US stocks edged lower on Friday as traders processed new economic data pointing to slowing inflation and unexpectedly strong consumer sentiment. Despite the day's dip, the market wrapped up an impressive first half of 2024. The S&P 500 and Nasdaq Composite both hit new intraday highs before retreating, driven by the ongoing enthusiasm for technology
US stocks edged lower on Friday as traders processed new economic data pointing to slowing inflation and unexpectedly strong consumer sentiment. Despite the day's dip, the market wrapped up an impressive first half of 2024. The S&P 500 and Nasdaq Composite both hit new intraday highs before retreating, driven by the ongoing enthusiasm for technology stocks, particularly in the AI sector. The Dow Jones Industrial Average also experienced a slight decline. This technology-driven surge highlights investor optimism and resilience amid shifting economic conditions.
Key Takeaways:
S&P 500 Declines Slightly Amid Strong First Half Performance: The S&P 500 fell 0.41% on Friday, closing at 5,460.48. Despite this, the index has achieved a significant 14.5% gain in the first half of 2024, underscoring robust market resilience.
Nasdaq Composite Retreats After Hitting New Highs: The Nasdaq Composite dropped 0.71%, ending the session at 17,732.60. The tech-heavy index has surged 18.1% year-to-date, driven by the growing AI sector, reflecting sustained investor excitement.
Dow Jones Records Modest Decline: The Dow Jones Industrial Average decreased by 0.12%, or 45.20 points, to settle at 39,118.86. The Dow has lagged behind other major indexes, posting a year-to-date gain of approximately 3.8%.
Inflation Hits Three-Year Low: The core personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, rose just 0.1% in May and 2.6% year-over-year, marking the lowest annual rate in more than three years. Headline PCE was flat on the month and also up 2.6% annually.
Consumer Sentiment Surges: The University of Michigan consumer sentiment index for June increased to 68.2, surpassing the preliminary reading of 65.6, with the one-year inflation outlook dropping to 3% from 3.3% in May.
US Markets Enjoy June Gains: For June, the Nasdaq led with a 6% increase, followed by the S&P 500's 3.5% rise, and the Dow's 1.1% gain. This marks the seventh positive month in the last eight for all three indexes.
Small-Cap Stocks Lag: The Russell 2000 index, focused on small-cap stocks, has underperformed, slipping 0.8% in June and more than 3% over the second quarter, with a modest year-to-date increase of less than 1.5%.
European Markets React to US Data: The pan-European Stoxx 600 ended 0.24% lower on Friday, marking a fourth consecutive session in the red. UK GDP for Q1 was revised higher to 0.7%, while inflation in major European economies showed mixed trends. French inflation slowed to 2.5% in June, Spanish inflation dipped to 3.5%, and Italian inflation ticked up slightly to 0.8%. The FTSE 100 Index is up 211.50 points or 2.66% this quarter. Meanwhile, For the month of June, the CAC experienced a decline of 6.8%, extending its second-quarter losses to 8.9%.
Asian Markets Performance: South Korea's Kospi inched up 0.49%, while the Kosdaq closed 0.21% higher at 840.44. Hong Kong's Hang Seng index rose 0.36%, and mainland China's CSI 300 rebounded 0.22%. Australia's S&P/ASX 200 rose 0.1%. Japan's Nikkei 225 rose 0.64%, and the Topix reached a 34-year high at 2,809.63, driven by positive industrial production data and higher inflation in Tokyo. The Japanese yen hit fresh 38-year lows against the dollar.
Oil Market Movements: US crude oil prices saw a weekly gain of 1%, with West Texas Intermediate futures closing at $81.54 per barrel. Brent futures closed at $86.41 per barrel. The oil market is closely watching with concern about the potential for conflict in the Middle East..
10-Year Treasury Yield Rises: The 10-year US Treasury yield rose nearly 10 basis points to 4.384% on Friday. Investors reacted to the key inflation measure, which met expectations, signalling gradual economic cooling. The 2-year Treasury yield also increased to 4.747%, reflecting the ongoing market adjustments to inflation data and monetary policy expectations.
Canada's Economy Expands: Canada’s GDP grew by 0.3% in April, driven by rebounds in wholesale trade, manufacturing, and mining sectors. A preliminary estimate for May suggests a further 0.1% increase, highlighting the country's economic resilience.
FX Today:
EUR/USD Drifts into Familiar Midranges: The EUR/USD pair wrapped up the trading week near technical levels at 1.0710. Despite attempts to break higher, the pair faced resistance at the 200-hour Exponential Moving Average (EMA) at 1.0715. Bidders struggled to overcome the 1.0700 handle, maintaining a near-term pattern of lower highs. Daily candlesticks continue to consolidate below the 200-day EMA at 1.0788, indicating potential for a downside break toward 2024’s low at 1.0600.
