✅ Daily Market Analysis - THURSDAY JULY 27, 2023Key News:
Eurozone - Deposit Facility Rate (Jul)
Eurozone - ECB Interest Rate Decision (Jul)
USA - Core Durable Goods Orders (MoM) (Jun);
USA - GDP (QoQ) (Q2;
USA - Initial Jobless Claims;
Eurozone - ECB Press Conference
USA - Pending Home Sales (MoM) (Jun)
On Wednesday evening, US stock futures exhibited a mixed trend following the Federal Reserve's decision to raise interest rates by 25 basis points, a move that was in line with market expectations. The major averages saw diverse trading patterns as investors closely monitored earnings reports from significant companies.
At 6:55 pm ET, Dow Jones Futures declined by 0.2%, indicating a slightly negative sentiment for the Dow Jones Industrial Average. Meanwhile, S&P 500 Futures remained unchanged, suggesting a relatively stable outlook for the broader market represented by the S&P 500 index. On the other hand, Nasdaq 100 Futures rose by 0.2%, indicating a positive bias for the technology-heavy Nasdaq Composite index.
The mixed trends in the futures market reflect the uncertainty and cautiousness among investors as they digest the impact of the Federal Reserve's interest rate hike and closely analyze corporate earnings reports. The Federal Reserve's decision to raise rates was widely anticipated, but the nuances in their accompanying statements and the economic outlook can still influence market sentiment.
NASDAQ indices daily chart
SPX indices daily chart
DJI indices daily chart
During extended trading, Meta Platforms Inc (NASDAQ: META) experienced a significant 7% surge in its stock price following the release of its second-quarter earnings report. The company's Q2 earnings per share (EPS) came in at $2.98, surpassing market expectations, which had anticipated earnings of $2.91 per share. Furthermore, Meta Platforms reported total revenues of $32 billion for the quarter, exceeding the projected revenue figure of $31.08 billion.
Investors responded positively to the strong financial performance of the company, driving its stock price higher in after-hours trading. The better-than-expected earnings and revenues indicated a robust performance during the quarter and suggested that Meta Platforms was outperforming market forecasts.
In addition to the impressive Q2 results, Meta Platforms Inc also provided optimistic guidance for the upcoming third quarter of 2023. The company forecasted revenues in the range of $32 billion to $34.5 billion for Q3, which surpassed the market's expected revenue of $31.2 billion. This positive outlook for the next quarter further contributed to the stock's increase in after-hours trading.
Overall, Meta Platforms Inc's strong Q2 financial results and optimistic guidance for Q3 have buoyed investor confidence in the company's performance and future prospects, leading to a notable increase in its stock price during extended trading.
Meta Platforms daily chart
After reporting its second-quarter earnings, eBay (NASDAQ: EBAY) faced a decline of 4.8% in its stock value. The company's Q2 earnings per share (EPS) were reported at $1.03, slightly higher than the market's expectations of $0.99 per share. However, the company's Q2 revenues came in at $2.5 billion, slightly below the anticipated revenue figure of $2.51 billion.
The stock price decline indicates that despite beating earnings estimates, investors may have been disappointed with eBay's revenue performance for the quarter. The revenue miss could have raised concerns about the company's ability to drive top-line growth in a competitive market.
Looking ahead to the next quarter, eBay provided a positive outlook for its financials. The company projected EPS in the range of $0.96 to $1.01, surpassing the market's expected EPS of $0.92. Additionally, eBay forecasted revenues in the range of $2.46 billion to $2.52 billion, significantly higher than the market's expected revenue of $2.23 billion.
The optimistic guidance for the next quarter suggests that eBay management expects improved financial performance in the coming months. This outlook might have provided some reassurance to investors, preventing a steeper decline in the stock price.
Overall, the mixed reaction to eBay's earnings report reflects the complex interplay of various factors in the stock market. While beating EPS estimates and providing a positive outlook for the next quarter could be seen as positive signs, the slight revenue miss in Q2 may have tempered investor enthusiasm and led to the stock price decline. As with all earnings reports, market participants closely assess the financial metrics and guidance to form their investment decisions, which can result in varied reactions to the same set of results.
eBay daily chart
The Federal Reserve has implemented a 25 basis points increase in interest rates, bringing the range to 5.25% to 5.50%. This move marks the highest interest rate level observed in 22 years and aligns with the Fed's ongoing tightening campaign.
