Starting August Market: Mixed Earnings Impact S&P 500

　　

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Starting in August, the S&P 500 experienced a 0.27% decline, with the Nasdaq Composite also dropping by 0.43%, while the Dow Jones Industrial Average gained 0.2%. Several companies reported mixed results, leading to varied stock movements. Pharmaceutical giant Merck pulled back 1.3% despite exceeding revenue expectations, while Caterpillar’s strong results boosted shares by 8.9%. On the other hand, Pfizer fell 1.2% due to declining Covid product sales, and Uber slid 5.7% on mixed earnings. JetBlue also tumbled 8.3% after reducing its guidance due to slowing domestic travel.

Market analysts attributed these fluctuations to overbought conditions, given the market’s strong performance this year and solid quarterly earnings. Despite over 160 S&P 500 constituents reporting second-quarter results, with 82% exceeding earnings expectations, analysts anticipate a 7.1% earnings decline from a year ago and a third consecutive quarter of falling profits. Economic indicators, including job openings data and manufacturing data showing a continued contraction, were also closely assessed by Wall Street.

Data by Bloomberg

On Tuesday, all sectors experienced a 0.27% decline, except for Industrials, which rose by 0.32%, and Information Technology, which saw a slight increase of 0.09%. Financials and Real Estate both dipped by 0.03% and 0.13%, respectively. Communication Services and Materials experienced greater losses, with declines of 0.29% and 0.44% respectively. The Energy sector suffered a 0.46% decrease, while both Consumer Staples and Health Care declined by 0.51%. The Consumer Discretionary sector faced the most significant setback, with a notable 1.15% decline, and Utilities also experienced a considerable 1.26% drop.

Major Pair Movement

EUR/USD is trading lower due to influences from China’s yuan and U.S. interest rates. The yuan’s recent appreciation against the dollar stalled, raising concerns about China’s economy and leading to yuan selling. Eurozone data also indicates a slowdown, potentially resulting in a less hawkish ECB stance and weighing on EUR/USD rates.

U.S. yields remain elevated, and investors expect the Fed to keep rates higher for longer, increasing the dollar’s yield advantage over the euro. Key U.S. data risks are in focus, and upbeat data could further support U.S. rates and the dollar. USD/CAD eyes cloud base support at 1.3311 amid a gloomy global growth outlook, while GBP/USD faces relentless bearish pressure as the BoE’s more-hawkish rate outlook diminishes. USD/JPY is on track to revisit June’s 2023 peak with support at 142. Resilient U.S. data and a soft landing narrative are expected to strengthen the USD.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
NZD	Employment Change q/q	06:45	1.0% (Actual)
NZD	Unemployment Rate	06:45	3.6% (Actual)
USD	ADP Non-Farm Employment Change	20:15	191K

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