An extremely bullish quarterly earnings report from Nvidia paved the way for stock gains across the board last week. The Dow Jones continued to push further into unchartered territory, gaining 1.3% on the week and surpassing 39k for the first time. Similar story for the S&P 500, which ended the week 1.66% higher and further cemented its place above the 5k level. Despite the rally being started by technology companies, the Nasdaq Composite is the last remaining of the big three to have not yet established a new all-time high. The index gained 1.4% on the week but remains a hair’s breadth away from its highest close of 16,057 back in 2021. This is to say nothing of the real record breaker last week: the Nikkei 225. Decade-long records are not broken every day, but the Japanese index’s all-time high finally tumbled from its pedestal last Thursday after 34 years. Commentators could perhaps downplay the significance of the event by pointing to the weakness of the Yen as a contributor to the index’s performance, but where’s the fun in that. The economic calendar does not have much to offer early this week, with the possible exception of new home sales later today. We will have to wait until Thursday to get to the meatier data releases, particularly the Personal Consumption Expenditures (PCE) index. The PCE figures are heavily favoured by the Federal Reserve as being the most accurate inflation gauge. Last week’s FOMC minutes did not garner the attention they are used to, partly because very little surprises were expected, but mostly because the event was overshadowed by a flurry of earnings reports.
Well that didn’t last. The rebound we saw early this week in US stocks has been thoroughly undone, due in part to poor earnings. The Nasdaq in particular fared terribly as it fell 2.43% on Wednesday, before losing a further 1.76% the following day. Quarter-on-quarter GDP growth rate figures may have compounded matters, coming in higher than expected at 4.9%. The downturn extended to the S&P 500, falling 1.43% on Wednesday then 1.18% on Thursday. Not even the Dow Jones was spared, itself seeing declines of 0.32% and 0.76%. It will be interesting to see how Asian markets react on Friday as we close the week on the back foot once again. USDJPY finally closed above the dreaded 150 level on Wednesday, after threatening to do so all month. The recent strength in the greenback proved to be too much as the pair closed at 150.2 on Wednesday then climbed again to just under 150.4 on Thursday. The Japanese Yen has had a rough year so far, down almost 15% versus the Dollar. The Bank of Japan is in a difficult position, it does not have the flexibility to fight off challenges from the USD because any attempt to do so will impact the little economic growth achieved so far via easy monetary policy. There are expectations of an intervention at some level, but for now we can only speculate on what that level may be. With the Dollar still not showing any signs of weakness, and interest rate hikes not on the table for the time being, other central banks around the world will also want to have some kind of contingency plan in place.
US stock indices finally had a good day on Tuesday, driven mainly by strong earnings reports from several major blue-chip companies. The Dow Jones Industrial Average gained 0.62% on Tuesday, enough to reverse the damage done the previous day. Similar story with the S&P 500, which gained 0.73% and the NASDAQ, which was up 0.93% on the day. Traders perhaps grateful to latch onto any good news in these uncertain times. The Hang Seng and Nikkei 225 attempted to find some semblance of a bottom yesterday, the Japanese index falling as low as 30,551 in search of buyers before reaching back up to close at 31,062. The Hang Seng finished 1.05% in the red on Tuesday but opened high on Wednesday morning at 17,465. European stocks finally broke their recent five-day downtrend but remain on the back foot overall. The Dollar reacted predictably to news of better-than-expected earnings, EURUSD falling 0.72% on Tuesday, completely erasing the previous day’s gains. There is a lot to look forward to on Thursday as both the Fed Chair and European Central Bank President are set to provide some much-needed clarity on their respective positions on inflation and possible interest rate hikes. Bitcoin annihilated the $30k resistance it had been hammering against all weekend on Monday as it blasted straight to $33k and beyond. The move extended to other cryptocurrencies, albeit in more muted fashion, with the bitcoin dominance chart hovering around 54% at the time of writing. Gold finally took a breather early this week as traders once again keep their eye on the Middle East. The lack of further developments so far left oil in a position of weakness, losing 2% on Tuesday.
