In a remarkable end to a turbulent week, Wall Street surged on Friday with the Dow Jones Industrial Average closing at an all-time high. This impressive rally was fuelled by encouraging US inflation data, which has increased investor confidence in potential Federal Reserve rate cuts later this year. The S&P 500 and Nasdaq Composite also saw significant gains, underscoring a renewed optimism across the market. Key sectors, including technology and industrials, led the charge, with companies like 3M and Meta Platforms recording notable increases. Meanwhile, European and Asian markets showed mixed responses, with European stocks rising on easing global sell-offs, and Japan’s Nikkei index continuing its downturn amidst broader regional gains. 

Key Takeaways:

  • Dow Jones Hits Record High: The Dow Jones Industrial Average surged 654.27 points, or 1.64%, to close at 40,589.34, marking its highest level ever. This rise was driven by positive US inflation data and investor sentiment favouring potential rate cuts by the Federal Reserve.
  • S&P 500 and Nasdaq Rally: The S&P 500 climbed 1.11% to 5,459.10, while the Nasdaq Composite rose 1.03% to 17,357.88. These gains were boosted by a rotation into technology and cyclical stocks, with Microsoft and Amazon each gaining over 1%, and Meta Platforms up nearly 3%.
  • European Markets Rebound: The pan-European Stoxx 600 closed 0.9% higher, with nearly all sectors in positive territory. The FTSE 100 Index rose 1.21% to 8,285.71, while France’s CAC 40 increased by 1.2%, bolstered by strong corporate earnings, including Essilor’s 7.4% gain and Hermès’ 3.4% rise. Notably, EssilorLuxottica surged 7.4% following a 5.2% increase in Q2 revenue, driven by strong performance in the EMEA region. Hermès also saw a 3.4% rise after reporting a 13% increase in Q2 sales to EUR 3.7 billion, surpassing market expectations. 
  • Mixed Asian Market Performance: Asian markets exhibited mixed results, with Japan’s Nikkei 225 falling 0.53% to 37,667.41, marking its eighth consecutive day of losses, and the Topix dropping to 2,699.54. Conversely, the Hang Seng index gained 0.34%, and South Korea’s Kospi rose 0.78% to 2,731.9, rebounding from recent lows. The Taiwan Weighted Index dropped 3.29%, largely due to significant declines in major tech stocks.
  • US Inflation Data: The June personal consumption expenditures (PCE) price index, a key inflation measure favoured by the Federal Reserve, rose 0.1% month-over-month and 2.5% year-over-year, meeting economists’ expectations. This data has increased speculation about potential rate cuts by the Fed, starting as early as September, signalling a shift in monetary policy to support economic growth.
  • Oil Prices Decline: US crude oil prices fell, with West Texas Intermediate declining 1.43% to $77.16 per barrel, while Brent crude dropped 1.51% to $81.13 per barrel. This marks the third consecutive weekly decline for US crude, driven by concerns over weakening demand from China, the world’s largest crude importer, despite strong economic growth signals from the US.

FX Today:

  • EUR/USD Maintains Modest Gains: The EUR/USD pair edged up 0.1% to 1.0855, showing resilience despite remaining below the 1.09 mark. The currency pair is navigating a descending channel, with the 200-day Exponential Moving Average (EMA) at 1.0795 providing key support. Despite recent challenges, the EUR/USD has struggled to break above 1.0950, indicating ongoing pressure on the euro amid mixed market sentiment.
  • GBP/USD Ends Week Lower: The GBP/USD closed the week down approximately 0.5%, marking its second consecutive week of losses. The pair fell below the 1.2900 level, retracing from a 12-month high near 1.3045 reached last week. The 200-day EMA at 1.2636 continues to offer support, while the 1.2600 level remains a crucial point for potential further declines. Buyers may re-enter the market if the pair approaches the rising trendline from last October’s lows around 1.2037.
  • USD/JPY Bounces Back: After touching a 14-week low at 151.93, the USD/JPY pair recovered slightly, ending the session at 153.74. The pair faces critical resistance near the 156.00 level, which it must breach to regain bullish momentum. A failure to sustain above 153.00 could see the pair retesting recent lows, with support around 151.94 and 151.00 being key levels to watch.
  • NZD/USD Sees Brief Reprieve: The NZD/USD experienced a minor rebound to 0.5890, pausing a six-day losing streak that has seen the pair drop over 4% in July. The currency pair remains under significant bearish pressure, with a recent bearish crossover of the 20-day Simple Moving Average (SMA) at 0.6050 with the 100-day SMA, reinforcing the downward trend. The market’s focus will be on whether the pair can maintain any recovery or continue its slide toward new lows.
  • Gold Climbs Toward Key Levels: Gold prices moved higher, trading at $2,385 per ounce after bouncing off a daily low of $2,356. XAU/USD must reclaim the $2,400 level to target the psychological $2,450 area. A break above this could challenge the all-time high around $2,483, with the next key resistance at $2,500. On the downside, losing the 50-day moving average (DMA) at $2,359 could open the way for further declines towards $2,324, and potentially the $2,300 mark.
  • Silver Remains Below Key Resistance: Silver (XAG/USD) ended a two-day losing streak but remained under pressure, closing below $28.00 with a modest gain of 0.31%. The metal faces critical resistance at $28.00, with further upside potentially targeting $28.91. A break above this level could pave the way for testing the $29.00 mark. However, a dip below $27.00 could see the next support at $26.02, ahead of the 200-day moving average (DMA) at $25.88.

