The S&P 500 and Nasdaq Composite saw modest gains on Tuesday as investors looked forward to a pivotal earnings report from Nvidia later this week. Both indices rose by 0.16%, driven by optimism surrounding the tech giant’s impact on the artificial intelligence sector and its potential to influence market trends. Meanwhile, market sentiment was boosted by recent comments from Federal Reserve Chair, hinting at a possible interest rate cut in the near future. As the global markets navigate mixed economic signals and await critical data releases, the anticipation around Nvidia’s performance reflects the ongoing enthusiasm for technology and AI stocks amidst broader economic uncertainties.

Key Takeaways:

  • S&P 500 and Nasdaq Post Modest Gains: The S&P 500 rose 0.16% to close at 5,625.80, while the Nasdaq Composite also edged up 0.16% to finish at 17,754.82. Both indices showed slight upward movement ahead of a highly anticipated earnings report from Nvidia, reflecting some optimism in the market.
  • Dow Jones Continues to Climb: The Dow Jones Industrial Average increased by 9.98 points, or 0.02%, closing at a new record high of 41,250.50. This marks the second consecutive record close for the Dow, showcasing sustained investor confidence despite mixed economic data.
  • European Markets Close Higher, Led by Travel Stocks: European markets saw a positive close, with the pan-European Stoxx 600 gaining 0.23%. Travel stocks led the charge, with EasyJet soaring 6.6% and Tui up 5%, fuelled by expectations of stabilised fares in the coming months. The FTSE 100 added 17.68 points, or 0.21%, to close at 8,345.46. In contrast, the CAC 40 fell 0.3% to 7,566, weighed down by declining luxury stocks, including Burberry, which is set to be relegated from the FTSE 100 after a 70% drop in market value since April 2023. UK retail sales also declined for the third consecutive month in August, with the Confederation of British Industry reporting a retail sales balance of -27, highlighting ongoing challenges in the consumer sector.
  • Asian Markets Show Mixed Performance Amid Economic Data: Asian markets presented a mixed picture, with Japan’s Nikkei 225 rising 0.47% to close at 38,288.62, and the Topix increasing 0.73% to 2,680.80. Meanwhile, China’s CSI 300 fell 0.57% to 3,305.33 as investors assessed industrial profit data showing a slight year-on-year increase of 3.6% from January to July. Hong Kong’s Hang Seng index gained 0.4%, while South Korea’s Kospi and Australia’s S&P/ASX 200 ended the day with declines of 0.32% and 0.16%, respectively, indicating varied investor sentiment across the region.
  • Consumer Confidence and Inflation Outlook Improve: The Conference Board’s survey revealed a rise in consumer confidence in August, with the index climbing to 103.3, up from 101 in July, surpassing expectations. The 12-month inflation expectation dipped to 4.9%, the lowest since March 2020, indicating a more optimistic outlook among consumers despite ongoing economic challenges. However, plans to purchase a home fell to a 12-year low, highlighting continued concerns in the housing market amidst fluctuating economic conditions.
  • Oil Prices Decline Amid Expectations of Limited Disruption: US crude oil futures fell 2.22%, closing at $75.70 per barrel, while Brent crude decreased 2.14% to settle at $79.70 per barrel. The drop came as the market anticipates a gradual disruption from Libya’s production halt, rather than a sudden and total shutdown, reducing immediate supply concerns.
  • Treasury Yields Rise on Rate Cut Speculation: The yield on the US 10-year Treasury climbed slightly to 3.831%, reflecting market expectations for a potential interest rate cut by the Federal Reserve. The yield on the 2-year Treasury was trading 3 basis points lower at 3.908%.

FX Today:

