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US Earnings In Focus

US Earnings In Focus

US and European futures are trading almost flat as investors are more focused on the US earnings season. Goldman Sachs is expected to announce its earnings today before the US market open and the results are likely to influence the future direction of the US stock indices.

As for the economic calendar, what matters the most is the US Empire State Manufacturing index which will be coming out at 01:30 PM GMT. The forecast is at -8.7 while the previous reading was at -11.2. If the data matches the forecast, it could lift optimism among traders.

Earnings

Before the market opens on Tuesday, it is anticipated that Goldman Sachs will report adjusted profits for the fourth quarter of $5.78 per share, which is roughly a fifty percent decrease from the previous year. The Wall Street powerhouse is experiencing difficulties as a result of declines in mergers and equity underwriting, in addition to significant losses incurred as a result of a recent reduction in its efforts to expand into consumer lending. Recently this week, Goldman Sachs let go of 3,200 people, which is equivalent to 7% of its total staff. After the tremendous load of losses brought on by consumer lending, the company’s Chief Executive Officer, David Solomon, is working to grow fee income from wealth and asset management.

As the Wall Street giant moves away from a consumer-focused growth strategy that has saddled it with losses in the billions of dollars, Goldman Sachs (GS) is heading into its fourth-quarter report with a newfound enthusiasm for asset management. The report is scheduled to be released before the markets open on Tuesday.

The challenging conditions in investment banking and (for Goldman) in consumer lending heighten the stakes for the company’s performance in asset management, wealth management, and proprietary trading. Trading in equities, fixed income, currencies, and commodities was responsible for over 80 percent of Goldman Sachs’ net income and slightly over half of the company’s total revenue in the third quarter.

 On Friday, the rival bank, JPMorgan Chase (JPM) stated that its trading income for the fourth quarter increased by 7% year-over-year. Additionally, JP Morgan declared a provision for credit losses of $2.3 billion. The bank said it expects a small worsening climate in the firm’s macroeconomic outlook. JP Morgan currently expects a moderate recession and the question now is how Goldman Sachs sees that.

Cryptos

The cryptocurrency market is, without a doubt the most important topic of discussion this week, as the price of Bitcoin seems to be mounting an impressively decisive recovery. As of today, we can see that the price of Bitcoin is going over a key resistance level of 20,000, but traders need to be more cautious with regard to the excitement they have. Because in order to be fully confident about bitcoin’s winter season being over, the price needs to move above the 30,000 dollar price mark, which is really a long shot for the time being. Until then we cannot say that Bitcoin has fully survived another winter. 

Overall, the fundamentals that are really helping bitcoin are the Fed’s monetary policy and threats of deep recession easing off. It is true that Bitcoin is classified as a risk-off asset. However, over the past year or so, it has had a more strong positive correlation with the risker assets which means that when the S&P 500 moves higher, we also see bitcoin moving up and vice versa. 

Gold

The dollar index is continuing its downward trend against the price of gold, which is keeping the precious metal’s price somewhat intriguing. The fact that a number of Fed officials have said that it would not be such a terrible idea to slow down the speed at which interest rates are being increased speaks volumes about where the price of gold is headed. The consensus among traders is that the price of gold is about to see a dramatic upward explosion. Having said that, there are a few key distinctions. It is a reality that the Federal Reserve is going to continue to raise the interest rate; nevertheless, this does not imply that someone is going to yank the rug out from under the dollar index. It is possible that the dollar index may see a little pullback, but overall, it will continue to maintain its strength, which will keep a lid on the price of gold.