Investing.com | Jul 24, 2017 06:30AM ET
by Pinchas Cohenh3 Key Events /h3
The global market opened negatively with Asia Pacific shares falling, though they closed mixed, while the yen advanced for a fifth day. The MSCI Asia Pacific has fallen for the first time in 11 days, but has since stabilized. Investors are demonstrating caution ahead of a week bursting with earnings releases and a Fed interest rate decision.
European shares were sold off on Germany’s top automakers coming under investigation for collusion on prices and the design of diesel emissions treatment systems. Among the companies in question are BMW (DE:BMWG), Volkswagen (DE:VOWG_p), Audi (DE:NSUG) and Porsche (DE:PSHG_p).
Volkswagen gapped down 2.85 percent and rebounded 0.40 percent. The plunge crossed below the uptrend line since February 2016, after managing to climb back above it. Should it fall below its initial downside breakout, the June low of 134.90, it would suggest a downtrend.
So far, of the US companies that have already reported earnings, 20 percent beat expectations with earnings near 10 percent. So, why are investors turning cautious? There are no expectations of an interest rate change later this week, and the Fed already slowed its path of hikes. So, why have investors put the brakes on last week’s rallies? What are they scared of?
Oil was suppressed below $46 a barrel, and plunged a quarter-percent between in early morning trade, ahead of an OPEC meeting, whose headline excludes curbing Libyan and Nigerian production. Unidentified sources claim the two African members are willing to cap output if they can maintain 1.8 million barrels a day for Nigeria, and 1.28 million barrels a day for Libya. Both countries have boosted their output— Nigeria from 1.5 to 1.75 million barrels a day and Libya from 630,000 to 840,000 barrels a day.
However, OPEC Secretary-General Mohammad Barkindo told reporters on Sunday in St. Petersburg, that while:
Get The News You WantRead market moving news with a personalized feed of stocks you care about.Get The App“The re-balancing process may be going on a slower pace than we earlier projected, but it is on course, and it’s bound to accelerate in the second half.”
It will go faster in the second half of the year, as demand will rise and the oil market will need even more Libyan and Nigerian crude. This is spinning taken to a masterful level, particularly at a time when oil's price has plunged because of global glut. Oil pared its losses as of 4:42 EDT and is flat with yesterday’s close.
Investors will be following this week’s earnings from industry leaders, beginning today with Alphabet (NASDAQ:GOOGL), and will continue through Thursday with Amazon (NASDAQ:AMZN). Traders hope these earnings will demonstrate that this bull market, valued at $78 trillion, is still charging ahead.
Optimism continues, even as President Trump, upon whom so much faith was placed to restart the economy, is struggling to keep his administration functioning as the Russia probe increases in magnitude and after two senior spokesmen from his inner White House circle have resigned.
h3 Up Ahead/h3Alphabet is scheduled to report earnings after market close, for the fiscal quarter ending June 2017. Consensus EPS for the internet giant forecast for the quarter is $8.2 vs $7 YoY.
On Thursday, the stock got stuck under the resistance of the June 26 peak. On Friday it climbed back toward its high of the day, but failed to surpass it. This invites an attractive risk-reward ratio for a short, unless earnings won’t blow the stock past its June 6 peak, which would provide an implication for a top.
Mobileye (NYSE:MBLY), the company recently acquired by Intel (NASDAQ:INTC) which develops systems for autonomous driving is scheduled to report earnings. Consensus EPS forecast for the quarter is $0.18, vs $0.11 YoY.
IBM (NYSE:IBM), the US's biggest manufacturer, had its stock drop after posting 21 consecutive revenue declines, ending a return move to its broken uptrend line since June.
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