After an impressive eight-day winning streak, both the S&P 500 and Nasdaq Composite experienced a slight pullback on Tuesday, signalling a temporary pause in the market's recent rally. The Dow Jones Industrial Average also dipped, marking its first negative session in six days. Despite these declines, investor sentiment remains optimistic, lifted by robust retail sales
After an impressive eight-day winning streak, both the S&P 500 and Nasdaq Composite experienced a slight pullback on Tuesday, signalling a temporary pause in the market's recent rally. The Dow Jones Industrial Average also dipped, marking its first negative session in six days. Despite these declines, investor sentiment remains optimistic, lifted by robust retail sales data and a soft inflation report from last week. As volatility eases and markets stabilise, attention is now shifting towards the Federal Reserve’s upcoming Jackson Hole Economic Symposium, where Chair Jerome Powell’s remarks could provide critical insights into the central bank's future policy direction.
Key Takeaways:
S&P 500 and Nasdaq Snap Eight-Day Winning Streak: The S&P 500 declined by 0.2% to close at 5,597.12, while the Nasdaq Composite shed 0.33% to finish at 17,816.94 on Tuesday. These drops marked the end of eight-day winning streaks for both indices—their longest streaks since late 2023.
Dow Jones Dips, Ending Six-Day Positive Run: The Dow Jones Industrial Average fell by 0.15%, or 61.56 points, to close at 40,834.97, marking its first negative session in six days. Despite this slight decline, the Dow remains strong after a sustained period of gains, reflecting a resilient market sentiment.
Market Volatility Declines Sharply: The CBOE Volatility Index (VIX) has plummeted from its peak of 65 on August 5 to below 16, indicating a significant reduction in market volatility. This sharp decline underscores the market's recovery since the beginning of August, driven by positive retail sales data and a soft inflation report, which have helped to ease economic concerns.
European Markets Close Lower Amid Economic Uncertainty and Rising Inflation: European markets ended Tuesday on a weaker note, with the pan-European Stoxx 600 closing down 0.46%. The FTSE 100 dropped by 1.00% to 8,273.32, and the CAC 40 declined by 0.3% to 7,482, snapping a five-day winning streak. Additionally, the Eurozone's annual inflation rate accelerated to 2.6% in July from 2.5% in June, adding to the region's economic challenges. Sweden's Riksbank also cut its interest rate by 25 basis points to 3.5%, with further rate cuts anticipated later this year.
Asian Markets Show Mixed Performances: The Nikkei 225 in Japan surged 1.8% to close at 38,062.92, driven by strong performances in utilities and healthcare. In Australia, the S&P/ASX 200 rose by 0.22% to close at 7,997.7. South Korea's Kospi gained 0.83% to finish at 2,696.63, while the small-cap Kosdaq saw a more significant rise of 1.28% to end at 787.44. Meanwhile, Chinese markets weakened, with the Hang Seng index in Hong Kong falling by 0.50% and the mainland China CSI 300 index declining by 0.72% to close at 3,332.7, snapping a three-day winning streak.
Oil Prices Decline During Demand Concerns: US crude oil futures settled at $73.82 per barrel, down 0.74%, while Brent crude dropped 0.49% to $77.29 per barrel. The declines reflect ongoing concerns about softer demand in Asia and the impact of supply fundamentals. Year to date, US crude oil has gained 3.2%, while Brent remains flat, up just 0.2%.
Treasury Yields Slide Ahead of Fed Minutes and Jackson Hole: US Treasury yields declined on Tuesday as investors prepared for the release of Federal Reserve meeting minutes and the upcoming Jackson Hole Economic Symposium. The yield on the 10-year Treasury slid nearly 5 basis points to 3.818%, while the 2-year Treasury yield fell by around 7 basis points to 3.998%. These movements indicate cautious sentiment in the bond market as traders await further guidance from the Fed on future monetary policy.
FX Today:
Gold Continues to Shine Amid Dollar Weakness and Rate-Cut Expectations: Gold prices sustained their record-breaking rally on Tuesday, firmly holding above the critical $2,500 level. The spot price of gold edged up 0.1% to $2,507.45 per ounce. This persistent upward trend is being driven by a combination of a weakening US dollar and growing market anticipation that the Federal Reserve may cut interest rates in September. The yield on the 10-year US Treasury bond remains subdued, sliding below 3.9%, which is further supporting gold's bullish momentum. The technical outlook suggests that the precious metal could continue its ascent, with the resistance level at $2,523.50 likely to be tested soon. However, should the market face a pullback, key support levels around $2,496.40 and $2,485.10 may provide a safety net for investors.
GBP/USD Gains Ground, Eyeing Key Resistance Levels: The GBP/USD pair maintained its upward momentum on Tuesday, rising by 0.32% to close near 1.3030. The immediate challenge for GBP/USD lies at the resistance levels of 1.3100 and 1.3150. A successful breach of these levels could signal further bullish momentum, potentially leading the pair higher in the coming sessions. However, traders should be cautious of potential downside risks, with support levels at 1.2900 and 1.2850. A break below 1.2900 could suggest a shift in sentiment, possibly leading to a correction.
