In the world of financial frenzy, US stocks emerged victorious, spearheaded by the Russell 2000 index, which performed like a star. What fueled this surge? Well, the regional banking ETF witnessed impressive gains, buoyed by a series of robust bank earnings reports from heavyweights like Bank of America (BAC), Morgan Stanley (MS), and Bank of New York Mellon (BK), among others.
Tech stocks didn’t want to be left out of the party and contributed to the euphoria. The likes of Microsoft (MSFT) and NVIDIA (NVDA) led the pack, delivering stellar performance on the back of exciting updates in the artificial intelligence domain. Energy stocks also got their share of the action, riding the wave of soaring crude oil prices.
But let’s not overlook the impact of some heartening comments from the European Central Bank (ECB), which maintained a dovish stance. This added more fuel to the bullish sentiment, further propelling the market.
As for the US dollar, it seemed to be stuck in a state of indecision. Amidst some economic turbulence, it remained virtually unchanged for the day. However, there were some dramatic swings due to the US retail sales data. The currency stumbled to a session low after a headline retail sales miss but regained composure as the retail control group outperformed forecasts, coupled with upward revisions to the previous month’s data.
Key Summary of Article:
- US stocks rallied, led by the Russell 2000, driven by strong gains in the regional banking ETF supported by robust bank earnings from major players like Bank of America, Morgan Stanley, and Bank of New York Mellon. Tech stocks, particularly Microsoft and NVIDIA, also outperformed on AI updates, while Energy stocks surged alongside crude oil prices.
- The US dollar remained flat despite fluctuations due to mixed US data; it fell initially on a headline retail sales miss but recovered on positive retail control group data and upward revisions to previous months’ data.
- Looking ahead, market focus shifts to New Zealand CPI, Australian MI Leading Index, and supply updates from Australia & Japan.
- Russia suspended navigation through the Kerch Strait, and North Korea launched ballistic missiles into the East Sea.
- ECB’s Knot signaled a hike in July as a necessity but expressed caution on further tightening, citing the possibility of an inflation plateau and an optimistic 2% 2024 inflation view.
Looking Ahead – What’s on the Horizon?
In the days to come, keep your eyes peeled for significant events and data releases from the Asia-Pacific region. Anticipate New Zealand’s CPI and Australia’s MI Leading Index, which could sway the markets. Additionally, supply updates from Australia and Japan might also have a say in how things unfold.
US Trade – Riding the Wave of Positivity
As we delve deeper into the US trade landscape, it becomes apparent that the positive sentiment was widespread. The S&P 500 index rose by a notable 0.71%, closing at 4,554, while the Nasdaq 100 (NDX) surged by 0.82% to reach 15,841. Not to be outdone, the Dow Jones Industrial Average (DJIA) soared by a solid 1.06%, landing at 34,951. The Russell 2000, as mentioned earlier, was the undeniable winner, claiming a remarkable 1.27% increase to settle at 1,976.
Notable Headlines – Nuggets of Insight
US Treasury Secretary Yellen shared her observations, stating that hiring was cooling down, rents were subsiding, and supply chains were easing. However, she urged caution when interpreting the June data, suggesting that reining in wages may not be an absolute necessity to temper prices.
“The labor market’s cooling without there being any real distress associated with it,” Yellen told Bloomberg News in an interview Tuesday.
“Inventories are being rebuilt. The whole supply chain in autos is improving. So there’s reason to believe that we could get some continued benefit from that,” Yellen said.
“Profit margins are also quite high, and they have some cyclical dimension,” she said. “So, I don’t want to go so far as to say you couldn’t see inflation come down without further moderation in wages.”
The US government added four entities to export control list
The Commerce Department’s Bureau of Industry and Security (BIS) takes action today, adding four entities to the Entity List. The listed entities are Intellexa S.A. in Greece, Cytrox Holdings Crt in Hungary, Intellexa Limited in Ireland, and Cytrox AD in North Macedonia. The decision comes as these entities were found to be involved in trafficking cyber exploits that pose a threat to the privacy and security of individuals and organizations globally.
Data Recap – The Numbers Speak
US retail sales for June clocked in at 0.2%, below expectations of 0.5%. However, the retail control group pleasantly surprised with a 0.6% rise, surpassing the anticipated 0.3%. Industrial production for the same month dipped by 0.5%, missing the forecast of 0.0%.
Fixed Income – A Flattened Outlook
US Treasuries experienced a flattening trend, driven by a mix of US retail sales data and the ECB’s dovish comments, which provided the necessary push.
We are still at 5.28% for the one-month treasury…
FX Roller Coaster – USD Holds Its Ground
Amid the economic roller coaster, the US dollar ultimately managed to stay relatively unchanged on the day. However, it couldn’t escape the turbulence caused by the US retail sales data, plummeting to a session low post the headline miss. Fortunately, the currency recovered its position as the retail control group exceeded expectations, with the prior month’s data seeing positive revisions.
Other currencies faced their own trials. The euro slightly weakened but maintained its grip on the 1.1200 handle. The culprit behind its early headwind was unusually dovish-leaning remarks from ECB’s outspoken hawk Knot.
On the other side, the British pound softened against the dollar, failing to sustain the 1.3100 status, despite the constructive risk tone. All eyes are now on the incoming CPI data from the UK, scheduled for Wednesday morning.
Meanwhile, the Japanese yen experienced some back-and-forth movement after the mixed US retail sales data.
Commodities – Riding the Risk-On Wave
Crude oil was in fine form, settling around session highs. The risk-on sentiment and initial dollar weakness provided the much-needed boost to the energy market, even in the absence of significant energy-related catalysts.
In the world of geopolitics, there were some noteworthy developments. Russia suspended navigation through the Kerch Strait from July 16th. On a different note, North Korea launched ballistic missiles into the East Sea, with both missiles landing outside Japan’s exclusive economic zone, according to NHK.
Notably, South Korean National Security Adviser Kim hinted at a trilateral summit between South Korea, Japan, and the US, possibly in August.
In a curious incident, a US national crossed the military demarcation line into North Korea. It was later reported that the individual is a soldier, as per Donga Ilbo.
The White House announced that Taiwan’s VP’s transit through the US in August would be “routine.”
European officials expressed confidence in maintaining ballistic missile sanctions on Iran beyond October. They also see an opportunity by the end of 2023 to negotiate a de-escalatory nuclear deal with Iran.
Asia-Pacific – Keeping an Eye on Notable Headlines
In the Asia-Pacific region, the Bank of Japan (BoJ) Governor Ueda spoke about the challenges in achieving the 2% inflation target sustainably. He emphasized the BoJ’s patient approach to maintaining easy policy unless the need for a change arises.
Over in the EU and UK, the ECB’s Knot made interesting remarks. He noted that a July hike is necessary, and further hikes remain possible but not certain. Knot also shared the view that they might have reached an inflation plateau, and more tightening could tip the scales towards excess. Additionally, he referred to the 2% 2024 inflation view as optimistic, keeping an eye on the economic horizon.
And there you have it, a lively and informative roundup of the recent financial shenanigans. Stay tuned for more updates!
Tomorrow, we will diligently keep track of the stock market’s dynamic movements through comprehensive monitoring and analysis. Our team of experienced financial experts will stay abreast of real-time market data, news, and events that might influence stock prices. Utilizing advanced tools and technology, we’ll closely follow key indices, individual stocks, and sectors to identify emerging trends and potential opportunities. By combining our expertise with cutting-edge resources, we aim to provide accurate insights and updates throughout the day, ensuring our audience stays informed and empowered in navigating the ever-changing landscape of the stock market.