FX.co ★ Market Tectonics: Boeing and PDD Holdings Pull Down, Oil Stocks Rally Ahead

Tech Giants Slip as Market Awaits Nvidia's Quarterly Report

The S&P 500 ended lower on Monday, despite investors' growing expectations for Nvidia's upcoming quarterly report. The AI chipmaker saw its shares fall amid uncertainty surrounding its report, which is due out this week.

Meanwhile, investors are keeping a close eye on upcoming inflation data for clues about potential changes in the Federal Reserve's interest rate policy.

Nasdaq Slips, Dow Jones Surges

The tech-heavy Nasdaq also slipped, while the Dow Jones Industrial Average managed to stay afloat, helped by giants like Caterpillar and American Express. Despite the overall decline, the Dow ended the day with a small but positive gain, helped by a nearly 1% gain in those stocks.

Nvidia Expectations Are Peak

Nvidia, the leader in AI chips, is set to report its quarterly results on Wednesday. Investors are pinning their hopes on the company's results, which have risen an impressive 160% year-to-date, accounting for a significant portion of the S&P 500's 18% gain.

"Risky Investing in Focus"

"Nvidia is in the spotlight this week as a barometer for 2024 risk investing," analyst McMillan said. He stressed that Nvidia's success or failure could have a major impact on the market, given the company's importance in the AI sector.

Cautious Expectations

Still, there is growing anxiety among investors. Some fear that if Nvidia's guidance falls short of lofty expectations, it could derail the current rally in AI stocks like Microsoft and Alphabet.

"There is a concern that Nvidia could disappoint," warns Jake Dollarhide, CEO of Longbow Asset Management. "When the market finds confidence without considering the possibility of negative news, that's when the news comes."

Market Under Pressure: PDD Holdings and Tesla Slip

Shares in PDD Holdings, the U.S. unit of the Chinese company behind the popular Temu platform, have plunged nearly 29% after the company failed to meet investor expectations for its second-quarter earnings. The significant drop has raised concerns in an already tense market.

Tesla hit by new tariffs

Tesla also found itself in the spotlight, losing 3.2% of its market value. The reason was the unexpected move by Canadian authorities, who, following the example of the United States and the European Union, announced the introduction of a 100% tariff on the import of Chinese electric cars. This move could seriously affect Tesla's sales in the region and threaten its market position.

Stock indices: S&P 500 and Nasdaq in the red, Dow Jones afloat

The major stock indices ended the day in different directions. The S&P 500 index fell by 0.32%, stopping at 5,616.84 points. The tech-heavy Nasdaq suffered more, losing 0.85% and ending the session at 17,725.77 points. Meanwhile, the Dow Jones Industrial Average managed to stay in positive territory, adding 0.16% to close at 41,240.52.

Tech Down, Energy Up

Of the 11 sectors in the S&P 500, six ended the day lower. The information technology sector was the most pressured, falling 1.12%. Consumer discretionary was also under pressure, losing 0.81%. However, amid geopolitical tensions in the Middle East and related oil supply disruptions, the energy sector showed the opposite dynamics, jumping 1.11%.

Boeing Slips Amid NASA News

Boeing shares fell 0.85% after it became known that NASA has chosen SpaceX as the primary partner to return astronauts to Earth next year, choosing its vehicle over Boeing's Starliner.

Positive Signals from the Fed: Wall Street on the Rise

Stock markets rose on Friday, with the S&P 500 approaching its all-time highs. This happened amid statements by Federal Reserve Chairman Jerome Powell that it was time to lower borrowing costs. Powell emphasized that the reduced risk of inflation and stabilization of labor demand created the conditions for such a decision, which was a positive signal for investors.

Bets on a decrease: The market awaits the Fed decision

There is some expectation in the money market, with traders estimating the probability of a 25 basis point cut in September at 70%, and a 50 basis point cut at 30%. These forecasts are based on data from the FedWatch tool from CME Group, which closely tracks investor sentiment.

Inflation Indicators in Focus

Friday's July personal consumption spending data, a key measure of inflation for the Federal Reserve, could be a key factor in its policy outlook. The data could provide insight into the trajectory of the Fed's monetary easing, which could in turn impact market sentiment.

Corporate Earnings: Dell, Salesforce, and Other Giants

Investors will be focused on earnings this week from companies like Dell, Salesforce, Dollar General, and Gap. These reports could provide insight into the health of the corporate sector and provide additional guidance to the market.

Stock Market Balance

On the stock market front, the S&P 500 showed a modest 1.1-to-1 advantage over declining stocks. Overall, declining stocks outnumbered advancing stocks in the U.S. by 1.2-to-1, suggesting some volatility among market participants.

