Nasdaq Nears Record as Big Tech Gears Up for Pivotal Earnings Week | Daily Market Analysis

Key events:

• Canada - BoC Gov Macklem Speaks
• Eurozone - ECB's De Guindos Speaks

The Nasdaq closed higher Friday as tech stocks continued to rally, driven by investor enthusiasm ahead of a crucial week for earnings in the sector. The NASDAQ Composite rose 0.6% to close at 18,519.36, approaching its record close of 18,647.45. Earlier in the session, it reached an intraday high of 18,690.01. The Dow Jones Industrial Average, however, lost 260 points, or 0.6%, while the S&P 500 remained largely unchanged.

Big tech and chip stocks led the Nasdaq’s gains, buoyed by investors anticipating positive earnings reports from the sector. Five of Wall Street’s largest tech companies, commonly called the “Magnificent Seven,” are set to release their quarterly earnings, which could be a turning point for the broader market.

Among tech giants, Apple Inc. (NASDAQ: AAPL) managed to rebound from early-session losses, despite facing competitive pressures in the Chinese market, where its iPhone sales reportedly declined in Q3. Meanwhile, chipmakers Nvidia Corporation (NASDAQ: NVDA) and Western Digital (NASDAQ: WDC) saw gains of 1% and 6%, respectively. Western Digital’s rise followed a stronger-than-expected earnings report, providing a boost to the tech sector overall.

The upcoming earnings reports from key players include Alphabet (NASDAQ: GOOGL) on Tuesday, Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT) on Wednesday, and Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) on Thursday. These companies, with their substantial influence over market capitalization, are expected to serve as indicators of the sector's health. Investors will be particularly focused on the role of artificial intelligence, as recent capital expenditures have emphasized its importance to growth. Success in AI could drive investor sentiment, while any slowdown may cause caution.

Outside of tech, currency markets also saw notable movements, particularly with the USD/CHF pair, which has gained ground in recent sessions. The US Dollar has strengthened, reaching two-month highs around 0.8700 during Asian trading hours on Monday. Recent economic data from the US have fueled expectations that the Federal Reserve may adopt a more conservative stance in its November meeting, supporting USD gains. Positive consumer sentiment data and smaller-than-expected declines in durable goods orders added to the USD’s appeal.

On Friday, the US Michigan Consumer Sentiment Index climbed to 70.5 in October, surpassing the anticipated 69.0 and improving from September's 68.9. Additionally, durable goods orders fell by 0.8% month-over-month in September, slightly better than the expected 1.0% decline. The US Dollar Index, a measure of the USD against six major peers, traded around 104.50. US Treasury bond yields further supported the dollar, with the 2-year and 10-year yields at 4.12% and 4.27%, respectively.

The Swiss Franc could face challenges as expectations rise for a rate cut by the Swiss National Bank in December. Market participants will closely monitor October's Consumer Price Index (CPI) data, expected this week, which could influence the SNB’s decision. Additionally, the CHF’s safe-haven appeal may be limited due to easing geopolitical tensions. Following airstrikes by Israel targeting Iranian missile and defense sites on Saturday, the situation has appeared to de-escalate somewhat. Iranian leaders have downplayed the impact of the strikes, suggesting the situation remains manageable.

In Japan, the Yen reached a three-month low against the USD in Monday’s Asian trading session. This decline followed a loss of parliamentary majority by Japan’s ruling coalition, casting uncertainty over the Bank of Japan’s future policy stance. Speculation over potential interest rate hikes has diminished, with the yen’s safe-haven status also affected by a generally positive risk sentiment in global markets. USD/JPY approached the 154.00 mark, as continued USD buying further pressured the Japanese currency.

Australia's dollar was also on the decline for a second consecutive session, though hawkish remarks from the Reserve Bank of Australia may provide some support. Investors are looking ahead to domestic inflation data, scheduled for Wednesday, which could impact the RBA’s rate policy. Currently, the cash rate stands at 4.35%, a level the RBA deems adequate to bring inflation within its target range while sustaining employment levels.

Gold prices opened the week on a modestly bearish note, eroding some of the gains made on Friday. Trading near the $2,748-$2,750 zone, gold's price was pressured by positive risk sentiment, which dampens the demand for safe-haven assets. Nonetheless, some support may come from uncertainties around the US election and Middle East tensions, which could sustain gold's appeal. Many traders are also adopting a wait-and-see approach ahead of key US economic releases this week, including the Q3 GDP report, the Personal Consumption Expenditures (PCE) Price Index, and the nonfarm payrolls (NFP) report.

In conclusion, the markets are gearing up for a pivotal week with tech earnings likely to set the tone. The USD/CHF gains, the weaker Yen, and the AUD’s decline reflect currency market reactions to both local and global factors. With major US economic data and global political developments, this week will be crucial for setting short-term market directions across sectors.