Markets can return to basics. Focus on earning growth ahead with US earnings season about to kick off

Well that was a relief. US markets rebound from their worst session in a month as Nvidia $NVIDIA (NVDA.US)$ shares jumped 4.4% on Tuesday adding a $160 billion in market value. While Australia’s share market opened higher.

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Stocks been able to climb up as oil dropped about 5%, the US dollar dipped, and bond yields fell as geopolitical tensions eased. While a US central banker said the Fed should keep cutting interest to bring inflation back to 2% target. So that’s it.

But in reality. This set up allows markets to go back to basics.

With stock markets being driven by earnings growth. Now investors are focused on just that. US company earnings season get underway this week . We’ll find out how corporate earnings grew last quarter and what the biggest 500 companies in the US see ahead. US Earnings expectations have been downgraded from 15% to 9.8% growth. So now there’s a lower bar to jump over. Meaning if earnings grow more than the 9.8% expected markets could take off. That’s provided inflation doesn’t deliver nasty surprises this week.

What to watch today locally:

Focus is on stocks benefiting from the two long-term trends - US rate cuts and China-stimulus. Block $Block (SQ.US)$ $Block Inc (SQ2.AU)$, the payment platform is up the most up 3.7%. While Life360 $Life360 Inc (360.AU)$ lifted almost 5% at one point today hitting a new record high of $19.98. Life360 is the family tracking app endorsed by the Michael Phelps, and the family of the late Kobe Bryant. It makes most of its money from the US and expected to see 23% earning growth this year with US rate cuts to support the stocks earnings. 360 the stock was upgraded by Bell Potter today. Life360 is already one of this year best performing its up 169% this year. But Bell Potter reiterated it’s a ‘buy’ with a $22.50 price target.

Meanwhile stocks that could benefit from China stimulus and Australian Business Conditions improving New Zealand rate cuts are rising. Stocks like Car sales, Realeste.com, JB Hi Fi and Aristocrat are all higher. While Netwealth, Hub24, Promedicus hit new 52-week highs today, along with Industrial stocks Brambles and glove maker Ansell.

Lastly – remember that global Institutions have been pouring the most money into China facing stocks than US tech stocks of late. Meaning, they’re been buying more of China’s index ETFs like the CSI300 than NDQ ETFs. So that’s something to consider.

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