Despite recent market optimism, US stocks faced a notable setback on Thursday, with the Nasdaq Composite leading the decline due to mounting pressure on technology shares. The S&P 500 also pulled back, while the Dow Jones Industrial Average followed suit. This downturn comes as investors grow increasingly cautious ahead of Federal Reserve Chair Jerome Powell’s anticipated speech at the Jackson Hole Economic Symposium, where further insights into the Fed’s rate policy are expected. Rising Treasury yields contributed to the broader market weakness, adding to the challenges faced by equities, particularly within the tech sector.

Key Takeaways:

  • Nasdaq Slides Amid Tech Sell-Off: The Nasdaq Composite dropped 1.67% to close at 17,619.35, as technology stocks faced significant pressure. The tech-heavy index led the market’s decline, reversing gains from earlier in the session and marking a notable retreat as investors grew cautious ahead of the upcoming Federal Reserve meeting.
  • S&P 500 and Dow Jones Decline: The S&P 500 fell 0.89% to close at 5,570.64, while the Dow Jones Industrial Average slipped 177.71 points, or 0.43%, to end at 40,712.78. Both indices had been trading higher earlier in the day but succumbed to the negative sentiment driven by rising Treasury yields and tech stock weakness.
  • Rising Treasury Yields Add Pressure: The 10-year US Treasury yield increased by nearly 9 basis points to 3.863%, while the yield on the 2-year Treasury rose above 4%, reflecting investor caution ahead of Jerome Powell’s speech at the Jackson Hole Symposium. The rise in yields added pressure on equities, particularly within the information technology sector, which saw a decline of over 2% on the day.
  • Global PMI Data Shows Mixed Economic Signals: Business activity across the US, UK, and Eurozone showed varied results in August. In the US, the Composite PMI edged down to 54.1 from 54.3 in July, with the manufacturing PMI dropping to an eight-month low of 48.0, indicating contraction, while the services PMI rose slightly to 55.2. The UK saw its Composite PMI rise to 53.4 from 52.8, driven by the services sector reaching 53.3, its highest since April. Meanwhile, the Eurozone’s PMI Composite unexpectedly increased to 51.2 in August from 50.2 in July, signalling a modest expansion, despite the manufacturing sector continuing to contract with a PMI of 45.6.
  • European Markets Close Higher Amid Fed Speculation: European stocks closed higher on Thursday, with the Stoxx 600 index gaining 0.35%. The FTSE 100 in the UK rose slightly by 4.57 points to 8,288.00, while France’s CAC 40 edged lower to 7,524. The services sector showed resilience, helping to offset continued weakness in manufacturing, and contributing to a more optimistic view of potential policy easing by the European Central Bank in September.
  • Asia-Pacific Markets Mostly Rise on Positive Data: Asian markets were mixed, with Japan’s Nikkei 225 climbing 0.68% and South Korea’s Kospi adding 0.24%. Australia’s S&P/ASX 200 also saw a modest gain of 0.21%, driven by an improvement in the country’s composite PMI, which rose to 51.4 in August from 49.9 in July, signalling a return to growth. However, mainland China’s CSI 300 fell 0.26%, as concerns over economic activity continued to weigh on the market. The CSI 300’s close is just 4 points above its six-month low, reflecting persistent investor uncertainty.
  • US July Home Sales See First Gain in Four Months: In a sign of improving conditions in the housing market, sales of previously owned homes in the US rose by 1.3% in July compared to June, marking the first increase in four months. The annualised rate of home sales reached 3.95 million units, though this was still 2.5% lower than the same period last year. The supply of homes on the market rose by nearly 20% compared to July 2023, indicating better availability and slightly improved affordability as mortgage rates declined.
  • Oil Prices Recover Amid Market Volatility: US crude oil prices rose to $73 per barrel, with the West Texas Intermediate October contract closing at $72.93, up 1.38%. Brent crude followed suit, rising 1.35% to $77.08 per barrel. However, both benchmarks remain significantly below their April highs, reflecting ongoing concerns about global demand, particularly in China, and the broader implications of potential economic slowdowns in major economies.

