Economic data and earnings drive stocks volatility

Major global stock markets were seeing important price movements today after a series of economic data affected traders’ expectations. The economic releases were coming on top of major US companies’ earnings releases. The latter have strongly impacted their respective stocks leading to sharp losses in some cases.

Limited improvements in Japan and deteriorating manufacturing activity in Europe have set a weaker perspective for industrial stocks. Conversely, services sectors were improving in Europe but retreated in Japan.

This data comes at a time when the European Central Bank is expected to continue raising its interest rates which could further affect activity levels in the region. Some doubts remain over the size of the next rate hike in the euro area and a surprise early next month could fuel strong volatility.

In the US, the Federal Reserve is still expected to raise interest rates next month, however, the trend toward a softer policy, later on, could support the market to some extent.

While Tesla’s performance has affected investors’ expectations, traders could still be focusing on next week’s company earnings as more large technology and industrial firms will reveal their results.

The automotive sector as a whole and Tesla in particular could be exposed to a potentially difficult price war as competition around electric vehicles market share heats up. Tesla has already led the effort in reducing pricing for certain models in a number of markets, which could affect its margins and that of its competitors in the long run.

Microsoft, Alphabet, and Meta could drive the market next week due to their sheer size. Large surprises could fuel strong volatility while investors are becoming increasingly cautious. In addition to that, US GDP figures to be released by the end of next week could add to the uncertainty and risks for the stock market.