Netflix’ upbeat corporate earnings for the fourth quarter brightened up market sentiment on Wall Street. Nevertheless, optimism remains fragile and could be dampened by the hawkish Fed. InstaForex analysts are ready to introduce you to a fresh market review.

As expected, Wall Street traded under pressure yesterday. Investors digested good and bad news, but the strong labor market was a major headache. A steady decline in weekly unemployment claims gives leverage to the Federal Reserve and dents the appetite for risk. Another strong update on jobless claims pushed the stock indices down. The Dow Jones lost 225 points or 0.7%. The Nasdaq shed 0.9%. The S&P 500 was 0.7% down to close at 3,890.
The benchmark indices regained optimism in the New York pre-market. The three indices regained their footing with the Nasdaq taking the lead. The S&P 50 is expected to trade in the intraday corridor between 3,890 and 4,010.
Yesterday, investors looked for the signs of the weakness in the labor market as the key for the US Fed to soften its aggressive monetary tightening. However, no signs were detected.
The stock indices closed in the red yesterday because the tight labor market revived concern for sharp rate hikes. The weekly update by the Labor Department showed that initial unemployment claims decreased by 15,000 last week despite the Fed’s efforts to reduce demand for jobs. In a separate report, the manufacturing index by the Philadelphia Fed declined in January. The Commerce Department confirmed a downturn in the housing market.

Comments by Fed’s policymakers highlighted different visions of the central bank and the market.

As for corporate news, the shares of Procter & Gamble slid by 2.11% after the company’s warning that commodity prices put pressure on its profits despite the upgraded sales forecast for the year ahead.
Netflix shares closed 3.23% down before the publication of the financial report. Today the entertainment giant can act as the main catalyst for market optimism.
Netflix’ shares surged by 7% on Friday because the financial records for the fourth quarter revealed that the company added one million subscribers more than Wall Street had expected.
The streaming service giant added 7.66 million subscribers last year beyond the forecast for 4.57 million subscribers. With this figure, investors forgot gloomy economic prospects and downbeat revenue for the fourth quarter.

Nexflix slumped by almost 70% from late 2021 until early 2022 due to contraction in the number of subscribers. However, the stock recovered by more than 60% compared to the lows of last year.

Market sentiment today will also depend on comments by Fed policymakers Christopher Waller and Patrick Harker. The US dollar is trading steadily. Having gained 0.3% intraday, its index is still hovering around 102.3. The intraday corridor for the index is seen between 101.7 and 102.7.
The US dollar gained ground against its rival currencies because a flood of economic data released this week, including consumer spending, business activity, and inflation, underscored uncertain global economic growth.
The US dollar shed almost 1.3% in January and slumped by almost 8% in the last three months of 2022. Judging by the market response to the fundamental data on the US economy, the US dollar is likely to find support only from the Fed’s policy decision in February.
Dovish expectations for the Fed’s policy are bearish for the US dollar. Most economists reckon that the US Fed will complete the cycle of monetary tightening after two rate hikes by 25 basis points and maintain interest rates at such levels until the year-end. FedFunds futures confirm that the market is on the same page with analysts.

As inflation in the US has been loosening its grip, analysts expect the US Fed to moderate the pace of rate hikes to 25 basis points at the meeting on January 31 – February 1. As a result, the official funds rate will stand at 4.50-4.75%. Anyway, the US dollar is set to trade under pressure until the policy meeting. The Canadian dollar is asserting its strength amid rising oil prices. Today the loonie dipped. The USD/CAD pair edged up 0.13% in the pre-market to trade at 1.3470.

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