In their statement, the Fed expressed a positive outlook for economic growth, acknowledging that economic activity has been expanding at a moderate pace. This represents a slight improvement compared to their previous description of growth as "modest." The focus on consumer prices remains a top priority for the Fed, as they emphasized that inflation continues to be elevated. Policymakers will closely monitor the risks associated with inflation, just as they have been doing in the previous months.
The decision to raise interest rates was widely anticipated by the market, as the Federal Reserve has been communicating its intention to address the inflation surge and gradually normalize interest rates in response to the economic recovery. By increasing interest rates, the Fed aims to curb inflationary pressures and maintain a balanced economic environment.
As the Fed continues to monitor economic developments and inflation data, future interest rate adjustments will likely be influenced by the pace of economic growth and the trajectory of inflation. The central bank will take a data-dependent approach to ensure that its monetary policy remains aligned with the evolving economic conditions.
US Dollar Currency Index
After the Federal Reserve's decision to raise interest rates, the US dollar experienced a decline against various currencies. This weakening of the dollar resulted in a notable increase in gold prices. As a safe-haven asset, gold tends to perform well during periods of uncertainty and when the value of the US dollar is under pressure.
Investors are now closely monitoring key resistance levels for gold. The $1,973 level is seen as a minor resistance, and if gold surpasses this level, it could signal further upward momentum. Above that, the $1,978 level becomes significant, and a break above it might lead to additional gains for gold.
The central bank's indication of a data-driven approach to future rate hikes means that the pace of rate increases will depend on the economic data and developments. This stance has been interpreted positively for gold as it implies that the Fed may be cautious in its tightening measures, which can weaken the US dollar and boost gold prices.
Gold's strength in pushing further into the high-$1,900 an ounce territory indicates that investors are turning to the precious metal as a hedge against inflation and currency devaluation. The lingering uncertainty in the financial markets and the ongoing focus on inflation by the Federal Reserve have contributed to gold's attractiveness as a safe-haven asset.
As global economic conditions and central bank policies continue to evolve, gold prices may remain sensitive to changes in the US dollar and market sentiment. Investors will closely follow economic data releases, monetary policy statements, and geopolitical developments to gauge the outlook for gold and make informed investment decisions.
XAU/USD daily chart
Despite showing some strength, gold remained stuck in a tight trading range for the past two weeks and struggled to break above the critical $2,000 an-ounce mark, which is often considered a significant level that could trigger further upward movement in the metal's price.
One exception to the overall trend in the currency market was the Australian dollar. It defied expectations and weakened after the release of data that indicated a slowdown in domestic inflation during the second quarter. The decrease in inflation reduced the pressure on the Reserve Bank of Australia (RBA) to implement further policy-tightening measures.
The data revealed that Australia's consumer price index (CPI) rose by 6% during the second quarter. This represented a deceleration from the 7% recorded in the first quarter and fell below the market's expectations of 6.2%. As a result, the Australian dollar depreciated to approximately $0.676 against the US dollar.
The lower-than-expected inflation figures indicate that price pressures in Australia are not rising as quickly as anticipated, giving the RBA room to maintain a wait-and-see approach on monetary policy. A weaker inflation outlook reduces the likelihood of interest rate hikes in the near term, which can weigh on the currency's value.
Overall, the tight trading range for gold and the Australian dollar's depreciation following the inflation data release reflect the cautious and uncertain market sentiment amid ongoing economic and monetary policy developments.
AUD/USD daily chart
This week, the market's attention is not only on the Federal Reserve's interest rate decision but also on upcoming rate decisions from the European Central Bank (ECB) and the Bank of Japan (BOJ). The ECB is widely expected to raise interest rates by 25 basis points, while the BOJ is likely to maintain its ultra-low rates and continue with its dovish policies. However, traders are cautiously watching for a potential hawkish surprise from the BOJ, given inflation trending above its target.
The possibility of rising interest rates is generally considered negative for metal markets, and it is anticipated to limit significant gains in gold throughout the year.
In Thursday's trading session, several important economic indicators will be closely monitored, including fresh core durable goods orders, GDP data, pending home sales, and jobless claims. These data points can offer valuable insights into the health and performance of the US economy.
Furthermore, earnings reports from major companies such as Mastercard Inc, McDonald’s Corporation, Intel Corporation, and Nestle SA ADR will be in focus. These earnings releases can have a substantial impact on the respective company's stock prices and may also influence broader market sentiment.
Overall, this week's events are likely to play a crucial role in shaping market sentiment and direction, with investors closely analyzing central bank decisions, economic data releases, and corporate earnings reports to make informed investment decisions.
