A mixed start to a big week

Stock markets off to a mixed start ahead of a fascinating week, with major tech earnings and the Fed meeting the highlights.

And it’s tech that’s leading the way this morning, with earnings to come from a number of heavyweights including Apple, Facebook, Tesla and Microsoft. Perhaps it’s the anticipation of more bumper results that’s driving this early optimism this week, after Netflix got the season off to a strong start for the sector. A number of these names have thrived in the current environment and the expectation seems to be that we’re going to see more of the same.

Monday has little to offer on this front but with almost a quarter of the S&P 500 due to report this week, it’s a theme that’s likely to be a key sentiment driver in the coming days. Investors were a little more risk-averse late last week but this week could get them back on track.

The risk for these markets is that after a bumper couple of months, investors may start to wonder whether they’re looking a little frothy. Especially against the backdrop of lockdowns in multiple countries and restrictions that are unlikely to be lifted in any considerable way for months, as the vaccine continues to be rolled out.

Of course, we’ve seen lockdowns being imposed for months now and let’s face it, it’s done little damage to investor sentiment. The unwavering belief in the Fed and other central banks to solve all is very powerful indeed.

And the Fed is going to be key once again this week. All of this talk of tapering and rate hikes is nonsense, especially given the tweaks to its targeting that ensures we won’t be facing tightening any time soon, until long after the pandemic.

But fear of the unknown is one thing that can shake investors, as the Fed is all-too-aware. Policymakers have been on the PR offensive in recent weeks to avoid a needless taper tantrum repeat and reassure investors they have nothing to worry about. Perhaps this in itself is a sign of investors being uncomfortable with what they perceive to be lofty valuations.

I expect the Fed meeting this week will pass without any problems, investors suitably assured that the central bank isn’t about to spoil the party. Whether that, or earnings, is enough to get them back aboard the FOMO train, we’ll have to see.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam