Markets Today: Earnings Are Failing To Impress Traders, Dow Jones Flirting With Critical Levels

European and US futures are trading lower on the second last day of the week as traders and investors digest the current earnings’ season while keeping a close eye on the economic data, which is very much not going to shape the monetary policy of central banks, but it could also provide a massive tailwind for the equity markets in the US and in Europe, which they desperately need.

Earlier today, in Europe, we had a mixed bag of earnings from a number of major players. Deutsche Bank DB and Barclays BCS produced decent earnings numbers. For instance, Barclays, first quarter net income was 1.55 billion pounds, which was way ahead of expectations. Similarly, Deutsche Bank also reported 1.275 billion euros of profit, which is a 10% annual increase. However, both banks failed to impress investors, and their stocks traded in negative territory during the early morning’s price action.

Neste, another major player in the consumer sector, also failed to impress markets as it reported a 5.9% fall in sales for the quarter to 22.1 bullion Swiss francs, and most of the drag came from North American markets. However, as always, the shining spot for the company was its organic sales growth—a trend that many consumers are favouring despite higher inflation pressure, which has already squeezed their disposable income. The company did assure investors that its strategies to promote organic products are still very much in play, and they are expecting another 4% growth, which should help its overall operating profit margin. The stock traded over 4% during the early morning’s price action.

While earnings are in focus, investors are paying attention to the big potential M&A news that has given a massive lift to the Anglo American company, which has received a takeover bid from BHP Group. BHP has valued the company at 31.1 billion pounds, and the share price has surged by over 13%. In a time like this, the initial surge is usually only the beginning of a larger rally. If the deal goes through, this BHP Group would become the biggest player in the copper mining playfield, which is already attracting a lot of attention among investors.

Over in the US, the focus will be on the tech sector, as Meta META failed to impress investors and its shares tanked, which made Meta lose its market cap by nearly $200 billion. The issue with the company is its big dive into the metaverse and also its headsets, which continue to become less popular than many initially thought. Perhaps the issue here is not the concept but the slow adoption of the technology. But if you look at the earnings on its face value, things were no short of good surprises, as the company not only produced stellar numbers for its profit but also healthy revenue for the first quarter. The core business for Meta still continues to be its advertising, where 98% of its revenue comes from. The company continues to show progress here, and the fact that it has increased its CAPEX means that Zuckerberg has something up his sleeves that he is working on.

Moving away from all of this, the main factor to focus on today is the US GDP data, which is going to either firm up the narrative that the Fed already has or make the Fed think again about their monetary policy. Looking at the recent PMI numbers and other economic indicators, no one is expecting the GDP number to fall off the cliff—what we need is just about the right number that matches expectations, and the Fed will be more than happy to drum the same beat. The Dow Jones index posted three consecutive weeks of losses; however, this week the index is set to close higher, but by only a small margin. If the sentiment becomes adverse, the current bounce in the price action of the Dow Jones will be nothing more than a dead cat bounce, which means that the index is likely to move lower and could easily test the levels that are shown on the chart. The support level is already tested by the market, and another test could either make a double bottom, which would mean that the only potential way for the price action would be to the upside. However, on the flip side, a break in this zone would open the floor for a much deeper correction for the price action, which could actually last all summer.

US 30 chart by XTB

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.