Wall Street Recovers to End the Week
- After starting the week strong, Wall Street registered three consecutive losing sessions. However, markets were able to recover on Friday, as the Dow Jones and S&P 500 both closed higher.
- The correction seen midweek is attributed to Treasury Secretary Mnuchin’s stop to stimulus negotiations and to the surging probability of a new global lockdown.
Earnings Season Kicks Off
- Big banks announced their earnings throughout last week, signalling the beginning of earnings season.
- The six largest US banks posted a cumulative net income of $25 billion in Q3.
- Both JP Morgan and Citi reported loan loss provisions well below analysts estimates, which is very positive. Goldman Sachs also reported strong numbers, thanks to trading and investment banking.
- Banks will now be judged on their ability to generate income. Net interest income has fallen for several banks, in the wake of the massive rate cut in the US since the start of the crisis. With a Fed forecasting interest rates around 0% at least until 2023, banks will have to adapt.
Oil Remains Around $40
- Despite showing volatility in the past week, oil prices were able to hold around the $40 mark.
- The number of active US oil rigs reduced by 70% since the beginning of the pandemic, while production is only down 17%. This means that oil production is expected to drop in the following months.
- Reactivating oil rigs takes time, so when demand recovers, it could potentially push oil prices up rapidly.
Bitcoin Powers Through $11,000
- Bitcoin has broken the $11K level, finding support at $11.3K.
- The world’s largest crypto reached a high this week of $11.7K — its highest level since early September.
- The move upwards didn’t surprise analysts: Prices have been consolidating for a number of weeks, and as seen in the past, after periods of price consolidation there tends to be a sharp price move in one direction or another. The catalyst for this move seems to have been the news from last week of Square buying $50 million in Bitcoin.
- It will be interesting to see how price reacts at the $12K level as Bitcoin has struggled to rise above it.
Nio Races to All-Time High
- Chinese electric carmaker Nio received a price upgrade from JPMorgan last week, setting a target of $40 and calling the stock a “long term winner”.
- Although Tesla currently has the best selling EV in China, JPMorgan analysts see Nio as the long term winner.
- Nio surged 30% this week on the back of the upgrade, to $28.
The Week Ahead
- Earnings season continues: Tesla, Amazon, Netflix, Intel and Coca-Cola to release reports next week.
Written by a team of experienced financial analysts at eToro.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.