Stocks Rise as Investors Await CPI Report and Q2 Earnings

In this daily market update, we delve into the latest financial developments that occurred on Wednesday, July 12, 2023. U.S. stocks experienced gains as investors eagerly awaited the release of the consumer price index (CPI) report and the commencement of Q2 earnings. We explore the impact of these events on various aspects of the market, including stocks, currencies, commodities, and digital assets. Let’s dive into the details.

Stocks:
U.S. stocks closed higher on Wednesday, with the Dow surging just under 1%, the S&P 500 gaining approximately seven-tenths of a percent, and the Nasdaq adding about half a percent. Investors were particularly interested in the upcoming CPI report, hoping for indications that price pressures have abated. The core CPI, which excludes volatile gas and food prices, held significance as it influenced the Federal Reserve’s decision on interest rates. A sticky core CPI around 5% could impact the Fed’s predetermined path.

Currencies:
The Dollar faced downward pressure, reaching a 2-month low, after Federal Reserve officials signaled the nearing end of their tightening cycle. Conversely, GBP/USD hit a 15-month high due to better-than-expected pay growth, increasing pressure on the Bank of England (BoE) to tighten its policies. The British Pound’s rally can be attributed to a robust economy and the market’s repricing of expectations for tighter BoE policies. EUR/USD rose to 2-month peaks, while USD/JPY fell to a 4-week trough.

Commodities:
West Texas Intermediate (WTI) crude oil experienced a notable rise, closing at the highest level since May 1. This increase followed a prior dip, with the market stabilizing due to production cuts from Saudi Arabia and an improved demand forecast from the Energy Information Administration (EIA). WTI crude oil for August delivery settled at $74.83 per barrel, and September Brent crude, the global benchmark, reached $79.31.

The EIA’s Short-Term Energy Outlook revealed an upward revision of the oil demand forecast for 2023, projecting a rise of 1.8-million barrels per day above 2022 levels. However, the forecast for 2024 was slightly trimmed. The report also indicated a gradual decline in global inventories until the last quarter of 2024.

Gold prices saw an increase as the Dollar extended its decline to a 2-month low. Simultaneously, U.S. treasury yields edged higher ahead of the release of the US June inflation data. COMEX gold for August delivery settled at $1,937.10/oz.

Digital Assets:
Bitcoin (BTC/USD) and Ethereum (ETH/USD) experienced mixed movements, with Bitcoin hovering above the $30,000 level and Ethereum down 1.3% at $1,874. Over the past 30 days, Bitcoin has gained 18%, while Ethereum has increased by 7%.