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Mixed Economic Data and Debt Ceiling Negotiations Dampen U.S. Equities

Market Update - Daniel Ang The Accidental Trader Traders Academy International 11

On Tuesday, U.S. equities closed lower, with the Dow Jones Industrial Average falling 336.46 points, or 1.01%, to 33,012.14, the S&P 500 losing 26.38 points, or 0.64%, to 4,109.9, and the Nasdaq Composite dropping 22.16 points, or 0.18%, to 12,343.05. The decline was due to mixed economic data, weak corporate results, and ongoing debt ceiling negotiations in Washington that dampened risk appetite.

Debt Ceiling Negotiations

Yesterday, President Joe Biden and House of Representatives Speaker Kevin McCarthy met to negotiate the details of an agreement to raise the U.S. debt ceiling. The looming deadline and the failure to reach an agreement is a major concern. The United States faces a catastrophic default if a deal is not reached soon.

Mixed Economic Data

In economic news, US retail sales edged up 0.4% last month to $686.05 billion following a revised 0.7% fall in March. The consensus was for a 0.7% rise. U.S. industrial production unexpectedly rose in April as a sharp gain in motor vehicles drove factory output higher, according to data released by the Federal Reserve. Industrial output rose 0.5% last month, the first increase after two months of flat output. Despite these positive indicators, weak corporate results and the ongoing debt ceiling negotiations dampened the market sentiment.

U.S. Treasury Yields and the Dollar

U.S. Treasury yields continued to rise, with benchmark 10-year notes falling 7/32 in price to yield 3.5339% and the 30-year bond falling 10/32 in price to yield 3.8601%. This increase comes despite the Federal Reserve’s restrictive policy. The Dollar inched higher after the retail sales data showed underlying signs of consumer resiliency as focus shifted to the wrangling over the debt ceiling in Washington. The Dollar Index rose 0.2%, with EUR/USD down 0.1% to 1.0861. USD/JPY rose 0.14% to 136.32, while GBP/USD was last trading at 1.2482, down 0.36%.

Oil and Precious Metals

West Texas Intermediate (WTI) crude oil slid 0.7% to $70.60 per barrel on Tuesday. The International Energy Agency (IEA) raised its global oil demand outlook for 2023 amid a stronger-than-projected recovery in China. The agency now expects worldwide oil demand this year to increase by 2.2 million barrels per day from last year, compared with its prior growth outlook of 2 million barrels. Spot gold dropped 1.5% to $1,990.68/oz. COMEX gold declined 1.4% to $1,993.60/oz, and silver was down 1.5% to $23.92/oz.

Cryptocurrency Market

Bitcoin (BTC) was changing hands at $27,066, down 1.3% in the past 24 hours, after reaching a day low of $26,878. Ethereum (ETH) was down 0.4% at $1,821. The recent declines slashed BTC and ETH year-to-date rallies to 63% and 52%, respectively.

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