Stock indices sold off on concerns that the Fed is behind on rate cuts. :: InvestMacro

By JustMarkets

On Thursday, US indices were declining, with the Dow Jones (US30) Index down 1.21% and the S&P 500 (US500) Index down 1.37%. The NASDAQ Technology Index (US100) closed negative 2.30%. Weaker-than-expected US economic news caused a liquidation of equity positions due to concerns that the Fed is behind schedule and waiting too long to cut interest rates. US weekly initial jobless claims rose by 14,000 to a near 1-year high of 249,000, indicating a weaker labor market than expected at 236,000. The US ISM Manufacturing Index for July unexpectedly fell by 1.7 to 46.88, weaker than expectations of a rise to 48.8 and the sharpest contraction in 8 months. US construction spending in June unexpectedly declined by 0.3% m/m, weaker than expectations for a 0.2% m/m increase.

Moderna (MRNA) is down more than 21% and topped the list of losers in the S&P 500 and Nasdaq 100 after cutting its full-year revenue guidance to $3.0–3.5 billion from the previous estimate of $4 billion, which was weaker than the consensus prognoses of $4.14 billion. Etsy (ETSY) closed down more than 7% after reporting second-quarter earnings per share of 41 cents, weaker than the consensus expectation of 45 cents, and estimating a third-quarter adjusted EPS margin of 27%, weaker than the consensus estimate of 28.9%. Meta Platforms (META) is up more than 4% and topped the Nasdaq 100 after reporting second-quarter revenue of $39.07 billion, beating the consensus estimate of $38.34 billion. Amazon (AMZN) shares fell nearly 8% after the company said in a report that online sales growth slowed in the second quarter and noted that consumers are looking for cheaper shopping options. Intel (INTC) said Thursday it will cut more than 15% of its workforce (about 17,500) and suspend its dividend starting in the fourth quarter as the chipmaker seeks to turn things around by focusing on its loss-making manufacturing business. Intel’s shares fell by 20% in extended trading, leaving the chipmaker poised to lose more than $24 billion in market value. About a third of the companies in the S&P 500 have already reported. Most of the companies that reported beat consensus earnings estimates, but only 43% beat revenue expectations, the lowest in five years.

Equity markets in Europe were mostly falling yesterday. Germany’s DAX (DE40) decreased by 2.30%, France’s CAC 40 (FR40) closed down 2.14%, Spain’s IBEX 35 (ES35) lost 1.90%, and the UK’s FTSE 100 (UK100) closed negative 1.01%.

Thursday’s economic news showed that the Eurozone unemployment rate for June unexpectedly rose, pointing to labor market weakness that is dovish for ECB policy. The Eurozone unemployment rate for June unexpectedly rose by 0.1 to 6.5%, indicating a weaker labor market compared to expectations of no change at 6.4%. The S&P Eurozone Manufacturing PMI for July from S&P was revised upward by 0.2 to 45.8 from the previously reported 45.6. ECB Governing Council spokesman Stournaras said yesterday that he still expects two more ECB rate cuts this year if disinflation continues. In addition, economic growth has been weaker than expected, which also supports lower interest rates.

Switzerland’s annualized inflation rate for July 2024 was 1.3%, unchanged from the previous month and in line with market expectations. The core rate, which excludes volatile items such as unprocessed food and energy, was unchanged at an annualized rate of 1.1% in July.

The US natural gas prices (XNGUSD) surpassed the $2.05 per MMBtu mark, weakly holding the week’s gains amid supply risks and expectations of higher demand. The latest data from the EIA showed that US utilities added 18 billion cubic feet of gas in the week ended July 26, half as much as financial markets had expected. That added to fears of declining US supply after reports that Freeport LNG, the second-largest US export facility, produces more than 2 billion cubic feet of gas daily and is on track to return to full production.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was down 2.49%, China’s FTSE China A50 (CHA50) lost 0.71%, Hong Kong’s Hang Seng (HK50) decreased by 0.23%, and Australia’s ASX 200 (AU200) was positive 0.28%.

The Australian dollar fell to its lowest level in three months as risk sentiment declined after weak US economic data added to recession fears. Markets feared that an expected interest rate cut by the Federal Reserve may come too late to stave off a recession. Domestically, the Australian dollar also came under pressure from softer-than-expected second-quarter inflation data, which reduced the chances of another rate hike by the Reserve Bank of Australia (RBA) this month.

S&P 500 (US500) 5,446.68 −75.62 (−1.37%)

Dow Jones (US30) 40,347.97 −494.82 (−1.21%)

DAX (DE40) 18,083.05 −425.60 (−2.30%)

FTSE 100 (UK100) 8,283.36 −84.62 (−1.01%)

USD Index 104.34 +0.58 (+0.57%)

Important events today:

• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
• – US Unemployment Rate (m/m) at 15:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.