The S&P 500 continued its decline for a third day in a row, grappling with the impact of rising bond yields and mixed corporate earnings results. The index fell 0.25%, closing at 4,501.89, while the Dow Jones Industrial Average also lost 0.19%. The Nasdaq Composite inched down by 0.1% at the end of the trading day. The surge in the benchmark 10-year Treasury yield, reaching around 4.18% – its highest since November 2022, added pressure to the real estate sector and resulted in a spike in the Cboe Volatility index. Utilities were also impacted, losing 2.3%.
Some experts on Wall Street highlighted that the market had been overdue for a pause or minor correction, following months of bullish performance. The recent trend of eroding momentum raised concerns, although the longer-term outlook remained positive. The week’s busy earnings reports included chipmaker Qualcomm, which saw an 8.2% drop after disappointing results, and PayPal, which shed 12.3% despite posting in-line results. Meanwhile, Expedia experienced a significant plunge of 16.4% as its gross bookings fell short of expectations.
The market’s focus shifted to tech giants Apple and Amazon, set to release their earnings reports after trading hours. So far, approximately 79% of S&P 500 companies have issued quarterly reports, with around 82% surpassing expectations, but overall earnings are expected to be about 5% lower than the previous year. In the midst of these developments, the Bank of England raised interest rates by 25 basis points to tackle inflation. Additionally, Wall Street kept a close eye on economic data, including weekly jobless claims and second-quarter productivity figures, which showed slight improvements.
Data by Bloomberg
On Thursday, the overall market declined by 0.25%. The energy sector showed a notable gain of 0.95%, while consumer discretionary and financial sectors also saw modest increases of 0.34% and 0.07%, respectively. On the other hand, the real estate and utilities sectors experienced significant losses of 1.35% and 2.29%, respectively. Additionally, the information technology sector declined by 0.32%, health care by 0.50%, and industrials and materials both dropped by 0.61% and 0.60%, respectively. Communication services and consumer staples also faced minor declines of 0.17% each.
Major Pair Movement
The dollar index experienced a 0.11% decline, led by a 0.48% loss in USD/JPY, as mixed U.S. data weighed on market sentiment ahead of Friday’s employment report. The dollar’s recent recovery was interrupted due to rising Treasury yields compared to bunds, JGBs, and gilts, though it had already recovered most of its late June to July slide. The markets eagerly awaited Friday’s jobs report to gauge its potential impact on monetary policy.
During Thursday’s trading, long dollar positions were squared off, partly driven by signs that the recent surge in longer-term Treasury yields might have reached a near-term peak. EUR/USD rebounded slightly, while USD/CNH and USD/JPY experienced losses, contributing to profit-taking on long dollar positions. The sharp fall in the yen was influenced by the Bank of Japan’s decision to double the hard cap on 10-year JGB yields, raising concerns over potential Japanese selling of Treasury holdings. Sterling remained flat after the Bank of England’s 25bp rate hike, which fell short of expectations for a 50bp hike. Additionally, Brent and WTI crude oil prices rose following Saudi Arabia’s decision to extend production cuts, impacting USD/NOK and AUD/USD.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Stays Steady Ahead of US Employment Data Despite Limited Market Impact
The EUR/USD remained flat during a quiet session, trading around 1.0940, as investors awaited crucial US employment data. On the economic front, Germany reported lower-than-expected June exports and imports, while Eurostat revealed a decline in the Producer Price Index (PPI) for the Euro area. The Bank of England’s rate hike initially boosted EUR/GBP, but gains were later reversed. In the US, data on initial Jobless Claims and Unit Labor Costs were released, with focus shifting to the upcoming Nonfarm Payrolls report, expected to show an increase of 200,000 jobs.
According to technical analysis, the EUR/USD remained flat on Thursday as the market awaited today’s US Non-farm data, reaching the middle band of the Bollinger Bands. Currently, the price is moving at the middle band, creating a narrow gap between the upper and lower bands of the Bollinger Bands. The Relative Strength Index (RSI) currently stands at 44, suggesting that the EUR/USD is back in consolidation mode. Please be aware that we expect high volatility in the EUR/USD today as the US Non-Farm data will be released.
Resistance: 1.1038, 1.1121
Support: 1.0915, 1.0839
XAU/USD (4 Hours)
XAU/USD Consolidates Losses as US Dollar Strength Persists Amid Labor Market Concerns
On Thursday, XAU/USD traded in the $1,930 price zone, consolidating losses after hitting its lowest point in almost a month at $1,929.48 per troy ounce. The decline was attributed to the continued strength of the US Dollar, which benefited from a somber market sentiment, leading to increased government bond yields and impacting equities. Market players are worried that the tight US labor market will prompt the Federal Reserve to maintain its tightening path for a longer duration than expected. Despite signaling at least one more rate hike, uncertainty prevails as tepid economic indicators suggest a possible pause. The July Nonfarm Payrolls Report (NFP) is eagerly awaited to gain more clarity on the employment situation in the US.
According to technical analysis, on Thursday, the XAU/USD remained flat, with the upper and lower bands of the Bollinger Bands moving closer together. Currently, the price is slightly below the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 39, indicating that the XAU/USD pair is still slightly bearish.
Resistance: $1,945, $1,963
Support: $1,930, $1,912
Economic Data
| Currency | Data | Time (GMT + 8) | Forecast |
|---|---|---|---|
| CAD | Employment Change | 20:30 | 24.6K |
| CAD | Unemployment Rate | 20:30 | 5.5% |
| USD | Average Hourly Earnings m/m | 20:30 | 0.3% |
| USD | Non-Farm Employment Change | 20:30 | 205K |
| USD | Unemployment Rate | 20:30 | 3.6% |
