Weekly News 2023/07/24-2023/07/28

 U.S. stocks closed higher on Friday. The Dow rose 176.57 points, or 0.50%, to 35,459.29; the Nasdaq rose 266.55 points, or 1.90%, to 14,316.66; the S&P 500 rose 44.82 points, or 0.99%, to 35,459.29. 4582.23 points. Both the Dow and the S&P 500 posted their third straight weekly gains. For the week, the Dow rose 0.66% and the S&P 500 rose 1.01%, both rising for the third straight week. The Nasdaq rose 2.02% for the week.

Earnings are still the focus of the market. Consumer goods giant Procter & Gamble, a Dow component, beat earnings and revenue expectations. Intel returned to profitability. Roku's revenue and earnings beat expectations. Ford Motor Company's performance exceeded expectations and raised its performance guidance. The company said adoption of its electric vehicles was taking longer than expected due to higher costs.

In terms of economic data, an inflation data closely watched by the Federal Reserve released on Friday showed that U.S. inflation showed signs of further cooling in June. The U.S. Department of Commerce reported that excluding food and energy, the U.S. core personal consumption expenditures (PCE) price index rose only 0.2% month-on-month in June, in line with market expectations. The so-called core PCE price index rose 4.1% year-on-year, the lowest level since September 2021. The expected value was 4.2%.

Daniel Ivascyn of PIMCO said investors had better remain vigilant, as it is not foolproof. He wasn't contradicting the consensus that Fed tightening was coming to an end. He said the Fed could raise rates again in September if inflation data supports it, but he also said that even if rates were left unchanged by then, the risk of rate hikes could persist for some time.

 Intel's (NASDAQ: INTC) second-quarter revenue was US$12.9 billion, exceeding the expected US$12.02 billion; earnings per share were US$0.35, far exceeding the expected loss of US$0.04. Intel expects third-quarter revenue of US$12.98-13.98 billion, with a median of US$13.28 billion exceeding expectations.

AMD (NASDAQ: AMD) announced on Friday (July 28) that it will invest about US$400 million in India in the next five years and will build its largest design centre in Bangalore, the technology centre. AMD pointed out at the meeting on Friday that it will open a new design centre campus in Bengaluru by the end of this year and create 3,000 new engineering jobs within five years. The new campus is expected to cover an area of 500,000 square feet and will increase AMD's offices in India to 10, where the company currently employs more than 6,500 people.

Microsoft (NASDAQ: MSFT) emphasized to investors that graphics processing units (GPUs) are a key raw material for its fast-growing cloud computing business and that the business could suffer if it can't get the infrastructure it needs. There are three explicit mentions of GPUs in Microsoft's filing, with the company writing, “Our equipment is primarily manufactured by third-party contract manufacturers, and if they cannot supply or meet our requirements, there are few qualified alternative suppliers. Long-term Disruptions could impact our ability to meet consumer demand.”

In the second quarter, Ford's (NYSE: F) revenue increased by 12% year-on-year to US$45 billion, while its net profit nearly tripled to US$1.9 billion. But the company also warned of a bigger-than-expected loss in its electric vehicle business, which has been hit by severe price competition in some parts of the EV market. Ford now expects its electric vehicle division to lose $4.5 billion this year, up from a previous forecast of $3 billion.

 This week Bitcoin fell 1.93 percent to $29,199. The world's largest cryptocurrency by market cap has traded below $30,000 for most of the week. Ethereum fell 1.02% this week to $1,867. This week, Bitcoin lost support at $30,000 on Sunday after briefly touching $30,291 and has remained below $30,000 since then.

“The fact that Bitcoin is trading below $30,000 is due to a combination of factors, including a lack of positive catalysts in the short term and the lack of new developments at the moment,” said cryptocurrency market analyst Jonas Betz.

The Federal Reserve raised interest rates by 25 basis points to 5.25% to 5.5% on Wednesday, in line with market expectations, and borrowing costs rose to the highest level in 22 years. But investors remained optimistic after Federal Reserve Chairman Jerome Powell said his next rate decision would depend on data, suggesting the central bank may pause its September rate hike cycle. “Interest rates are currently at 22-year highs, which could ultimately strengthen the dollar. In the short term, this is bearish for bitcoin and cryptocurrency prices. Traditionally, when central banks raise interest rates, it can be negative for various asset classes.” Investor sentiment has a negative impact, Lucas Kiely, chief investment officer at digital asset platform Yield App, told Forkast.

“Higher interest rates may continue to increase borrowing costs, reducing liquidity in the cryptocurrency market. In recent history, the cryptocurrency market has generally been immune to macroeconomic events.”

