500 currently stands at 24.7x compared to 20.1x a year ago.
Economic indicators and central banks could nevertheless relegate the start of the results season to second place.
Faced with a slowdown that threatens to take the form of a recession, the European Central Bank (ECB) will have no choice but to further reduce its key rates by 25 basis points on Thursday.
The acceleration of monetary easing led by the ECB could even fuel hopes that the Federal Reserve will follow suit with a rate cut, perhaps by 50 points, next month.
As for economic indicators, the Empire State index from the New York Fed is expected tomorrow, retail sales on Wednesday, housing starts and the Philadelphia Fed index on Thursday.
Investors’ eyes will also turn to Beijing where Chinese gross domestic product (GDP) figures will be published and will provide valuable clues on the state of the economy of the world’s second largest economy.
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