In a dramatic turn of events, the stock market experienced a sharp decline following a brief surge triggered by Nvidia’s impressive quarterly results. As the tech rally faded, investors also braced themselves for a significant address from Federal Reserve Chairman Jerome Powell. The Dow Jones Industrial Average closed with a hefty loss of 373.56 points, marking a 1.08% drop to settle at 34,099.42. Similarly, the S&P 500 witnessed a substantial decline of 1.35%, concluding the day at 4,376.31, while the Nasdaq Composite, renowned for its tech-heavy constituents, plunged by 1.87% to reach 13,463.97.
This Thursday brought forth the Dow’s most challenging day since March, while the S&P 500 and Nasdaq encountered their most significant single-day losses since August 2nd. Nvidia, a prominent tech player, reported better-than-expected earnings and revenue, propelling its shares to an all-time high. Although the company’s leadership projected a remarkable third-quarter revenue increase of 170% year-over-year, the stock only managed a meager 0.1% gain by the closing bell. Meanwhile, the tech sector faced a notable setback, causing the S&P 500’s largest loss of 2.15%. Renowned tech giants like Amazon, Apple, and Netflix saw their shares decrease during the session, with losses ranging from 2.6% to 4.8%. As the market awaits Powell’s speech, U.S. Treasury yields climbed, touching 4.241% for the benchmark 10-year Treasury note.
On Thursday, all sectors of the stock market experienced a decline of 1.35%. Among the various sectors, technology and communication services were hit the hardest, both dropping by 2.15% and 2.04% respectively. Consumer discretionary also faced a substantial decrease of 2.01%. Industrials followed with a decline of 1.22%. Health care, energy, and utilities sectors recorded losses of 0.76%, 0.74%, and 0.63% respectively. Financials, real estate, and materials sectors had more modest declines, each decreasing by 0.24%, 0.41%, and 0.43%. The consumer staples sector also saw a decrease of 0.77% in its value.
Major Pair Movement
The US Dollar Index rebounded and surged above 104.00, marking its highest point since early June after a brief correction. This resurgence was fueled by fundamental factors, risk aversion, and higher US Treasury yields, all of which contributed to the strengthening of the Greenback. All eyes are on the Jackson Hole event, with European Central Bank President Christine Lagarde and Federal Reserve Chair Jerome Powell scheduled to speak. Their speeches are anticipated to induce volatility and potentially lead to significant movements in financial markets. Despite mixed data from the US on Thursday, including a 5.2% decline in July’s Durable Goods Orders (versus an expected -4%) and a lower than expected initial Jobless Claims of 230K (versus 240K expected), the US Dollar remained resilient. The University of Michigan’s Consumer Sentiment report is expected to be released on Friday. Additionally, Federal Reserve officials’ comments varied, with some suggesting that policy actions may have been sufficient, while others warned of the possibility of further rate hikes.
The 10-year US Treasury yield rebounded to 4.2%, though it remained below recent peaks, while the 2-year yield climbed back above 5%. These rising yields exerted pressure on the Japanese Yen, causing USD/JPY to rise from 144.65 to 145.85, poised for Jerome Powell’s speech. Meanwhile, EUR/USD retreated to 1.0800, trading with a bearish bias just above the 200-day Simple Moving Average (SMA). ECB President Christine Lagarde’s speech at Jackson Hole and upcoming data on German Q2 GDP and the IFO Survey are awaited. USD/CHF consolidated above 0.8800, achieving its highest daily close in a month around 0.8850, as Switzerland prepared to release Q2 employment data. Conversely, GBP/USD resumed its downtrend, slipping below 1.2600 after failing to hold above the 20-day SMA at 1.2740. In the Antipodean region, AUD/USD reversed its gains from Wednesday and neared the 0.6400 mark, while NZD/USD struggled to regain 0.6000 and dropped to 0.5920, both currencies facing pressure amidst cautious market sentiment.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Nears Crucial Levels Amidst Dollar’s Resurgence Ahead of Powell’s Jackson Hole Speech
The EUR/USD currency pair has edged back towards significant technical thresholds following a brief rebound that faltered near 1.0870. This pullback occurred as the US Dollar regained strength in anticipation of Federal Reserve Chair Jerome Powell’s imminent address at Jackson Hole on Friday. Despite mixed data from the US and no definitive cues from Fed officials, the Greenback managed to strengthen. US stocks saw declines, while US Treasury yields rebounded, contributing to the Dollar’s resurgence. US economic indicators revealed a notable 5.2% drop in Durable Goods Orders for July, exceeding the anticipated 4% decrease. Furthermore, Initial Jobless Claims declined to 230,000, surpassing the projected 240,000 figure.
