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Stocks dip amid tech pullback, inflation data eyed

March 14, 2024

On Wednesday, the stock market experienced a slight downturn, with the S&P 500 and Nasdaq Composite falling due to a pullback in tech shares, including notable declines in Nvidia, Meta Platforms, and Apple. This shift came after a record-setting session, spurred by U.S. inflation data that met expectations, causing investors to remain cautious about future Federal Reserve actions. Amid this backdrop, the dollar index saw a modest decline, and attention is now turned to upcoming economic data releases and central bank meetings, which will further guide market sentiment and monetary policy outlooks.

Stock Market Updates

The stock market experienced a slight retreat on Wednesday, following a record-breaking session the previous day, with the S&P 500 index falling by 0.19% to close at 5,165.31. The tech-heavy Nasdaq Composite also saw a decline, dropping 0.54% to end the day at 16,177.77. Conversely, the Dow Jones Industrial Average managed a modest gain, adding 37.83 points to close at 39,043.32. This shift in market dynamics was partly due to a cooldown in Nvidia’s shares, which fell by 1.1%, contributing to broader losses in the tech sector, including declines in Meta Platforms and Apple shares.

The decline in tech stocks, including a 2% slide in the VanEck Semiconductor ETF, reflects a broader trend of profit-taking following significant gains in the sector, particularly after Tuesday’s rally. According to Adam Crisafulli, founder and president of Vital Knowledge, despite the day’s pullback, the sentiment towards AI and data centers remains overwhelmingly positive, fueled by anticipation for Nvidia’s upcoming GTC conference. This optimism comes in the wake of a winning session on Wall Street, buoyed by U.S. inflation data for February aligning with expectations, which had previously ignited a more than 1% jump in both the S&P 500 and Nasdaq.

The recent U.S. inflation report indicated a rise in core inflation, stripping out food and energy costs, which was higher than anticipated last month. This has led to a cautious approach among investors, as explained by Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. With the Federal Reserve’s monetary policy and the upcoming meeting on March 19 in sharp focus, investors are keenly observing for signs of how the central bank will address these inflation trends, with Fed Chair Jerome Powell expected to maintain a data-dependent and neutral stance.

Concerns over inflation are further compounded by the increasing costs in the services sector, suggesting that the economic landscape might be more complex than initially perceived. This nuanced view of the economy is crucial as investors and analysts alike parse through the latest CPI data, seeking indications of future monetary policy directions. Moreover, the market is also reacting to corporate news, such as Dollar Tree’s 14% drop following its fourth-quarter results, with more inflation data expected to be released soon, providing further insights into the economic climate. 

Currency Market Updates

On the currency front, the dollar index saw a slight decline of 0.22%, erasing recent gains spurred by job and CPI reports that had previously lifted Treasury yields. This comes ahead of crucial data releases set for Thursday, which are expected to influence the Federal Reserve’s projections for interest rate adjustments in the coming year. Meanwhile, the EUR/USD pair gained, and the market is closely monitoring the European Central Bank’s rate decisions, amid a global financial landscape attentively awaiting the next moves by major central banks, including the Federal Reserve and the Bank of Japan, in response to inflationary pressures and economic data.

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

EUR/USD gains ground amid weaker dollar and anticipation of central banks’ easing measures

On Wednesday, the EUR/USD pair saw an uplift, reaching three-day highs in the 1.0960/65 range as the US Dollar weakened, driven by a growing appetite for risk and a drop in the USD Index below the 103.00 mark. This movement coincided with a rise in both US and German bond yields, reflecting broader financial market trends. Despite expectations for the Federal Reserve and the European Central Bank to begin easing monetary policy by early summer, likely in June, the pace of interest rate cuts could differ between the two, adding an element of uncertainty. However, the prospect of simultaneous easing measures by both banks, against the backdrop of a stronger US economy compared to the euro area’s slower fundamentals, suggests a potential medium-term strengthening of the Dollar. This scenario hints at a possible correction for the EUR/USD, initially towards its year-to-date low of around 1.0700, with further downside potential in the longer term.

Chart EUR/USD by TradingView

On Wednesday, the EUR/USD moved higher and reached the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement, and may reach the resistance level. Notably, the Relative Strength Index (RSI) maintains its position at 62, signaling a bullish outlook for this currency pair.

Resistance: 1.0984, 1.1079

Support: 1.0907, 1.0812

 Economic Data
CurrencyDataTime (GMT + 8)Forecast
USDCore PPI m/m20:300.2%
USDCore Retail Sales m/m20:300.5%
USDPPI m/m20:300.3%
USDRetail Sales m/m20:300.8%
USDUnemployment Claims20:30218K

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