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Wall Street Rebounds as Dow Rises and Investors Await Inflation Data and Earnings Season Kickoff

July 11, 2023

The Dow Jones Industrial Average rebounded on Monday, recovering from a previous week of losses. Investors were optimistic ahead of upcoming inflation data and the start of the second-quarter earnings season.

The Dow rose by 0.62%, adding 209.52 points, while the S&P 500 increased by 0.24%, and the Nasdaq Composite saw a gain of 0.18%. This positive momentum ended a three-day losing streak for the major averages.

The consumer price index report is scheduled for Wednesday, followed by the producer price index on Thursday, which will provide further insights into inflation and wholesale price pressures.

Last week, the S&P 500, Nasdaq Composite, and Dow experienced declines of 1.16%, 0.92%, and 1.96%, respectively. Despite weaker-than-expected nonfarm payrolls in June, concerns over potential Federal Reserve rate hikes were raised due to slightly stronger-than-anticipated wage growth.

However, investors will be closely watching the quarterly reports of finance giants BlackRock, JPMorgan Chase, Wells Fargo, and Citigroup, which will mark the beginning of the second-quarter earnings season.

All sector performances had an overall increase of 0.24%.

Data by Bloomberg

On Monday, all sectors in the market saw a modest overall increase of 0.24%. The Industrials sector performed the best, gaining 1.39%, followed by Health Care with a rise of 0.81% and Energy with a gain of 0.76%. Financials also had a positive day, increasing by 0.44%, while Real Estate and Consumer Discretionary sectors experienced smaller gains of 0.35% and 0.11% respectively.

Consumer Staples had a minimal increase of 0.03%. On the other hand, Materials and Information Technology sectors had slight declines of -0.01% and -0.02% respectively. Utilities and Communication services sectors performed the worst, with declines of -0.42% and -0.92% respectively.

Major Pair Movement

The dollar index experienced a decline of 0.29% as last week’s disappointing payrolls report continued to put pressure on Treasury yields, potentially leading to a further decrease in the U.S. currency. While Japanese Government Bond (JGB) and bund yields rose, Treasury yields fell, contributing to the downward trend.

Market sentiment was influenced by Fed speakers’ comments and a New York Fed survey indicating a decrease in household inflation expectations. The upcoming U.S. CPI report on Wednesday is highly anticipated, with the possibility that even a minor shortfall could result in a core inflation rate below 5%, which could support dovish views.

EUR/USD saw a gain of 0.26%, reaching its highest level since June, supported by a surge in the 2-year bund-Treasury yield spreads. Despite concerns about the eurozone investor mood and deflationary data from China, which could have negative implications for German businesses, the euro remained strong.

USD/JPY declined by 0.63% due to falling Treasury yields, with 10-year JGB yields approaching the Bank of Japan’s 50 basis points cap. The pair broke below key support levels, leaving speculators who were net long in a precarious position.

Sterling initially faced losses but eventually surpassed previous peaks, reaching its highest level since April 2022. Bank of England Governor Andrew Bailey emphasized the importance of combating UK inflation, which currently stands as the highest among the G7 countries.

AUD/USD and USD/CNH experienced minor declines of 0.2% and 0.02% respectively.

Picks of the Day Analysis
EUR/USD (4 Hours)

Weaker US Dollar Boosts EUR/USD as Market Awaits US Inflation Data

The EUR/USD pair continued its upward climb, propelled by a weaker US Dollar and positive momentum. The focus now turns to upcoming US inflation data, which is expected to shape the next direction for the pair. The US Dollar Index (DXY) fell to a three-week low, vulnerable to further losses due to declining inflation expectations and lower bond yields.

Additionally, the positive performance of Wall Street stocks exerted pressure on the US Dollar. Meanwhile, Eurozone data revealed a decline in the Sentix survey, suggesting weak GDP growth in the region.

Weaker US Dollar Boosts EUR/USD as Market Awaits US Inflation Data.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moved higher on Monday and created a push to the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band with still wider bands, indicating a potential for further upside towards the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 69, suggesting a bullish trend is in for the EUR/USD.

Resistance: 1.1033, 1.1057

Support: 1.1002, 1.0965

XAU/USD (4 Hours)

Spot Gold (XAU/USD) Prices Slide Amid Market Mood Swings and US Inflation Expectations

Gold prices experienced a downward trend, briefly reaching a low of $1,912.66 during London trading hours but recovering some losses following the opening of Wall Street. The initial strength of the US Dollar was fueled by concerns over China-US tensions and their impact on global growth.

However, a more positive sentiment during American trading hours led to a weaker USD as US stock indexes rebounded. With limited action in equities due to the absence of significant data, XAU/USD remained largely unchanged for the day.

The market focus remains on central banks’ monetary policies, particularly the potential extension of tightening measures, driven by policymakers’ concerns about persistent inflation. The upcoming release of the June Consumer Price Index (CPI) in the United States is expected to provide fresh insights into the Federal Reserve’s future actions, making it a significant event for financial markets.

Gold (XAU/USD) Prices Slide Amid Market Mood Swings and US Inflation Expectations

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving flat on Monday, between the middle band and the upper band of the Bollinger Bands. Currently, the price is moving in a flat movement, suggesting that there’s a possibility that the price will move in a tight consolidation. The Relative Strength Index (RSI) is currently at 56, indicating a neutral stance for XAU/USD with a slight potential bullish movement.

Resistance: $1,932, $1,946

Support: $1,920, $1,909

Economic Data
CurrencyDataTime (GMT + 8)Forecast
GBPClaimant Count Change14:0020.5K