European Central Bank (ECB) Governing Council member Mario Centeno delivered a cautionary stance on Thursday, expressing the need for prudence in upcoming meetings. He highlighted the realization of downside risks to the economy, aligning with the prevailing downtrend in expectations for additional monetary policy tightening from the ECB. These dovish remarks have potentially contributed to the EUR/USD’s weakness. As the week progresses, Germany is set to release updated data on Q2 GDP and the ZEW Survey, while the University of Michigan’s Consumer Sentiment Survey will be a focal point in the US. However, all eyes remain fixed on Jackson Hole, where ECB President Christine Lagarde will speak at 11:00 GMT, followed by Fed Chair Jerome Powell at 14:00 GMT. These speeches have the potential to trigger substantial market movements across various sectors.
In line with technical analysis, the EUR/USD declined on Thursday, reaching the lower boundary of the Bollinger Bands. At present, the price is hovering close to this lower boundary. The Relative Strength Index (RSI) is currently at 34, signaling a return to bearish sentiment for the EUR/USD.
Resistance: 1.0874, 1.0935
Support: 1.0789, 1.0740
XAU/USD (4 Hours)
XAU/USD Maintains Rally Near $1,923 Amid Dollar’s Volatile Performance
Spot Gold continued its weekly ascent, reaching $1,923.34 per troy ounce and sustaining modest intraday progress, just below this mark during the mid-American session. The US Dollar experienced selling pressure throughout the first half of the day, influenced by a decline in government bond yields and favorable stock market performance.
The USD briefly garnered demand following the release of mixed US data. Durable Goods Orders endured a substantial 5.2% plunge in July, significantly worse than anticipated. Conversely, Initial Jobless Claims for the week concluding on August 18 displayed improvement at 230K, surpassing the expected 240K. The July Chicago Fed National Activity Index also signaled a shift, rising to 0.12 from the previous month’s -0.33.
Macro figures triggered a decline in stock markets, causing Wall Street to further retreat after the opening bell. Despite optimistic remarks from Federal Reserve (Fed) officials, including Boston Federal Reserve President Susan Collins mentioning a possible steadying of the policy rate and Federal Reserve Bank of Philadelphia President Patrick Harker suggesting the Fed might have “done enough” with monetary policy, the market mood dampened. The USD found strength amid this sentiment, further supported by improved Treasury yields, which in turn curbed the extension of gains for XAU/USD (the Gold/US Dollar pair).
Using technical analysis, the XAU/USD didn’t change much on Thursday and stayed between the higher and middle bands of the Bollinger Bands. Right now, the price is still in that same zone between the middle and upper bands. The Relative Strength Index (RSI) is at 61 currently, showing that the XAU/USD pair is still in a positive mode.
Resistance: $1,926, $1,945
Support: $1,910, $1,896
Economic Data
Currency
Data
Time (GMT + 8)
Forecast
EUR
German ifo Business Climate
16:00
86.8
USD
Revised UoM Consumer Sentiment
22:00
71.2
USD
Fed Chair Powell Speaks (Jackson Hole Symposium)
22:05
EUR
ECB President Lagarde Speaks (Jackson Hole Symposium)
