Dow Jones Extends Winning Streak Amid Earnings Reports and Fed Speculations

　　

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The Dow Jones Industrial Average achieved its longest winning streak in over six years as it closed higher on Tuesday. The index rose by 0.08%, or 26.83 points, reaching 35,438.07. This marked the 12th consecutive positive session for the 30-stock index, the longest rally since February 2017. Meanwhile, the S&P 500 climbed 0.28%, and the Nasdaq Composite advanced 0.61%. Traders closely examined the latest earnings reports, with General Motors seeing a 3.5% decline despite raising its full-year earnings guidance, while General Electric surged nearly 6.3% due to stronger-than-expected second-quarter revenue.

Investors eagerly awaited the Federal Reserve’s policy decision, expecting a quarter percentage point rate increase. However, uncertainties lingered about future actions as the market sought clarity on the Fed’s stance towards inflation and its economic outlook. Amidst this backdrop, Wall Street analyzed results from major tech companies, including Alphabet and Microsoft, which were set to report after the market’s close. As earnings season progressed, around 79% of S&P 500 companies surpassed analyst expectations for the second quarter, offering optimism for the overall market performance.

Data by Bloomberg

On Tuesday, most sectors experienced modest gains, with all sectors combined showing a positive change of +0.28%. The Materials sector had the highest increase at +1.76%, followed by Information Technology at +1.19%, and Energy at +0.57%. Communication Services also saw a slight uptick of +0.42%, while Utilities and Commercial & Professional Services had more marginal gains of +0.22% and +0.42% respectively.

On the other hand, several sectors faced declines. Financials had the most significant drop, with a decrease of -0.73%, closely followed by Real Estate at -0.74%. Transportation experienced a notable decline of -0.63%, while Consumer Discretionary and Industrials both saw moderate decreases of -0.23% and -0.13% respectively. Health Care and Consumer Staples also ended the day in the red, but with marginal changes of -0.06% and -0.05% respectively.

Major Pair Movement

The dollar index slipped 0.07% as risk-on sentiment increased, reducing demand for the U.S. currency. Weak economic data weighed on the euro ahead of the Federal Reserve and European Central Bank (ECB) meetings. Sterling rose 0.4% with important supports preventing further decline. The prospect of ECB rate hikes diminished due to lackluster euro zone data in July, leading to a slide in EUR/USD.

EUR/USD fell 0.24%, marking its fifth consecutive daily loss to its lowest level since July 12, triggered by below-forecast U.S. CPI data. Dovish comments from ECB officials added to concerns about a potential rate hike beyond the expected 25bp increase this week. USD/JPY also declined 0.2% amid a broader risk-on sentiment and ahead of the Fed meeting. However, strong services data and rising Treasury yields provided some support.

Market expectations for a 25bp Fed rate hike were steady, but there were doubts about additional rate increases in the future. Speculation about increasing the pace of quantitative tightening instead of raising rates multiple times emerged. The BoJ meeting was anticipated to maintain unchanged policies, but some trimming of yen shorts was possible if there were any surprises.

Traders remained cautious due to significant upcoming U.S. data releases, including GDP, jobless claims, personal income, spending, core PCE, employment costs, and Michigan sentiment. Additionally, market participants kept an eye on earnings reports from major U.S. tech companies and beyond.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
AUD	Consumer Price Index q/q	09:30	1.0%
AUD	Consumer Price Index y/y	09:30	5.4%
USD	FOMC Statement	02:00 (27th)
USD	Federal Funds Rate	02:00 (27th)	5.50%
USD	FOMC Press Conference	02:30 (27th)

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