It looks like the suffering is going to continue for investors who already suffered from the year opening rout.
Prospects are dimming as far as a good start to this earnings season is concerned and worries regarding the slow growth in China have continued hanging over the market. Even if there is a price driven rally, market watchers feel it won’t last more than a couple of days.
Phil Orlando, the chief equity market strategist for Federated Investors said that the negative psychology is being driven mostly because of China and that there is nothing to do except stepping back and waiting for everything to play out.
The S&P500 faced its worst ever 5 day opening for a year since way back in 1929 and the Dow Jones notched its worst opening since back in 1897.
A number of analysts have cut earning targets already. Deutsche Bank has reduced fourth quarter forecasts and admitted that they don’t know how much to lower their estimates for 2016 since oil prices are continuously falling.
The declines have also damaged the technical aspect of stocks. The earlier support level of 1950 is now the resistance. The index is vulnerable to additional losses too with market participants seeing 1870, the low from Aug 2014, as the next support.
Earnings season is about the begin with Alcoa ready to report quarterly results on Monday evening and a number of major banks reporting results by the end of next week.
The outlook isn’t too bright though. Reuter’s data has shown that earning for the 4th quarter may fall by 4.2% which is down from the 3.7% decline which was expected just last week and the 1.1% growth which was expected as of Oct 2015.
There’s cautiousness with regard to this earnings season according to NYSE floor division Director from O’Neill Securities, Ken Polcari. He said that investors will only start feeling comfortable after they see a few reports.
At the end, it will all come down to China, the same factor which started the selloff. If there are any signs of stabilization there, it may help investors focus on the overall economic environment in the U.S.
Friday saw solid payroll data which hinted that the U.S. economy was strengthening. Retail sales for December which will be reported on Jan 15th are most probably the only reports from next week which are going to have any sort of impact.
Benzamin H
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