USD/JPY Extends Gains Near 161.00: The USD/JPY pair extended its gains on Friday, trading at 160.89, up 0.08%, and set to end the week with over 0.50% gains. The pair breached the psychological 160.00 level, increasing intervention risks from Japanese authorities. Resistance levels are eyed at 161.00, 162.00, and up to 164.87. Support lies at 159.19, with further backing at the June 24 low of 158.75.
AUD/USD Benefits from RBA Hawkishness and Soft US Data: The AUD/USD pair displayed signs of recovery, lifting above the 20-day Simple Moving Average (SMA) at 0.6640 after dipping to 0.6620. The pair traded higher on Friday, reflecting robust buyer defences. Maintaining above the 20-day SMA is critical for a positive outlook, with future targets set above this level.
CAD Finds Thin Gains on Friday: The Canadian Dollar gained around one-tenth of one percent against the US Dollar, trading near 1.3675 after briefly peaking at 1.3735. The CAD strength paused a recent upswing in USD/CAD, which settled around the 200-hour EMA near the 1.3700 handle.
NZD/JPY Reaches New Cycle Highs: The NZD/JPY pair advanced beyond 98.00 on Friday, achieving the highest level since 2007. The bullish momentum faces resistance at 98.50 and 99.00, with immediate support at 97.00 and 96.90 near the 20-day SMA. The pair’s upward trend remains strong despite overbought conditions.
XAU/USD Dips Amid Speculation on Fed Rate Cuts: Gold traded at $2,324, down 0.12%, after the release of key US inflation data. The precious metal remains on the defensive, with momentum showing neither buyers nor sellers in control. The Relative Strength Index (RSI) leans bearish. Key support lies at $2,300, followed by $2,277 and $2,222. If bullish momentum returns, resistance levels are at $2,350 and $2,387.
Silver Price Analysis (XAG/USD): Silver climbed 0.49%, trading at $29.13 after hitting a daily low of $28.78. Critical resistance stands at the 50-day moving average (DMA) at $29.19, with further targets at $31.54 and $32.51. Key support levels include $29.00, $28.28, and $27.01, with the 100-DMA at $26.82 serving as a major support point.
Market Movers:
Nike Plummets After Revenue Miss: Nike shares plunged nearly 20% after reporting fourth-quarter revenue of $12.61 billion, which fell short of the $12.84 billion forecasted by analysts. The athletic retailer also cut its full-year guidance, contributing to the significant drop in share price.
Infinera Surges on Acquisition News: Infinera's stock rallied 16% after Nokia announced plans to acquire the networking solutions supplier for $2.3 billion. The announcement significantly boosted investor confidence in Infinera's future prospects.
SAP Gains on Analyst Upgrade: US shares of German business software company SAP rose marginally following an upgrade by BMO Capital Markets to outperform from market perform. The firm also raised its price target for SAP, citing confidence in its longer-term potential.
Kura Sushi USA Drops on Revenue Miss: Kura Sushi USA shares dropped 23% after the company reported disappointing preliminary revenue figures for the third quarter. The company expects quarterly revenue of $63.1 million, below the StreetAccount estimate of $65.6 million, and lowered its full-year topline outlook.
Digital Realty Trust Upgraded: Digital Realty Trust saw a 2% increase in its share price following an upgrade at JPMorgan to overweight from neutral. The investment bank cited anticipated benefits from growth in artificial intelligence and cloud services as key drivers for the real estate investment trust.
Synchrony Financial Pops on Analyst Rating: Synchrony Financial shares rose 7% after Baird initiated coverage with an outperform rating. Analyst Brennan Crowley set a price target of $56, implying a potential 27% rally from Thursday's close.
Tractor Supply Gains Amid Strategic Shift: Tractor Supply shares added 1% after the company announced it would eliminate its Diversity, Equity, and Inclusion (DEI) roles and withdraw from its carbon emission goals, signalling a strategic shift that was well-received by investors.
As the first half of 2024 concludes, the impressive gains of the Nasdaq Composite and S&P 500 underscore the market's robust response to the AI boom and positive economic indicators, despite the day's slight declines. The Nasdaq's 18.1% rise and the S&P 500's 14.5% gain this year reflect strong investor enthusiasm, particularly in technology stocks. Inflation slowing to a three-year low and better-than-expected consumer sentiment have strengthened market optimism, even as global markets exhibit varied performances. Looking ahead, the resilience seen in the first half will be tested by upcoming economic developments and geopolitical tensions, with investors remaining vigilant and hopeful for continued growth.
