Morning Minutes

Lower Earnings and Higher Interest Rates Weigh on Stocks; Big Video Game Deal



Overseas stock markets have been retreating overnight and that downward momentum has carried into early North American trading today. NASDAQ futures are down 1.5% while Dow futures are down 0.75%. In Europe today, the Dax is down 1.0% while the FTSE is down 0.5%.

The growing downward pressure on stocks can be attributed to several factors. First, traded interest rates are on the rise again with the US 10-year treasury note yield climbing above 1.80%. Second, earnings reports from big US banks continue to show signs of struggle with Goldman Sachs reporting disappointing results this morning ($10.81 vs street $11.76, down 4.1% premarket). Last week’s signs of stagflation (highest US consumer prices since 1982, disappointing retail sales and industrial production reports) haven’t been helping either.

Potentially adding to inflation pressures, crude oil is soaring today. WTI is up 1.25% and trading near $85.00/bbl on rising tensions in the middle east following an attack in the UAE overnight. Natural gas is up 0.9%, while copper is down 0.3%. Gold and the Canadian Dollar are steady against a strong US Dollar, but Bitcoin is down 1.1%, Ethereum is down 2.0%, and the Euro is down 0.3%.  

In economic news, both Canadian housing starts (236K vs street 270K and previous 301K) and the Empire State Manufacturing Index (-0.7 vs street 25.7 and previous 31.9) came in well below expectations, adding to the recent string of disappointing economic reports.

In a late breaking development, Microsoft has agreed to purchase Activision Blizzard in a $68B deal which could spark trading action in video game stocks today.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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