The Markets Have Been Treading Water for the Last Ten Sessions



Stock markets have been cautious

For most of 2019, stocks have seen either steep gains or steep losses from session to session. The tech-heavy NASDAQ Composite Index (QQQ) has again outperformed the broader S&P 500 Index (SPY) this year. Both indexes saw one of the best quarters ever in the first quarter.

The NASDAQ Composite Index is now at over 8,000, close to the all-time high of ~8,120 it created in August 2018. However, in the last ten sessions or so, while the index hasn’t been declining, it has been treading water—something it hasn’t done too consistently this year.

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This performance may be a sign that the markets are wary as earnings season is hitting its peak. For most of this year, the markets have ignored the signs that US corporate earnings may be slowing, instead gaining traction on the back of multiple expansion as the Fed signals that it won’t be hiking rates this year.

Earnings season will now dictate stock direction

However, as we are now in the midst of earnings season, investors’ attention will likely shift to earnings growth. If earnings are sluggish, as expected, we’re likely to see a pullback at these levels.

As the graph above shows, FAANG stocks have all been seeing slowdowns in revenue growth in the past few quarters. This trend continued for Netflix (NFLX) in the first quarter of 2019 as well. Most major tech companies will be announcing their first-quarter results in the next few days, and these reports will determine the trajectory of the broader markets.


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