US stocks markets will be under the spotlight this week after the benchmark S&P 500 experienced its first week of losses after five straight positive weeks and yet more record highs. Earnings season also continues with Nvidia, the current market darling, reporting after the US close on Wednesday. The stock overtook Alphabet and Amazon recently to become the third most valuable company on Wall Street. The chipmaker has soared 48% so far this year after more than tripling in 2023 as demand for artificial intelligence drives huge orders for the company’s advanced semiconductors. Forward guidance and outlook for the rest of the year will be critically important for both the stock and wider indices. Options markets project at least a double digit move in the price on the back of the earnings announcement.
The greenback completed a fifth consecutive week of gains, though the dollar index again closed near its lows. The major theme for markets continues to be the scaling back of expectations of rate cuts, especially in the US which has boosted Treasury yields and the buck. Markets have gone from pricing in over 175bps of policy easing starting in March at the start of the year to currently around 100bps, kicking off in June.
The calendar is relatively thin Stateside this week with the FOMC minutes likely to be rather dated in light of the recent ongoing strength in the labour market and inflation data. However, it should be noted that expectations for price pressures are well in line with targets and banking activity point to the restrictive stance of policy having a dampening effect on the economy going forward. Support in the dollar Index sit around 103.86, with prices still above the 200-day simple moving average at 103.69.
Markets do get to see the latest PMI business survey which are released on Thursday. These are important forward looking economic indicators that are forecast to show renewed strengthening in global manufacturing, following on from several solid report out of Asian countries that normally lead in the cycle. However, PMIs could also signal ongoing softness in services, which at least in the euro area seem to be stagnating, albeit with rising prices. EUR/USD dropped to three-month lows last week below 1.07 though the major found buyers around this level. Regaining 1.08+ would give the euro a little more bullish momentum.
Major data releases of the week:
