Morgan Stanley's optimistic outlook for the S&P 500's earnings season has set a positive tone in the market, with expectations of an 11% y/y increase in 4Q EPS and a 3% y/y sales growth. Despite the U.S. Dollar Index's 9% rise from September through year-end, which could pose currency headwinds, the impact is anticipated to be more significant at the individual stock level rather than the index level. This environment is seen as conducive for stock-picking, with potential upside for companies like Axon, Cloudflare, and Walt Disney, while caution is advised for Caterpillar and Fortinet due to expected earnings pressures. As earnings reports begin to roll in, investors are closely watching how companies manage these currency challenges and the broader economic conditions.
The Direxion Daily S&P 500 Bull 2X Shares (SPUU) has responded positively, rising 1.13% to $157.66 as of 9:40 AM on Thursday, January 23.