On Friday, the global cryptocurrency market cap was $1.18 trillion. Bitcoin has a market cap of $567 billion, or 48.1 percent of the market, while Ethereum has a market cap of $225 billion, or 19.1 percent.

 Gold rose on Friday after sharp losses on Thursday, with the dollar retreating slightly as signs of cooling U.S. inflation raised bets that the Federal Reserve could end its monetary tightening cycle. Data on Friday showed that annual U.S. inflation slowed sharply in June. Data from the U.S. Commerce Department showed that the personal consumption expenditures (PCE) price index rose 0.2% last month.

“The core PCE, which the Fed is looking at, is in line with expectations. That's not a surprise. Also, the dollar is weaker today, which is giving gold a little bit of a boost,” said Edward Meir, metals analyst with research services at Marex. As long as inflation data continues to decline, the Fed doesn't mind seeing stronger data. The Fed may have finished raising rates and generally speaking, I would be inclined to buy gold on dips.

Gold fell nearly 1.4 percent on Thursday, its worst day in nearly a month after data showed the U.S. economy grew faster than expected in the second quarter and the number of Americans filing new claims for jobless benefits fell last week, boosting the dollar. However, the dollar slipped 0.16% on Friday, making gold less expensive for holders of other currencies.

Phillip Streible, chief market strategist at Blue Line Futures, said: “Gold has been hit in a chain. First, the number of initial jobless claims was better than expected, indicating the strength of the US labor market. No one is seeing it now either. So it paves the way for higher rates for a longer period of time.”

Spot silver rose 0.83% to $24.33 an ounce; platinum fell 0.23% to $933.81; palladium was nearly flat at $1,241.41.

 Oil prices climbed on Friday, posting their fifth straight weekly gain, with investors optimistic that healthy demand and supply cuts will keep prices on the rise.

Growing expectations that policy tightening by major central banks such as the Federal Reserve and the European Central Bank is nearing an end has boosted the outlook for global growth and energy demand, boosting risk appetite in broader financial markets.

Both benchmarks rose nearly 5 percent this week, their fifth straight weekly gain, helped by the OPEC+ alliance of oil producers announcing supply cuts earlier this month. Both indexes are on track to rise more than 13% this month.

Both benchmarks fell as much as $1 in early trade, with Price Futures Group analyst Phil Flynn saying investors took profits after U.S. crude rose above $80 a barrel.

Bullish demand expectations were boosted on Thursday after data showed that U.S. gross domestic product (GDP) rose at a faster-than-expected 2.4% annualized rate in the second quarter, supporting Federal Reserve Chairman Jerome Powell's view that the economy can achieve “ Soft landing”.

PVM analyst Tamas Varga said investor perceptions that peak interest rates are looming are growing, while the chances of the U.S. avoiding a recession are growing. Some of the euro zone's major economies showed surprising resilience in the second quarter, new data on Friday showed, even as a range of indicators pointed to renewed weakness ahead as manufacturing sluggish and services sector slowed.

On the supply side, U.S. oil rigs fell by one oil rig this week to 529, the lowest since March 2022, data from energy services firm Baker Hughes showed. This is a measure of future supply.

 The yen suffered its most volatile session in months on Friday after the Bank of Japan tweaked its yield-curve control policy, leaving investors wondering whether its massive stimulus program was looming toward an eventual reversal.

On Friday, the yen was down 1.13% at 141.05 per dollar. The Bank of Japan said it would buy 10-year Japanese government bonds at a rate of 1.0 percent in a fixed-rate operation and keep its short-term interest rate at minus 0.1 percent, with the 10-year government bond yield target unchanged at around 0 percent.

Meanwhile, the dollar fell against a basket of currencies as investors largely shrugged off fresh data showing a slowdown in inflation as they continued to digest decisions from several central banks this week for the outlook for monetary policy.

Annual U.S. inflation in June was the lowest in more than two years and core price pressures eased, a trend that if sustained could push the Fed closer to ending its fastest rate-hiking cycle since the 1980s.

The dollar index fell 0.049% to 101.630; the euro rose 0.42% to $1.1019. Adam Button, chief currency analyst at ForexLive, said: “The focus is back on economic growth and how high the U.S. economy can sustain growth without inflation rising again. There is a big difference between the ultimate direction of inflation and the Fed's tolerance.”

Earlier this week, the Federal Reserve and the European Central Bank announced interest rate hikes, as expected. Chances have risen that the European Central Bank will pause interest rate hikes in September, with inflationary pressures showing signs of temporary easing and recession fears growing.

OnePro Special Analyst

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