Stock futures were slightly down on Wednesday night as investors evaluated the latest corporate earnings reports. The Dow Jones Industrial Average futures lost 43 points or 0.1%, while the S&P 500 futures dropped 0.2%, and Nasdaq-100 futures slipped 0.3%. Investors examined various reports released after the bell, including Tesla and IBM. Tesla fell 5% after reporting that its net income and GAAP earnings dropped by over 20% from a year ago. However, IBM rose almost 2% after expanding its margins.
Although investor attention has mostly shifted to quarterly results, reporting firms have not driven the broader market, according to William Northey, senior investment director at U.S. Bank Wealth Management. The S&P 500 closed slightly below its flatline on Wednesday, while the Nasdaq Composite ended higher, and the Dow closed 0.2% lower. Investors anticipate more earnings reports on Thursday, including releases from Alaska Air and AT&T.
Data by Bloomberg
On Wednesday, all sectors experienced a slight dip of 0.01%. The utility sector saw the biggest gain, rising 0.78%, followed by real estate at 0.55% and health care at 0.28%. Financials and consumer discretionary also saw positive gains at 0.26% and 0.02%, respectively. On the other hand, communication services experienced the biggest drop at 0.72%, while the materials and energy sectors declined by 0.31% and 0.25%, respectively. The information technology sector also fell slightly by 0.13%, while consumer staples and industrials decreased at 0.05% and 0.07%, respectively.
Major Pair Movement
Data by VT Markets MT4
The dollar index rose on Wednesday but subsequently retreated from its highs after being rejected at Monday’s peak. Along with the earlier-fueling risk-off flows, the gains in 2-year Treasury-bond spread yields also reached a zenith. The euro zone’s above-forecast core inflation readings limited the euro’s losses against the dollar, while the United Kingdom’s significantly above-forecast March inflation pushed sterling broadly higher. Sterling was left with 0.13 percent gains after falling from its highs, with this week’s lows concentrated near the rising 21-day moving average support. In late trade, the EUR/USD had recovered from its lows between Tuesday and Monday but was still down 0.13 percent.
As a result of the BoJ’s reaffirmation of its yield curve control policy, rising Treasury-JGB yield spreads to support the USD/JPY. JGB yields are once again being capped. Treasury yields are increasing as a result of the markets’ pricing out of anticipated rapid Fed rate cuts during March’s banking crisis and in response to US core inflation increasing to 5.6% and the unemployment rate decreasing to 3.5% in March. Wednesday’s elevated European inflation readings suggest that inflation is more persistent than anticipated and will require the ECB and BoE to raise rates further and for an extended period.
However, the market struggles to price in more than one additional 25bp Fed raise, followed by roughly 50bp of cuts by the end of the year. Divergent central bank policy outlooks place the dollar index in a precarious position above February and April’s trend lows of 100.80/78.
Technical Analysis
EUR/USD (4 Hours)
The EUR/USD pair rose as the US Dollar lost gains on Wednesday, but pulled back to 1.0950 due to market fluctuations. Eurozone inflation remained high at 6.9% YoY in March, with the ECB suggesting more rate hikes ahead. The ECB Chief Economist expects a hike in May, with data determining the size, and the ECB will release meeting minutes on Thursday. The odds of a rate hike in May by the Fed are 83%. The EUR/USD pair is waiting for the next catalyst to move above 1.1000 or downside. Market sentiment may benefit the Euro if the risk appetite is high.
According to technical analysis, the EUR/USD experienced a slight decrease on Wednesday and broke its previous support level. It is currently trading around the middle band of the Bollinger band. It is predicted that the market will continue to consolidate, with the possibility of a downward movement toward the support level at 1.0923. The Relative Strength Index (RSI) currently stands at 47, indicating a potential slight decrease for the EUR/USD.
Resistance: 1.0975, 1.1026
Support: 1.0923, 1.0877
XAU/USD (4 Hours)
On Wednesday, financial markets started in risk-off mode, leading to a firmer demand for the US Dollar across the FX board. As a result, XAU/USD fell to its lowest in over two weeks but has since grounded higher to trade around $1,995 a troy ounce. This sentiment was triggered by US Federal Reserve officials’ suggestions of the need for more rate hikes to control inflation in the United States. The UK’s annual Consumer Price Index was higher than anticipated in March, while the Eurozone confirmed the annual Harmonized Index of Consumer Prices at 6.9% in the same period. Government bond yields are also on the rise due to inflation-related concerns. The US indexes are currently trading mixed, while Asian and European indexes edged lower.
According to technical analysis, XAU/USD has rebounded after experiencing a significant drop on Wednesday. It is currently trading at the middle band of the Bollinger band, indicating a neutral trend in the long term. The Relative Strength Index (RSI) is hovering around the 45 levels, suggesting the potential for a slight upward movement.
