In European morning trading, stocks are climbing. S&P 500 futures are up by 0.4%. European markets are also showing gains, with the DAX increasing by 1.1% and the CAC 40 rising by 1.6%. This boosts the markets after earlier weekly losses. The rise follows a trade deal between the US and Japan, which might be affected by Japan’s political situation. Market sentiment is also shaped by upcoming tech earnings reports. Alphabet and Tesla are among the key companies expected to share earnings soon. For Alphabet, there are concerns that Google may need to sell its Chrome browser, which could impact its search market share. Additionally, competition in the AI sector, especially with Gemini, is being closely watched due to expected increased spending in AI.

Tesla’s Struggles

Tesla is facing difficulties, with its stock down nearly 18% this year. Issues like a fallout with Trump and changes to the tax laws, including the loss of the federal EV tax credit, have hurt the company. Tesla continues to struggle, and these factors are playing a significant role in its problems. The current uptrend in stocks may be hard to maintain due to challenges from these major tech companies. More large companies are set to share their earnings in the coming week. The positive mood in stocks feels fragile, so we advise traders to be cautious. The CBOE Volatility Index (VIX), known as the market’s “fear gauge,” is now around 13, which is low and suggests traders are too relaxed. This is a good time to consider buying protective put options on major indices, as they are relatively inexpensive hedges against a potential market downturn triggered by earnings.

Market Strategies Overview

For the first company on our radar, uncertainty reigns supreme. The options market is anticipating a stock move of about 6% after earnings, highlighting serious questions about its browser and AI developments. This signals an opportunity to trade volatility through strategies like a long straddle, which can profit from big price swings in either direction. For the electric vehicle maker, the outlook is very negative. After reporting a 9% drop in quarterly deliveries—the largest miss in years—the challenges highlighted by Musk are clearly affecting performance. We plan to capitalize on this by buying put options, expecting the stock to fall below its year-to-date lows. Historically, the performance of these major tech firms significantly impacts the broader market. Should there be negative reactions to these earnings reports, especially given their struggles within the Magnificent 7, the bullish momentum in S&P 500 futures could come to a halt. Positive trade developments involving Ishiba may not be sufficient to offset the weaknesses seen from these key players. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now