Stock futures are trading lower as traders are concerned about several factors such as the escalating tensions between the US and China over Taiwan, a slowdown in economic activity, and several states declaring a state of emergency over monkeypox.
It seems like the stock rally may have stalled after scoring the best monthly performance since November last year.
All major US stock indices broke their three-day winning streaks yesterday; the S&P 500 dropped 0.28%, the Nasdaq Composite lost 0.18%, and the Dow Jones Industrial Average declined by 0.14%. The energy sector took most of the beating yesterday, and companies like ExxonMobil, Chevron, and Devon Energy saw their share prices dropping yesterday.
Although traders are primarily worried about the economic weakness in the US as the Fed has adopted a hawkish monetary stance, in reality, the data released in the US didn’t confirm those concerns. For instance, the US Manufacturing PMI number came ahead of expectations when the Chinese Manufacturing PMI number fell short of expectations. Nonetheless, the main economic event for this week is the US NFP number which will be coming out on Friday. Traders will pay attention to this number as a strong number is likely to encourage the Fed to continue its monetary policy with a hawkish stance. However, if the number comes in a bit soft, we could see a more cautionary tone among the Fed, which could be positive for the US stock market.
Regarding today’s economic docket, we have the US JOLTS Job Openings data coming out at 14:00 GMT. The forecast is 10.99 M, while the previous number came in at 11.25M. Later in the day, we also have the FOMC member James Bullard speaking later today. His view on the Fed’s monetary policy will likely bring higher volatility for the dollar index.
Investors and traders will pay close attention to a semiconductor company, Advanced Micro Devices, AMD. The firm will report its earnings today. There is no doubt that the whole semiconductor industry has been facing strong headwinds due to the supply shortage, and investors will like to know if this is still the single biggest problem.
In China, we still have some lockdowns, which makes traders believe that supply issues may not have eased. In addition, consumer spending power is receding, and there is one clear message from the current earnings: companies are being cautious with their spending. This means that the future forecast could be cautious as well.
AMD is a secular growth company whose five-year compounded annual growth rate stands at 32.52%. Thus, any weakness in the stock on the back of its earnings may be deemed an opportunity by many investors and traders. In addition to this, the company has a strong history of standing against most cyclical downturns.
AMD’s GPU market share is considerably large, and traders know that the company is set to grow at a CAGR of 31.1% until 2025, and the consistent growth in the gaming sector is only a plus for AMD.
The earnings result will also give us a better understanding of the crypto mining activities as AMD chips are used mainly in this area. Previously, we have seen a positive correlation between the bitcoin price and AMD chips, and that is when the price is high, the company reports more sales of crypto mining equipment. When the prices are down, as they are now, it slows down the sales activity of crypto mining machines.
Overall, investors aren’t expecting any stellar results from AMD, but as mentioned earlier, the semiconductor is an important sector, and AMD plays a vital role here. Given the future growth prospects, it is likely that traders are going to remain active as the company reports its earnings.