Market Movers:

  • 3M Soars on Strong Earnings: 3M’s stock surged 23%, reaching a 52-week high, after reporting stronger-than-expected quarterly results. The company posted adjusted earnings of $1.93 per share for the second quarter, significantly surpassing the consensus estimate of $1.68 per share. This remarkable performance highlighted 3M’s resilience and operational strength, driving investor confidence.
  • Dexcom Plummets on Disappointing Revenue: Shares of Dexcom fell sharply by 40.7% after the medical device company missed revenue expectations for the second quarter. Dexcom reported $1 billion in revenue, falling short of the consensus forecast of $1.04 billion, and provided weak full-year guidance, leading to a significant decline in its stock price.
  • Coursera Surges on Revenue Beat: Coursera’s stock soared 44.7% after announcing second-quarter revenue of $170 million, exceeding analysts’ expectations of $164 million. Despite reporting a loss of 15 cents per share, compared to an anticipated 1 cent per share profit.
  • Newell Brands Rises on Strong Earnings: Newell Brands saw its shares jump 40.5% following the announcement of better-than-expected earnings. The company reported adjusted earnings of 36 cents per share for the second quarter, beating the consensus estimate of 21 cents per share. 
  • Deckers Outdoor Gains on Earnings Beat: Deckers Outdoor stock climbed 6.3% after the footwear company reported better-than-expected fiscal first-quarter earnings. The company posted earnings of $4.52 per share on revenue of $825 million, surpassing the expected earnings of $3.48 per share and revenue of $808 million. The strong performance was driven by robust sales from its Ugg and Hoka brands.
  • Norfolk Southern Gains on Earnings Beat: Norfolk Southern’s shares increased 10.9% following a better-than-expected second-quarter earnings report. The railroad operator reported adjusted earnings of $3.06 per share, surpassing the $2.86 per share forecast by analysts. The company’s revenue met expectations, further solidifying its positive financial performance.
  • WW International Declines on Downgrade: WW International, the parent company of Weight Watchers, saw its shares decline by 12.5% after Morgan Stanley downgraded the stock from “overweight” to “equal weight.” The downgrade was attributed to the long-term headwinds posed by medications for obesity treatment, which could negatively impact the company’s core business.
  • Coinbase Rises with Bitcoin: Shares of Coinbase gained 4.9%, tracking a rise in Bitcoin, which increased by more than 4%. The positive movement in digital currencies increased investor confidence in the cryptocurrency exchange platform.
  • FTAI Aviation Upgraded and Surges: FTAI Aviation shares increased by 6.9% following an upgrade from “hold” to “buy.” Stifel’s positive outlook on the company, despite higher valuations, reflects a bullish view on industry dynamics and the company’s strategic positioning.

As the week draws to a close, the record-setting performances in the Dow Jones, S&P 500, and Nasdaq Composite underscore a strong recovery in investor sentiment, driven by favourable inflation data and robust corporate earnings. The positive momentum in technology and industrial sectors, coupled with gains in European markets, reflects a growing confidence in the economic outlook. Despite underlying challenges such as inflation concerns and economic uncertainties, the market’s response indicates a resilient stance from investors. The focus now shifts to upcoming Federal Reserve decisions and global economic developments, which will be crucial in shaping future market trends and investor strategies.