Despite a strong start to the earnings season, the S&P 500 fell modestly, while the Nasdaq experienced a sharper decline, as investors exhibited caution amidst uncertainty surrounding upcoming earnings and the Federal Reserve’s latest policy meeting. In contrast, the Dow Jones Industrial Average managed to post gains, reflecting a divergent market landscape. Major tech players such as Nvidia, Amazon, Netflix, and Meta Platforms saw significant declines, highlighting a broader retreat in the technology sector. The market’s focus now shifts to the Federal Reserve’s policy decisions and potential signals regarding future interest rate cuts, alongside ongoing global economic developments.
Key Takeaways:
- S&P 500 and Nasdaq Dip as Tech Stocks Slide: The S&P 500 closed at 5,436.44, down 0.5%, while the Nasdaq Composite fell 1.28% to 17,147.42. These declines were primarily driven by significant losses in major technology stocks, with Nvidia dropping 7%, and Amazon, Netflix, and Meta Platforms also seeing declines.
- Dow Jones Gains Amid Broader Market Losses: Contrary to the tech-heavy indices, the Dow Jones Industrial Average rose 0.5%, or 203.40 points, to close at 40,743.33. This increase highlights the divergence within the market, as gains in non-tech sectors provided a counterbalance to the tech sell-off.
- Federal Reserve Meeting and Rate Cut Expectations: The Federal Reserve’s two-day policy meeting has attracted significant attention, with market participants fully pricing in a rate cut by September. This anticipation is fuelled by moderating inflation and strong corporate earnings, setting the stage for potential monetary easing.
- European Markets Close Higher Ahead of Central Bank Meetings: European stocks ended the session higher, with the pan-European Stoxx 600 index gaining 0.53%. The CAC 40 rose by 39 points (0.52%), while the FTSE 100 saw a slight decline of 17.94 points (0.22%). Shares of Standard Chartered surged over 6% after announcing its largest-ever share buyback, while Diageo fell nearly 5% following its first sales decline since 2020.
- Asian Markets Slide as BOJ Policy Meeting Begins: Asia-Pacific markets experienced declines, with Japan’s Topix falling 0.19% to 2,754.45, and South Korea’s Kospi dropping 0.99% to 2,738.19. Australia’s S&P/ASX 200 decreased by 0.46% to 7,953.2, and Hong Kong’s Hang Seng index was down 1.43%, extending its losses to new six-month lows.
- Oil Prices Fall Amid China Economic Concerns: US crude oil futures dropped 1.42% to $74.73 per barrel, and Brent fell 1.44% to $78.63 per barrel. Concerns over China’s economic outlook and demand destruction have pressured oil prices, despite recent escalations in the Middle East.
- Treasury Yields Edge Lower Ahead of Fed Meeting: US Treasury yields were little changed as investors awaited the Federal Reserve’s July meeting. The yield on the 10-year Treasury decreased by three basis points to 4.143%, and the 2-year Treasury yield fell to 4.363%, reflecting cautious market sentiment ahead of potential rate cuts.
FX Today:
- Gold Rises Amid Geopolitical Tensions and Fed Uncertainty: Gold prices surged above $2,400, trading at $2,404, up over 0.80%, driven by geopolitical tensions and anticipation of the Federal Reserve’s next move. The precious metal’s upward momentum faces resistance at the psychological $2,450 mark, with potential to challenge the all-time high near $2,483, followed by the $2,500 threshold. If gold dips below $2,400, the next supports are at $2,358, $2,353, and $2,326, with further downside potential toward $2,300.
- EUR/USD Tests Key Levels as Fed Decision Looms: The EUR/USD pair briefly crossed above 1.0950, testing investor confidence ahead of the Federal Reserve’s anticipated policy announcements. The pair is navigating a range, with immediate support at 1.0798 and further down at 1.0794. Additional support levels lie at 1.0666 and 1.0649. Resistance hurdles include the July peak of 1.0948, the March high of 1.0981, and the pivotal 1.1000 mark. The overall bearish sentiment may resurface if the pair remains under 1.0821.
- GBP/USD Slips Amid Dollar Resurgence: The GBP/USD pair fell under 1.2840, pressured by a stronger dollar boosted by favourable US economic data. The pair’s struggle is highlighted by its position just below a descending trend line at 1.2830, with RSI on the 4-hour chart indicating subdued buying interest. Key support zones include 1.2820, 1.2800, and 1.2750. On the upside, if GBP/USD surpasses 1.2860, the next resistance levels are at 1.2880 and 1.2900.
