Tech Sector Awaits Earnings Data

The tech sector is waiting for earnings reports from major companies to decide whether to continue its AI-driven rally. Concerns have arisen due to supply issues after China imposed export limits on key minerals. President Trump has announced a 155% tariff on China, set to begin on November 1, if trade issues aren’t resolved. Traders are watching the US Consumer Price Index (CPI) for signs of inflation. Released monthly by the US Department of Labor Statistics, a high CPI is generally good for the US Dollar. The Federal Reserve aims to keep prices and employment stable, but inflation rates are still a concern post-pandemic. Oil prices have risen above $57.50, helped by easing trade tensions, which has affected currency movements. The GBP/USD continues to drop, while USD/JPY has gained due to Takaichi’s appointment in Japan. The NZD/USD remains steady, the EUR/USD has slipped, and the Canadian dollar is experiencing fluctuations following inflation data. The Dow has surged to 47,000, driven by industrial and consumer stocks. This growth contrasts with the cautious tech sector. This difference suggests investors might want to consider strategies that take advantage of sector shifts, especially with geopolitical uncertainty ahead. The CBOE Volatility Index (VIX) is at a low of 15, but options pricing indicates an expected spike around the November 1 tariff deadline.

Inflation and Federal Reserve Impact

With strong earnings from companies like General Motors and 3M, the industrial sector continues to gain momentum. The latest ISM Manufacturing PMI report confirmed this growth, showing a solid 52.5. Traders might want to buy call options on the Industrial Select Sector SPDR Fund (XLI) to benefit from this “old economy” strength. The technology sector is facing challenges from potential tariffs and China’s control over rare earth minerals, leading to potential risks. As key earnings reports from the “Magnificent Seven” approach, implied volatility for options on the Invesco QQQ Trust (QQQ) is increasing. We suggest considering protective put options or bear call spreads to guard against any disappointing earnings or trade developments. Persistent inflation keeps the Federal Reserve on a cautious path, which may affect rate-sensitive assets. The futures market, monitored by the CME FedWatch Tool, now shows an 85% chance of another rate hike before the end of the year. This strengthens the dollar, making bearish strategies on currency pairs like EUR/USD appealing as it approaches 1.16. The ongoing uncertainty in US-China trade talks is boosting the US dollar as a safe-haven asset. This is evident in the USD/JPY exchange rate, which is nearing 152.00, a level not seen since the early 1990s. This strength in the dollar will likely continue to pressure other major currencies in the weeks ahead. Create your live VT Markets account and start trading now.

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