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US tech stocks are set for a rebound following their worst week since April, as investor focus shifts from political developments to corporate earnings. Last week's market reaction to Joe Biden ending his re-election bid and endorsing Kamala Harris was relatively subdued, with minor movements in dollar strength and Treasury yields. The Democratic Party now faces the challenge of rallying behind a new nominee shortly before their convention, while Trump remains the Republican frontrunner. The prospect of his return to the White House has led investors to adjust their portfolios by reducing long-term US bond holdings and investing in Bitcoin. This political uncertainty may induce market volatility, although the current emphasis is on earnings reports and monetary policy.
Morgan Stanley strategist Michael Wilson indicates that the business cycle's pace is more critical to market participants than election outcomes. Despite increasing expectations of a Trump victory, any market recovery will likely hinge on economic growth. Nasdaq 100 futures rose 1%, indicating a partial recovery from last week's decline, while S&P futures increased by 0.6%. The Stoxx 600 index in Europe gained over 1%, ending a five-day slump.
This week, the market's attention will be on major corporate earnings, with Tesla Inc. and Alphabet Inc. slated to report first among the ‘Magnificent Seven’ on Tuesday. Analysts will particularly scrutinize Tesla's progress on its robotaxi initiative and Google's revenue boost from artificial intelligence. According to Andrew Pease from Russell Investments, while the reporting season has been positive, the market needs new catalysts for further growth. There is hope for a shift from the dominant tech firms to the broader S&P 493 and the equal-weighted index.
In US premarket trading, Verizon Communications Inc. fell after missing revenue expectations, and CrowdStrike Holdings Inc. dropped due to a downgraded stock rating following a problematic software update. Meanwhile, European companies have generally shown strong earnings, although Ryanair Holdings Plc fell sharply after lowering its summer ticket price outlook. Following Ryanair's downturn, EasyJet Plc and IAG SA also experienced declines.
Asian markets struggled due to weak tech sector performance, despite Chinese bonds gaining after a central bank rate cut. Chinese stocks fell amid investor dissatisfaction with the lack of significant economic stimulus from a major Communist Party meeting.
This week, key events include economic data releases from Europe and the US, along with a Bank of Canada rate decision. Highlights include retail sales in Mexico, CPI and industrial production in Singapore and Taiwan, a fiscal budget announcement in India, and Eurozone consumer confidence data. Additionally, crucial earnings reports from Alphabet, Tesla, LVMH, IBM, and Deutsche Bank are anticipated.
Further significant events include the G-20 finance ministers and central bankers meeting in Rio de Janeiro, the Bitcoin 2024 conference in Nashville, and economic indicators from Japan and the US towards the week's end.
In brief market movements, S&P 500 futures rose 0.6%, Nasdaq 100 futures increased 1%, and Stoxx Europe 600 gained 1.2%. In currencies, the Bloomberg Dollar Spot Index remained stable, with minor fluctuations in the euro, British pound, and Japanese yen. Bitcoin fell slightly, while Ether rose marginally. Bond yields for US, Germany, and Britain showed little change, and commodity prices for WTI crude and spot gold dropped slightly.