Volumes remain low

Trading activity on US exchanges was below average, with volumes of 9.5 billion shares compared to the average of 11.9 billion shares over the past 20 sessions. This may indicate that investors are taking a wait-and-see approach amid uncertainty about the Fed's future moves.

Global markets on hold

World stock markets also reacted to expectations of an imminent cut in US interest rates. Despite rising oil prices, caused by tensions in the Middle East, markets closed in the red. European stocks ended the day slightly lower, while London, closed for a public holiday, showed sluggish results. Japan's Nikkei also slid amid a stronger yen, ending trading down almost 0.7%.

Indices closed mixed: Dow Jones rises, Nasdaq falls

US stock indices ended the trading session with mixed results on Monday. The Dow Jones Industrial Average rose 0.16% to 41,240.52. Meanwhile, the S&P 500 lost 0.32% to end at 5,616.84 and the Nasdaq Composite fell 0.85% to end the day at 17,725.77. The MSCI World Index also fell 0.20% to end at 829.64.

Market Digests News: Reaction to Powell's Comments

Stock markets continue to react to a flurry of news, including recent comments from Federal Reserve Chairman Jerome Powell. "We saw a rally on Friday driven by Powell's comments and some strong durable goods orders data," said Ben MacMillan, principal and chief investment officer at IDX Insights in Florida. However, he added that historically, rate cuts often foreshadow weakness in the stock market because the cuts come for a reason.

Oil Futures Rise Amid Market Jitters

Brent crude futures ended the day up 3.05% to $81.43 a barrel. U.S. crude also posted significant gains, rising 3.5% to $77.42 a barrel. This reflects market volatility and investor anxiety amid global economic uncertainty.

Durable Goods Orders Beat Expectations

New data from the U.S. Commerce Department showed a sharp rise in orders for durable goods such as toasters and airplanes. These orders increased 9.9% in July, a significant rebound from a decline in June and beating analysts' forecasts. The surge signals a rebound in demand for U.S. manufactured goods.

Powell signals possible easing

Jerome Powell stressed at a symposium in Jackson Hole on Friday that the Fed is ready to ease monetary policy, noting the need to prevent further weakness in the labor market. His remarks drew interest from investors expecting lower interest rates to support the economy, but also hinted at possible challenges ahead.

European Central Bank remains cautious: Progress in tackling inflation, but risks remain

European Central Bank chief economist Philip Lane gave a cautiously optimistic assessment of the current situation at a symposium in Jackson Hole. According to him, the ECB has made significant progress in reducing eurozone inflation to its target of 2%, but stressed that it is too early to guarantee a final victory. The comment reflects the central bank's caution about the next steps in monetary policy.

Bond yields rise as market braces for rate hike

On the back of Lane's comments, the yield on the benchmark 10-year Treasury note rose 1.3 basis points to 3.82%. Two-year notes, which are more sensitive to interest rate changes, also rose 2.7 basis points to 3.94%. This suggests that markets are beginning to price in potential policy changes.

Market Expectations: Rates Under Closer Attention

Fed funds futures are fully pricing in a quarter-point rate hike at the Fed's upcoming Sept. 18 meeting, and are also offering a 39.5% chance of a more dramatic 50 basis point move. Investors are looking for 103 basis points of easing by the end of the year and another 122 basis points in 2025.

ECB Continues Rate Cuts

The European Central Bank has already started its easing cycle, cutting rates by 25 basis points in July. Two more such cuts are expected this year. Ben McMillan of IDX Insights expects the ECB to cut rates by 75 basis points this year, but he believes the market may adjust its expectations towards a less aggressive rate cut.

Key Economic Data on the Horizon

Key data on personal consumption and core inflation in the US are due on Friday, along with preliminary inflation data from the EU. These reports could be crucial for determining the direction of monetary policy in September, and most analysts expect them to support the idea of rate cuts.

Japanese Yen Strengthens Against Dollar

In the forex market, the Japanese yen strengthened to a three-week high against the US dollar, reaching 143.45 yen per dollar. However, the dollar then partially recovered its positions, increasing by 0.14% to 144.56 yen. This increase in the yen indicates increased investor interest in safe assets amid global economic uncertainty.

Dollar gains strength: index strengthens amid euro weakness

The dollar index, which tracks the exchange rate of the American currency against six major currencies, including the euro and the yen, showed a rise of 0.24%, reaching 100.84. At the same time, the euro weakened by 0.28%, falling to $1.1159. This movement reflects the strengthening of the dollar amid global economic uncertainty and demand for safer assets.

Gold continues to rise: investors seek safe havens

Gold prices continue to show steady growth, approaching their historical highs. Spot gold rose 0.31% to $2,518.27 an ounce amid increased demand for safe-haven assets. U.S. gold futures also showed positive dynamics, rising 0.28% to $2,515.50 an ounce. The gains highlight investors' desire to protect their capital amid instability in financial markets.