In a remarkable end to the week, the Dow Jones Industrial Average surged past the 40,000 milestone. The gains were driven by strong performances from Home Depot and Caterpillar, as investors began to diversify beyond the leading technology stocks. This rally occurred against a backdrop of encouraging inflation data from the US, which has fuelled
In a remarkable end to the week, the Dow Jones Industrial Average surged past the 40,000 milestone. The gains were driven by strong performances from Home Depot and Caterpillar, as investors began to diversify beyond the leading technology stocks. This rally occurred against a backdrop of encouraging inflation data from the US, which has fuelled hopes of an impending interest rate cut by the Federal Reserve. The S&P 500 and Nasdaq Composite also posted significant gains, reflecting a broad market rally lifted by economic optimism and strategic shifts among investors.
Key Takeaways:
Dow Jones Surpasses 40,000 for the First Time: The Dow Jones Industrial Average rose by 247.15 points, or 0.62%, to close at 40,000.90, reaching an intraday high of 40,257.24. This marks its first close above the 40,000 level since late May, driven by strong performances from various non-tech companies.
S&P 500 Recaptures 5,600 Level: The S&P 500 gained 0.55% to close at 5,615.35, bouncing back above the 5,600 mark after a dip below it on Thursday. The index's recovery highlights the resilience of the broader market amid ongoing sector rotations.
Nasdaq Composite Continues Upward Trend: The Nasdaq Composite increased by 0.63%, closing at 18,398.45. Despite a challenging session on Thursday, where major tech stocks like Nvidia saw significant sell-offs, the index managed to regain ground, underscoring investor confidence in the tech sector.
Russell 2000 Index Sees Significant Weekly Gain: The Russell 2000 Index jumped 6% for the week, including a 1.1% gain on Friday, as investors anticipated a soft landing for the economy, benefitting smaller companies.
European Stocks Hit One-Month High: The Stoxx 600 index closed up 0.97%, reaching its highest level since June 12. Telecom stocks rose 0.59%, with Ericsson among the top gainers, initially rising more than 8% before cooling. Technology stocks reversed earlier losses to end 1.73% higher. German inflation eased to 2.5% in June, down from 2.8% in May, supporting a positive market sentiment. The UK's FTSE 100 index added 0.36% while the CAC 40 Index rose 105 points or 1.38%.
Asian Markets Show Mixed Results: Japan’s Nikkei 225 fell 2.45% to 41,190.68, with the yen strengthening against the dollar amid speculation of a possible intervention by the country's ministry of finance. South Korea’s Kospi dropped 1.18% to 2,857, while the small-cap Kosdaq slipped 0.24% to 850.37. Hong Kong’s Hang Seng index surged 2.7%, and China’s CSI 300 edged up 0.12% to 3,472.4, driven by stronger-than-expected export data and a widening trade surplus. Australia’s S&P/ASX 200 rose 0.8% to close at a record 7,959.3.
Oil Prices Snap Four-Week Winning Streak: US crude oil futures for August settled at $82.21 per barrel, down 0.5% for the day and 1.14% for the week. Brent crude futures for September ended at $85.03 per barrel, down 0.43% for the day and 1.74% for the week. Despite early session gains fuelled by easing consumer inflation, the market lost momentum due to a slightly hotter-than-expected reading of wholesale prices.
10-Year Treasury Yield Ticks Down: The 10-year Treasury yield decreased by one basis point to 4.182%, down from 4.28% at the end of last week. Meanwhile, the 2-year Treasury yield fell by 5.1 basis points to 4.454%, as investors largely ignored a slightly higher-than-expected wholesale inflation reading.
IMF Reports Emerging Market Capital Inflows Recover to 2018 Levels: The International Monetary Fund reported that gross capital inflows into emerging markets, excluding China, rose to $110 billion or 0.6% of their economic output last year, the highest level since 2018. The report highlighted the resilience of emerging markets despite higher US interest rates. The US accounted for 41% of global gross inflows during the 2022-2023 period, nearly double its share from 2017-2019. The IMF noted that the US dollar's real effective exchange rate was overvalued by a median of 5.8% in 2023.
US Producer Price Data Points to Subdued Inflation Pressures: US producer prices increased slightly more than expected in June, with the Producer Price Index (PPI) for final demand rising 0.2% after being unchanged in May. Annually, the PPI increased by 2.6%, the largest year-on-year gain since March 2023. This rise was driven primarily by a 0.6% increase in the price of services, despite a fall in the cost of transportation and warehousing services. The slightly higher-than-expected PPI figures did not alter expectations for a potential Federal Reserve rate cut in September.