EUR/USD Approaches 2024 Highs, Eyeing Further Gains: The EUR/USD pair continued to build on its recent strength, reaching new highs for 2024 at 1.1130. The euro's resilience reflects ongoing optimism in the market, supported by a combination of favourable economic data and weakening dollar dynamics. The pair is now targeting its 2024 high of 1.1119, with the next significant resistance at 1.1139 and the 2023 high of 1.1275 as the next significant target. Should the pair face a retracement, traders will be watching 1.0843 and the support level at 1.0777 as key indicators of whether the bullish trend can be maintained.
AUD/USD Breaks Higher on RBA Hawkish Tone and Dollar Weakness: The AUD/USD pair rallied to fresh five-week highs near 0.6750 on Tuesday, caused by a hawkish tone from the Reserve Bank of Australia's latest minutes and continued pressure on the US dollar. The pair is now approaching crucial resistance at 0.6747, with further gains likely if the pair can break through to the July high of 0.6798. On the downside, the 200-day SMA at 0.6603 will be critical for maintaining the bullish outlook. A break below this level could trigger a deeper correction, but for now, the technical indicators suggest that the Aussie has room to move higher.
NZD/USD Surges Out of Range, Bulls Gain Control: The NZD/USD pair made a decisive move on Tuesday, rising by 0.80% to 0.6150, and breaking out of its previous trading range between 0.5980 and 0.6100. This breakout indicates a shift in market sentiment, with the bulls now in control. The pair is facing immediate resistance at 0.6200, and a sustained move above this level could pave the way for a rally towards 0.6300. However, if the pair struggles to maintain its momentum, support levels at 0.6100 and 0.6150 could come into play, providing a potential area for consolidation before the next directional move.
Market Movers:
Palo Alto Networks Surges on Strong Earnings and Buyback Announcement: Palo Alto Networks saw its shares jump by 7.2% on Tuesday, making it the top performer in the S&P 500. The cybersecurity firm reported fiscal fourth-quarter results that exceeded analyst expectations, and announced a $500 million stock buyback plan.
Lowe’s Dips on Disappointing Revenue and Lowered Outlook: Shares of home improvement retailer Lowe’s fell by 1.2% after the company reported second-quarter revenue of $23.59 billion, falling short of the $23.91 billion expected by analysts. Additionally, Lowe’s lowered its full-year profit outlook, citing a slowdown in consumer spending.
Bank of America Slips as Berkshire Hathaway Reduces Stake: Bank of America’s stock declined by 2.5% following news that Warren Buffett’s Berkshire Hathaway continued to reduce its holdings in the bank. Over the past three trading days, Berkshire sold 13.9 million shares for $550.7 million, bringing its stake down to 11.9%.
Boeing Drops on 777X Grounding News: Boeing shares fell by 4.2% after the company announced it had grounded its 777X test fleet due to structural damage concerns. The aerospace giant is facing increased scrutiny and potential delays in its flagship 777X program, which has negatively impacted investor sentiment.
Amer Sports Soars on Earnings Beat and Upgraded Guidance: Finland-based Amer Sports saw its shares rally by 10.4% following an earnings report that exceeded expectations. The company reported better-than-expected revenue and earnings, and also upgraded its full-year guidance.
XPeng Tumbles on Weak Revenue Guidance: XPeng’s U.S.-listed shares dropped by 6% after the Chinese electric vehicle maker issued third-quarter revenue guidance that fell short of analyst expectations. The company projected revenue between CNY 9.1 billion and CNY 9.8 billion, below the consensus estimate of CNY 10.40 billion.
Fabrinet Surges on Strong Quarterly Results: Fabrinet shares soared by 15.7% after the electronic manufacturing services company reported better-than-expected quarterly earnings and revenue. Fabrinet posted adjusted earnings of $2.41 per share on revenue of $753 million, surpassing analyst expectations of $2.25 per share and $733 million in revenue.
Paramount Global Slips Amid Rival Bid Reports: Shares of Paramount Global fell by 1.2% following reports that media executive Edgar Bronfman Jr. made a rival bid to acquire National Amusements, the company controlling Paramount Global.
As Tuesday's trading session wrapped up, the markets took a breather from their recent rally, with the S&P 500 and Nasdaq snapping eight-day winning streaks and the Dow Jones recording its first negative day in six. Despite these declines, the broader market sentiment remains optimistic, lifted by strong corporate earnings from companies like Palo Alto Networks and Amer Sports, alongside easing volatility and positive economic signals. However, concerns over slowing consumer spending, structural challenges in key industries, and ongoing adjustments in major investment portfolios, such as Berkshire Hathaway's stake in Bank of America, underscore the mixed environment. As investors look ahead to key Federal Reserve events later in the week, the market remains in balance between optimism for continued growth and caution over potential headwinds.