FX Today:

  • Gold Slips Below Key Levels Amid Rising Yields: After reaching a record high of $2,531, gold prices pulled back on Thursday, falling below $2,483 as US Treasury yields edged higher. This retreat suggests potential for a deeper correction if the metal closes below $2,483, with downside targets around $2,450 and $2,398. Despite the near-term pressure, the overall bullish trend remains intact as long as prices hold above $2,500, where a re-test of the all-time high could be in sight.
  • GBP/USD Struggles Amid Dollar Strength: The British pound managed to hold above 1.3080 on Thursday, but struggled to break past 1.3100 as the US dollar strengthened. UK economic data remains supportive, but uncertainty around Fed policy is limiting further gains. A sustained move above 1.3100 could target 1.3200, while a dip below 1.3100 might trigger a pullback toward 1.3010.
  • EUR/USD Faces Renewed Pressure: EUR/USD closed lower at 1.1106 as the dollar regained strength, pulling the pair back from its recent highs. The pair is currently supported at 1.1100, with further downside potential toward 1.1028 if pressure persists. Resistance at 1.1174 remains key for any bullish continuation.
  • USD/JPY Recovers as Yields Boost Dollar: USD/JPY rebounded to 146.24, supported by rising US Treasury yields. With the pair now back above the 146.00 mark, attention shifts to resistance at 146.92. The pair could see further gains if it breaks above 146.92, with the next target around 147.00. However, failure to maintain this recovery could lead to a retest of the 144.45 level.
  • AUD/USD Drops as Dollar Recovery Gains Momentum: The Australian dollar declined to 0.6950 as the USD staged a recovery. The renewed strength of the USD has pressured the Aussie, particularly as markets await further guidance from the Federal Reserve. While the pair is supported at 0.6700, resistance around 0.6760-0.6800 could cap any rebound. The outlook remains cautious, with the pair vulnerable to further declines if the USD continues to strengthen.

Market Movers:

  • Snowflake Plummets on Rising Costs: Snowflake’s shares tumbled 14.7% on Thursday as the company reported rising costs that squeezed operating margins, overshadowing its quarterly earnings beat. Despite a slight upward revision in its full-year product revenue forecast, the increased expenses sparked concerns about the sustainability of its growth trajectory, leading to a sharp sell-off.
  • Urban Outfitters Slides After Disappointing Sales: Urban Outfitters saw its stock drop by 9.6% as the company reported weaker-than-expected second-quarter same-store sales growth. The retailer’s sales in locations open for at least a year fell by 9.3%, missing the anticipated 8.3% decline. Despite beating on earnings and revenue, the disappointing sales figures weighed heavily on investor sentiment.
  • Peloton Soars Amid Turnaround Hopes: Peloton shares surged 35% after the company reported a rise in sales for the first time in nine quarters, signalling progress in its turnaround plan. The connected fitness company posted a smaller-than-expected loss of 8 cents per share, boosting investor confidence in its ability to stabilise and grow its business after a prolonged period of decline.
  • Advance Auto Parts Drops on Earnings Miss: Advance Auto Parts experienced a significant 17% decline in its stock price after reporting disappointing second-quarter earnings. The company posted earnings of 75 cents per share, falling short of the 93 cents expected by analysts. Additionally, the company lowered its full-year guidance, further dampening investor sentiment.
  • Wolfspeed Tumbles on Wider-Than-Expected Loss: Shares of Wolfspeed fell 5% after the semiconductor company reported a fourth-quarter loss of 89 cents per share, which was 4 cents wider than analysts had anticipated. Despite revenue meeting expectations at $201 million, the larger-than-expected loss raised concerns about the company’s profitability moving forward.
  • Zoom Video Jumps on Earnings Beat: Zoom Video saw its stock climb 13% following a strong second-quarter earnings report. The company not only beat expectations for both earnings and revenue but also provided upbeat guidance for the third quarter and full year, signalling ongoing demand for its video communication services.

As Thursday’s session came to a close, the markets reflected a sense of caution and volatility, driven by rising US Treasury yields and anticipation of Federal Reserve Chair Jerome Powell’s upcoming speech at Jackson Hole. Major indices, including the Nasdaq and S&P 500, faced significant pullbacks, with tech stocks suffering the biggest impact of the sell-off. In the forex market, the dollar’s strength pressured major currencies like the euro and pound, while gold’s retreat from its all-time highs underscored the impact of rising yields. Corporate earnings added to the day’s volatility, with companies like Snowflake and Urban Outfitters suffering steep declines, while Peloton and Zoom Video posted substantial gains on better-than-expected results. As investors navigate these shifting dynamics, the market’s focus remains firmly on central bank actions and the potential implications for economic growth and corporate performance in the months ahead.