Dow Jones, Nasdaq 100, DAX 30 Forecasts:
Dow Jones, Nasdaq 100, DAX 30 Fundamental Forecasts
The Dow Jones and Nasdaq 100 have an important week ahead of them with a heap of upcoming earnings from some of the country’s largest and most influential corporations. Ranging from Chipotle to Lockheed Martin, the quarterly results can potentially offer significant influence over the indices as 40% of Dow Jones components are slated to report. Consequently, the Industrial Average and the tech-heavy Nasdaq will look to ride the euphoria – or despair – brought about by each report.
Dow Jones Forecast
While earnings results and the corresponding price reactions are nigh impossible to predict, it would be presumptuous to argue against the Dow Jones when traders have pushed it to such levels. Admittedly, the Industrial Average has a laundry list of concerns, but price suggests the market is comfortable in dispelling those concerns in exchange for fresh all-time highs. In pursuit of those heights, the Dow Jones will look to earnings from Boeing, Caterpillar, 3M, Microsoft and other major components in the week ahead for an extra jolt to get across the finish line.
Dow Jones Price Chart: Daily Time Frame (February 2018 – October 2019) (Chart 1)
On a stock specific basis, Caterpillar should be watched closely for insight into the status of global construction, often apparent in the company’s machine orders by region. An abrupt slowdown in purchases in emerging markets, particularly China, could erode investor confidence and ignite global recession fears. Thus, Caterpillar has the potential to have an impact on the Dow Jones beyond the fluctuations in its own share price. Another such company is Microsoft.
Nasdaq 100 Forecast
To that end, the world’s largest publicly traded company by market cap is scheduled to report on Wednesday, in an event that could significantly sway the Nasdaq 100. Mega-cap companies like Microsoft and Apple have become synonymous with the broader market by some investors – due to their weighting on the index and vast supply chains – and have been known to impact other markets. One such instance was the USDJPY flash crash early this year when Apple revised their quarterly outlook lower.
Nasdaq 100 Price Chart: Daily Time Frame (September 2018 – September 2019) (Chart 2)
Evidently, market participants have afforded these companies significant influence which is partially why next week could prove to be a crucial moment for the US stock market. Alongside Microsoft, other tech companies like Amazon, Intel, Snapchat, Twitter and Texas Instruments are due to report. Each will offer insight on their unique corner of the tech industry, but their combined performances will likely decide the overall direction of the stock market’s reaction. If the first week of earnings was any indication, the season could prove to be a bullish catalyst, delivering the spark needed to drive the indices to new highs.
DAX 30 Forecast
Shifting to European equities, the DAX 30 has less to look forward to. Friday marked the implementation of $7.5 billion in US tariffs on the European Union targeting large commercial aircraft, agricultural products and other industrial goods. While the tariffs will undoubtedly weigh on trade between the two parties, their presence has likely been priced into the market already. Further still, the tariffs were approved and enacted within the World Trade Organization’s framework – thus making retaliation a tricky topic.
DAX 30 Price Chart: Daily Time Frame (August 2018 – September 2019) (Chart 3)
While various EU officials have stated they are seeking retaliation, doing so within the confines of the WTO would postpone retaliation until the first half of 2020 – at the earliest. Perhaps more concerning, would be if the EU sought retribution outside of the WTO, effectively expanding upon a precedent set by the United States where tariffs are imposed without the blessing of the intergovernmental trade body.
Such a move would essentially greenlight further escalation from the United States and could see the squabble devolve into a tit-for-tat conflict between the world’s two largest collective economies. With that in mind, traders should be wary of any signal that the EU will look to retaliate outside the WTO framework as it could seriously dent risk appetite as the odds of a US-EU trade war increase. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis on all the major stock indices.
–Written by Peter Hanks, Junior Analyst for DailyFX.com