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Mixed Market Indices and Strengthening Dollar

Daily Market Update - (Daniel Ang)

The latest financial update paints a diverse picture for U.S. equity markets as they close for the day. The narrative is largely marked by a downward trend, with prominent tech giants Tesla and Netflix adding to the negative pull. Their projections for near-term production and sales have been less than promising, bringing the Nasdaq Composite down.

Digging deeper into the economic panorama, housing market statistics raised eyebrows as June saw a significant drop in existing home sales, surpassing expectations. This included both single and multi-family homes, with a 3.3% sequential decrease, bringing the seasonally adjusted annual rate to 4.16 million units, lower than the expected 4.23 million.

In a surprising turn, new unemployment claims fell short of expectations. However, this number may not be as promising as it seems, with experts suggesting data adjustment difficulties could have skewed the numbers. Still, the unemployment claim rate remains significantly below the 280,000 mark, a signal that job growth is not slowing down in the vast U.S. labor market.

The U.S. Dollar experienced an uplift, thanks to data highlighting the country’s labor market’s resilience. This implies that the Federal Reserve might maintain higher interest rates to combat inflation. A healthy jobless claims report and solid retail sales figures are fueling the treasury yields, indicating the Fed may persist with higher rates.

However, the equity market tells a different story. Influenced by a drop in headline inflation numbers, market participants expect the Fed to wrap up its rate-hiking campaign at the conclusion of a policy meeting on July 26.

In the meantime, market indices varied. The Nasdaq Composite fell 2.1% to 14,063.3 points, the S&P 500 declined by 0.7% to 4,534.9 points, while the Dow Jones Industrial Average bucked the trend, rising 0.5% to 35,225.2 points.

The Dollar Index also enjoyed a lift, rising 0.62% to 100.85. The Euro, however, declined 0.67% to 1.1127 against the Dollar. The European Central Bank is expected to increase interest rates by 25 basis points in its meeting on July 27.

The U.K.’s Pound Sterling continued its downward trajectory following recent data that showed the inflation rate at its slowest in over a year at 7.9%. This could take some pressure off the Bank of England to raise interest rates rapidly. The Pound fell 0.61% to 1.2859 against the Dollar, dropping from last Thursday’s high of 1.3144, the highest since April 2022.

In the East, Japan’s inflation forecasts exceeded the Bank of Japan’s 2% target for the year, acknowledging broadening price rises. This could maintain market expectations for a cessation of ultra-low interest rates. The U.S. Dollar rose 0.35% to 140.20 against the Yen.

Commodities were mixed. West Texas Intermediate (WTI) saw a small overnight gain. WTI crude for August delivery closed higher by $0.28 to $75.63 per barrel. Meanwhile, September Brent crude, the global benchmark, rose $0.16 to $79.62.

These shifts followed an Energy Information Administration (EIA) report that revealed a lesser-than-expected drop of 0.7-million barrels in U.S. inventories last week. With refineries reducing gasoline production and the Cushing storage hub supply falling by 2.9-million barrels, it indicated weaker U.S. demand. However, supply remains a positive factor for the market, especially with Saudi Arabia cutting its July and August production by one-million barrels per day and Russia also seeming to follow suit on production cuts.

Finally, in the digital assets space, most cryptocurrencies retracted, reflecting the losses in the Nasdaq 100 and the S&P 500 indices. Bitcoin was trading at $29,694, down 1.2% in the past 24 hours, and Ethereum was down 1.5% at $1,884.

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