  • EUR/USD Stabilises Amid Inflation Data Anticipation: The EUR/USD pair ended the day at 1.1184, up 0.21%. After reaching a fresh swing high of 1.1200, the pair turned sideways as traders weighed upcoming inflation data from both the Eurozone and the US. The pair’s performance was underpinned by a breakout on the weekly timeframe, with the upward-sloping 10-week Exponential Moving Average (EMA) near 1.0940 supporting more upside. Key resistance levels lie at the July 2023 high of 1.1275.
  • GBP/USD Extends Rally to New Multi-Year Highs: The GBP/USD pair surged to close at 1.3260, up 0.54%, reaching a new multi-year high despite overbought conditions. The continued uptrend reflects strong bullish sentiment as the pair eyes resistance levels at 1.3298 and 1.3300. However, a pullback could occur if the pair dips below 1.3200, which may prompt a test of lower support levels, such as the August 22 high at 1.3130 and the July 17 peak at 1.3045.
  • USD/JPY Holds Below 144.00 Amid Mixed Signals: The USD/JPY pair remained stable, hovering below the 144.00 mark as the Asian session progressed. Despite a cautious market environment, the pair benefited from a rebound in the US Dollar and US Treasury bond yields. The downtrend remains intact, with the pair trading below the 200-day moving average (DMA) at 151.22. Should the pair clear 144.20, resistance is expected at 146.42, followed by 147.91. On the downside, a fall below 143.50 could lead to a decline towards the latest cycle low of 141.70, before testing 140.00.
  • USD/CAD Faces Continued Pressure Amid Data Drought: USD/CAD struggled to maintain ground, closing below 1.3500 and approaching six-month lows near 1.3450. The pair has faced persistent selling pressure, worsened by a lack of significant Canadian economic data to support the Canadian Dollar. The pair’s downward trajectory suggests a possible test of the lower end of early 2024’s congestion zone between 1.3600 and 1.3400, with bearish momentum prevailing as it trades below the 200-day Exponential Moving Average (EMA) at 1.3628.
  • Gold Gains on Fed Rate Cut Speculation: Gold prices advanced to $2,524 per ounce, up 0.20%, benefitting from speculation about potential rate cuts by the Federal Reserve. The precious metal has found support amid a risk-on environment and stable US Treasury yields, with key resistance at the all-time high of $2,531. If gold surpasses this level, it could push towards $2,550, while a drop below $2,500 may signal a deeper correction towards the July 17 high of $2,483 and the 50-day Simple Moving Average (SMA) at $2,410.

Market Movers:

  • Paramount Global Drops on Abandoned Takeover: Paramount Global shares fell 7.2% after Edgar Bronfman Jr. abandoned his pursuit of a takeover, leaving Skydance’s $8 billion acquisition deal in place. The Skydance deal, expected to close in the first half of 2025, included a “go-shop” period allowing Paramount to seek other buyers, but with Bronfman Jr.’s withdrawal, the path is clear for Skydance to proceed.
  • Hain Celestial Group Surges on Earnings Beat: Hain Celestial Group saw its shares soar 18.9% after reporting fiscal fourth-quarter adjusted earnings of 13 cents per share, significantly beating the FactSet consensus estimate of 8 cents per share. Despite revenue coming in slightly below expectations at $418.8 million versus the anticipated $419.4 million, the earnings surprise drove strong investor interest.
  • Hershey Declines on Downgrade: Hershey’s stock fell 2.7% after Citi downgraded the company from “neutral” to “sell,” citing concerns over potential volume weakness and higher cocoa inflation impacting future earnings. The downgrade reflects growing caution about Hershey’s ability to maintain its performance amid rising input costs.
  • Trip.com Jumps on Strong Revenue: US-listed shares of Trip.com surged 8.6% after the China-based travel company reported second-quarter revenue of 12.77 billion yuan, slightly above the 12.76 billion yuan forecast by analysts. The company also noted a 42% year-over-year increase in packaged-tour revenue, highlighting strong demand recovery in the travel sector.
  • Cava Group Declines Amid Insider Selling: Cava Group shares fell 6.1% following filings with the US Securities and Exchange Commission indicating that CEO Brett Schulman and other corporate insiders sold off some of their shares. The insider selling raised concerns among investors about the company’s future performance.
  • Nvidia Ticks Higher Ahead of Earnings: Nvidia shares rose 1.5% as investors anticipated its fiscal second-quarter earnings report. The stock’s performance reflects optimism about Nvidia’s ongoing role as a key player in the artificial intelligence sector, with expectations of continued strong growth.
  • Insulet Jumps on FDA Clearance: Insulet’s shares surged 6.6% following the US Food and Drug Administration’s clearance of its Omnipod 5 automated delivery system for adults with Type 2 Diabetes. The approval opens up a new market for the company, driving investor enthusiasm.
  • Hanesbrands Rises on Analyst Upgrade: Hanesbrands shares climbed 5.7% after UBS named it a “stock to watch” for 2025, despite reiterating its neutral rating. The positive mention suggested potential future growth opportunities, prompting increased buying interest.
  • Energizer Holdings Rally on Upgrade: Energizer Holdings saw its shares rally 6.6% after Truist upgraded the stock to “buy” from “hold.” Truist highlighted the stock’s “meaningful discount” relative to its consumer staple peers, attracting investor attention.

As markets move through August, the modest gains in the S&P 500 and Nasdaq, alongside Nvidia’s anticipated earnings report, reflect a restrained yet hopeful sentiment among investors. While European markets found support in the travel sector and Asian markets showed mixed responses to varying economic signals, the outlook remains uncertain. The rise in consumer confidence and the prospect of a Federal Reserve interest rate cut are lifting hopes, even as sectors like luxury goods and retail face significant challenges. As investors navigate these mixed signals, the focus remains on how upcoming earnings and economic data will shape the market’s direction in the coming weeks.