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Tech Stocks Lead Dow Jones Rebound as First Half Nears Conclusion

June 28, 2023

In a much-needed boost for the market, the Dow Jones Industrial Average rebounded after a seven-day slump, as investors embraced tech stocks ahead of the end of the first half.

The index gained 0.63%, or 212.03 points, closing at 33,926.74. The S&P 500 and Nasdaq Composite also experienced substantial gains of 1.15% and 1.65% respectively, signalling renewed investor confidence.

Tech giants such as Nvidia, Meta Platforms, and Microsoft spearheaded the market rally, reversing the previous day’s downturn and propelling the tech-heavy Nasdaq to surge. Additionally, consumer discretionary and travel stocks saw significant gains, driven by Delta Air Lines’ improved financial guidance, resulting in a remarkable 6.8% increase in the airline’s stock.

However, Walgreens faced a downturn of 9.3% due to a cut in its full-year profit guidance and weaker-than-expected earnings.

Despite concerns of an impending recession, the market found solace in promising economic data. May durable goods unexpectedly increased, consumer confidence exceeded expectations in June, and new home sales surpassed forecasts.

These indicators suggested that the economy remained on solid ground, dampening recession fears. As the second quarter and first half of 2023 concluded, the Nasdaq emerges as the top performer, with a 29.5% gain for the year and a remarkable 10.9% surge since April.

The S&P 500 and Dow are also set to close the quarter with gains of around 6.6% and 2%, respectively, while the month of June itself is on track to deliver a nearly 5% increase for the S&P 500 and Nasdaq, and a 3.1% advance for the Dow.

Data by Bloomberg

On Tuesday, the overall market showed a positive trend with a gain of 1.15%. The Consumer Discretionary sector performed well, with a significant increase of 2.06%. Similarly, the Information Technology sector also had a strong day, rising by 2.04%.

The Materials sector experienced a gain of 1.40%, while the Industrials and Communication Services sectors saw increases of 1.26% and 1.12%, respectively. Real Estate showed a modest gain of 1.11%, followed by Financials at 0.71%. The Consumer Staples sector had a smaller increase of 0.34%, and Energy and Utilities sectors had minor gains of 0.23% and 0.04%, respectively.

However, the Health Care sector experienced a slight decline of 0.20%. Overall, it was a positive day for the market, driven by strong performances in the Consumer Discretionary and Information Technology sectors.

Major Pair Movement

The dollar index experienced a 0.24% decline, mainly due to gains in EUR/USD by 0.5%. This gain was attributed to the argument for raising rates at upcoming meetings, with reduced chances of rate cuts next year due to ongoing inflationary pressures.

However, various economic indicators such as durable goods, home prices, consumer confidence, and new home sales prevented the euro from reaching its previous high. As a result, two-year Treasury yields initially experienced losses but eventually rose by 9 basis points.

The dollar’s challenge lies in the fact that the Federal Reserve is still expected to lower rates more rapidly compared to the European Central Bank. Federal Reserve Chair Jerome Powell’s appearance at the ECB’s central banker’s conclave further underscored this expectation.

The decision to pause the June rate hike has made it difficult to anticipate more than one additional rate hike unless significant US data, such as the Personal Consumption Expenditures (PCE) and June ISM (Institute for Supply Management) reports, support it.

Sterling saw a 0.3% increase, aided by improved risk sentiment and a rise in two-year gilts yields by 0.13%. The Bank of England is attempting to catch up with persistent inflation. USD/JPY experienced a 0.35% gain due to rising Treasury yields and sustained demand for carry trades, as the Bank of Japan has maintained its ultra-easy policies this month.

The yuan remained stable, close to the level at which the Ministry of Finance intervened last year, with USD/CNH experiencing a 0.25% loss due to further adjustments by the People’s Bank of China. AUD/USD rose by 0.2%, although it has retraced its recent highs and is mostly consolidating following last week’s decline. USD/CAD gained 0.17% with minor assistance from slightly lower-than-expected data.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rises on ECB’s Hawkish Stance Amid Upbeat US Data

The EUR/USD pair climbed on Tuesday as the European Central Bank (ECB) signaled a hawkish stance on inflation, while the US Dollar struggled to capitalize on positive US economic data. ECB President Lagarde mentioned that inflation in the Eurozone could persist for some time, indicating a continued path of rate hikes.

This boosted the Euro’s performance. In the upcoming days, attention will shift to inflation data from Italy, Germany, and the Eurozone, which could further impact market sentiment. Despite the US Dollar’s slight decline, it maintained stability due to expectations of a potential rate hike by the Federal Reserve in July. US yields rose during the American session, keeping the EUR/USD pair around the 1.0950 level.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moved higher on Tuesday trying to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band of the Bollinger Bands which shows that there’s a possibility that the price will continue to move higher. The Relative Strength Index (RSI) is currently at 55, suggesting that the EUR/USD is still in a neutral position.

Resistance: 1.0965, 1.0995

Support: 1.0920, 1.0890

XAU/USD (4 Hours)

XAU/USD Consolidates as Risk Appetite Rises on Positive Economic Data

Gold (XAU/USD) continued its consolidation phase, fluctuating around the $1,920/30 range, as increased risk appetite drove demand towards more attractive assets. Asian stock markets received a boost from news of a stronger-than-expected Chinese economy, while upbeat economic data from the United States further contributed to positive sentiment.

Durable Goods Orders, Nondefense Capital Goods Orders, New Home sales, and CB Consumer Confidence all surpassed expectations, leading to gains in European indexes and a recovery on Wall Street. The US Dollar gained momentum as macroeconomic figures exceeded forecasts, causing yields to rise and putting pressure on gold (XAU/USD), which briefly dipped to $1,911.46 before recovering to approximately $1,914.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower to reach the previous low on June 23rd, 2023, and is expected to reach the lower band of the Bollinger Bands. Currently, the price is slightly higher than the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 40, indicating that the XAU/USD is in a neutral but slightly bearish condition.

Resistance: $1,921, $1,932

Support: $1,912, $1,903

CurrencyDataTime (GMT + 8)Forecast
AUDConsumer Price Index09:305.6% (Actual)
GBPBOE Gov Bailey Speaks21:30
JPYBOJ Gov Ueda Speaks21:30
USDFED Chair Powell Speaks21:30

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