- USD/CHF Edges Down Amid Bearish Pressure: USD/CHF has retreated to around 0.8845, losing 0.20% as it struggled against the 200-day SMA. The pair’s bearish outlook is underscored by trading below the 20, 100, and 200-day SMAs, signalling continued downward pressure. Critical support levels include 0.8800, 0.8750, and 0.8730, while resistance is noted at 0.8850, 0.8870, and 0.8900. The RSI and MACD remain negative, reinforcing the bearish trend.
- AUD/USD Under Pressure Ahead of Key Data Releases: The AUD/USD continued its downtrend, dipping 0.20% to 0.6535 as markets await crucial Australian economic data. Support is identified at 0.6530 and 0.6500, while resistance levels stand at 0.6600, 0.6610, and 0.6630. Despite entering oversold territory, the pair shows limited recovery potential, suggesting possible sideways trading in the absence of new economic triggers.
Market Movers:
- Microsoft Shares Decline on Cloud Revenue Concerns: Despite reporting better-than-expected earnings and revenue, Microsoft shares fell approximately 3% in extended trading. The decline was driven by investor concerns over disappointing growth in the company’s cloud segment, overshadowing the positive overall financial results.
- AMD Gains on Strong Data Centre Sales: AMD shares rose nearly 8% in extended trading after the company reported second-quarter earnings that exceeded Wall Street expectations. The semiconductor firm highlighted significant growth in its AI chip sales, contributing to a favourable market response and increased investor confidence.
- JetBlue Soars on Earnings Beat: JetBlue’s shares surged over 12%, closing at a significant high after the airline reported better-than-expected second-quarter earnings. The company posted adjusted earnings of 8 cents per share, surpassing analyst expectations of a loss of 11 cents per share.
- Sprouts Farmers Market Hits New High: Sprouts Farmers Market’s stock climbed more than 13%, reaching a new 52-week high, following strong quarterly earnings. The retailer reported earnings of 94 cents per share on revenue of $1.89 billion, beating analysts’ forecasts of 78 cents per share on $1.84 billion in revenue.
- Varonis Systems Jumps on Positive Results: Varonis Systems saw its shares rally over 14% after reporting impressive second-quarter results. The company achieved adjusted earnings of 5 cents per share, significantly better than the expected loss of 2 cents per share. Revenue also surpassed expectations, reaching $130.3 million against the consensus estimate of $124.8 million.
- F5 Inc. Surges to 52-Week High: F5 Inc. shares jumped around 13%, hitting a new 52-week high, following robust fiscal third-quarter earnings and revenue. The company reported adjusted earnings of $3.36 per share, exceeding estimates of $2.97 per share. Revenue was reported at $695 million, also above the expected $686 million.
- Symbotic Plummets on Weak Guidance: Symbotic shares dropped more than 23.5%, marking a new 52-week low, after the company issued disappointing guidance for the fiscal fourth quarter. Symbotic forecasted revenue between $455 million and $475 million, falling short of the consensus estimate of $516.9 million.
- Woodward Slips on Revenue Miss: Woodward’s stock fell over 17% after the company reported weaker-than-expected revenue for its fiscal third quarter. The company posted revenue of $847.7 million, below the FactSet consensus estimate of $853.3 million. The disappointing revenue figures overshadowed other aspects of the earnings report, leading to a sharp decline in share value.
- Amkor Technology Tumbles on Disappointing Forecast: Amkor Technology’s shares fell nearly 19% after providing a less optimistic third-quarter outlook. The company expects earnings per share between 42 cents and 56 cents, below analysts’ forecasts of 64 cents per share. This outlook, combined with market conditions, led to a significant drop in the stock price.
- Lattice Semiconductor Drops on Earnings Miss: Lattice Semiconductor’s stock decreased by over 9% after the company reported second-quarter earnings and revenue guidance that fell short of expectations. The company posted earnings of 23 cents per share on $124 million in revenue, missing the forecasts of 24 cents per share and $130 million in revenue. Bank of America downgraded Lattice to “underperform” from “neutral,” citing concerns over growth prospects and visibility.
As the market navigates through a season of significant earnings reports and upcoming central bank meetings, investor sentiment remains a blend of restrained optimism and strategic positioning. The divergence between the tech-heavy indices and the broader market underscores a shifting landscape where traditional sectors and undervalued stocks are gaining traction. Meanwhile, key players like Microsoft and AMD highlight the varying impacts within the technology sector, from cloud revenue concerns to robust growth in AI-related sales. With geopolitical tensions influencing commodity prices and the Federal Reserve’s policy decisions on the horizon, the market is poised for a period of heightened volatility and potential realignment.