FX Today:
GBP/USD Rises to 12-Month High as Markets Pile into Rate Cut Hopes: GBP/USD wrapped up Friday on a high note, closing near the 1.3000 handle. The pair has risen nearly 3% in July, climbing from an early swing low of 1.2615. With hopes of a Federal Reserve rate cut in September, GBP/USD has closed in the green for all but two of the last twelve consecutive trading days, making a strong push toward 2023’s peak of 1.3142. Bearish pressure, however, may see it testing the 50-day EMA at 1.2715.
EUR/USD Reclaims 1.0900 as Greenback Plummets: EUR/USD has recorded its third consecutive week of gains, closing just above 1.0900. The pair has climbed 2.3% from a late June low of 1.0666, with intraday action poised to challenge resistance near 1.0920. Despite this, bullish momentum might falter, potentially leading to a pullback to the 200-day EMA at 1.0797.
NZD/USD Regains Ground, Eyes on 20-Day SMA Resistance: The NZD/USD pair demonstrated renewed strength, rising to around 0.6120. Bulls will face resistance at 0.6150 and 0.6200, with a decisive close above these levels signalling further gains. On the downside, support lies at the convergence of the 100 and 200-day SMAs at 0.6070, with a potential slide towards 0.6050 and 0.6030 if bearish momentum prevails.
USD/CAD Struggles in a Narrow Range: USD/CAD remained constrained just above the 1.3630 handle, as the Canadian Dollar struggled against the backdrop of accelerating US PPI inflation. Intraday bidding was capped below the 200-hour EMA at 1.3640, while support at 1.3600 held firm. Daily candlesticks are supported by the 200-day EMA at 1.2594, with resistance above 1.3750 limiting upward movement.
Gold Price Steadies Above $2,400: Gold prices held firm above $2,400, closing at $2,415 after hitting a daily low of $2,391. The Producer Price Index (PPI) rose modestly in June, while consumer sentiment weakened. XAU/USD faces first resistance at $2,450, with potential to reach the $2,500 mark. Support is at $2,392, with a slide below this level potentially leading to $2,350.
Silver Falls Below $31.00: Silver prices reversed their gains, closing at $30.78 after reaching a daily high of $31.43. The XAG/USD pair registered losses of more than 2%, though it remained above the 'double bottom' neckline. Support lies at $30.50, with further targets at $30.00 and the 50-day DMA at $29.82. Resistance is at $31.00, with additional levels at $31.75 and $32.00, and the year-to-date high at $32.51.
Market Movers:
Wells Fargo Shares Drop Amid Weak Earnings: Wells Fargo shares fell by 6% after reporting a 9% decline in net interest income. The bank recorded $11.92 billion in net interest income, falling short of the expected $12.12 billion. Despite exceeding Wall Street expectations in overall earnings and revenue, the weaker-than-expected net interest income significantly impacted investor sentiment.
JPMorgan Slips Despite Earnings Beat: Shares of JPMorgan dipped 1.2% even though the bank posted second-quarter revenue of $50.99 billion, surpassing the $49.87 billion expected by analysts. Adjusted earnings per share were $4.26, beating the consensus estimate of $4.19.
Citigroup Shares Decline on Mixed Results: Citigroup shares dropped 1.8% despite the bank reporting better-than-expected profits. Earnings per share came in at $1.52 for the second quarter, above the $1.39 expected.
Bank of New York Mellon Rises on Strong Earnings: Shares of Bank of New York Mellon rose by 5.2% after the bank reported adjusted earnings per share of $1.51, beating the $1.43 consensus estimate. Revenue came in at $4.6 billion, higher than the expected $4.52 billion, driving the positive market response.
Carvana Jumps on Positive Analyst Outlook: Carvana shares increased by 4.9% following BTIG's initiation of a "buy" rating. BTIG highlighted Carvana's industry-leading EBITDA margin and potential for market share and profit growth, boosting investor confidence.
Array Technologies Surges After Upgrade: Array Technologies shares jumped 8.7% after Citi upgraded the solar energy company from "neutral" to "buy." The upgrade was based on the potential for the stock to regain market share after losing more than 31% year-to-date.
Vita Coco Declines on Downgrade: Vita Coco shares fell 9.1% following a downgrade by Piper Sandler from "overweight" to "neutral." The downgrade was attributed to rising sea freight costs, which are expected to weigh on the company's financial performance.
As the markets closed out the week, the Dow Jones Industrial Average's impressive surge past 40,000 highlighted investor optimism fuelled by easing inflation and hopes for a Federal Reserve rate cut in September. The S&P 500 and Nasdaq Composite also posted gains, reflecting broad market strength despite recent volatility in technology stocks. The resurgence of sectors outside of tech, coupled with strong performances from companies like Home Depot and Caterpillar, showed a variation in investor sentiment. Meanwhile, mixed earnings reports from major banks and fluctuating commodity prices added complexity to the economic landscape. With inflation data and central bank decisions in focus, the market's optimism suggests a delicate balance between growth potential and underlying economic challenges.
