With Q2 Earnings Underway, Keep an Eye on the Overnight Session

Investors shouldn’t overlook the overnight trading session, especially as earnings season gets into full swing this week.

Many key macro and earnings updates are released during the post-close (between the closing bell and midnight) or the pre-open (between midnight and the opening bell), greatly influencing returns during the overnight trading session.

This week will be lighter than last on macro data, but earnings season kicks off with big hitters. Bank of America (BAC), Morgan Stanley (MS), and Charles Schwab (SCHW) reporting second-quarter results on Tuesday before markets open.

Notably, 95% of publicly traded companies in the U.S. announce their quarterly earnings during the overnight trading session, according to Northwestern’s Kellogg School of Management. Generally, with few exceptions, strong earnings result in the stock price increasing, while the price may fall on disappointing earnings.

Investors with leveraged exposure to the overnight trading session may be well positioned if second-quarter results are rosy. The NightShares 500 1x/1.5x ETF (NSPL) provides exposure that corresponds to 1x the performance of the S&P 500 during the day and 1.5x the portfolio performance at night, capturing overnight returns.

How Macro Reports Influence Overnight Returns

Stocks rallied during the overnight session on July 12 as the Consumer Price Index came in below analysts’ expectations. Wall Street celebrated as the report showed inflation eased last month to its slowest pace in over two years.

The highly anticipated monthly CPI reports are released before market open, triggering positive returns in the overnight session. Notably, there was very little movement in the daytime session, as all gains came in before markets opened.

At market close on July 12, large caps, as measured by the SPDR S&P 500 ETF Trust (SPY), were up 0.8%. The night contributed 0.9% of performance, while the day session declined 0.1%, according to the NightWatch Mobile App.

For more news, information, and analysis, visit the Night Effect Channel.