Monday witnessed a favorable rally in the US equity benchmarks as market participants await the Federal Reserve’s rate decision and anticipate financial disclosures from leading technology corporations. The Dow Jones Industrial Average experienced a 0.5% hike to settle at 35,411.2, and the S&P 500 likewise advanced by 0.4% to close at 4,554.6. Concurrently, the Nasdaq Composite also saw growth, ticking up 0.2% to conclude the trading day at 14,058.9.
On Wednesday, the Federal Open Market Committee (FOMC) is slated to unveil a probable 25-basis-point augmentation to its principal policy rate. Market analysts are anticipating Jerome Powell, Fed Chairman, to tread lightly on committing to further rate hikes in the FOMC meetings due in September and November.
In relation to yields, the US two-year yield experienced an upswing of 6.9 basis points to 4.92% on Monday, with the 10-year rate also adding 3.7 basis points to conclude at 3.88%.
Monday’s economic updates revealed that US private sector growth decelerated in July to the slowest pace since February, as indicated by the flash Purchasing Managers’ Index (PMI). The composite output index slipped to 52 from June’s 53.2 print, indicating a rather modest expansion in private sector business activity. The services sector output fell to a five-month low of 52.4 from 54.4, while the manufacturing PMI exceeded estimates, rising to a three-month high of 49 from 46.3.
A separate update from the Chicago Fed unveiled a slower pace of business activity growth in June, driven by a dip in production-related indicators. The Fed branch’s national activity index for the previous month dropped to negative 0.32 from May’s negative 0.28. The consensus had anticipated an improvement to 0.03.
The Dollar managed to maintain minor gains overnight following recent economic data indicating a resilient US economy and a sluggish Eurozone. The Dollar Index inched up 0.247% to 101.330, while the Fed’s overnight rate is expected to rise to 5.43% in November and remain above 5% until June 2024. The Index has witnessed a downward trend for the past ten months, declining from a September 2022 high of 114.745.
Meanwhile, the USD/JPY pair softened by 0.24% to 141.47. Last Friday, the pair bounced back to 141.92 following a Reuters report that suggested the Bank of Japan (BoJ) would keep its yield curve control policy unchanged.
Crude oil prices experienced an uptick, with Brent crude futures climbing 7 cents to $82.81 a barrel, and West Texas Intermediate (WTI) crude edging up 11 cents to close at $78.85. This rise follows reassurances by Chinese authorities to bolster economic recovery and maintain demand levels in the world’s second-largest economy.
Gold prices, on the other hand, faltered, with the commodity closing lower by $4.40 to settle at $1,962.200/oz, as the Dollar strengthened ahead of an anticipated rate hike by the Fed.
Digital assets didn’t fare as well, with Bitcoin touching a month-low intraday price, trading at $29,124, a 3.1% decrease over 24 hours. Ethereum also noted a 2% decline to $1,849, touching its lowest point since July 7.