US stock markets await the presidential debate
On US stock exchanges, trading is marked by caution. Investors look towards the upcoming first presidential debate and the important PCE Index, whose data will be released on Friday.
US stock markets closed with slight gains in the evening. The Dow Jones Index closed 0.1% higher at 39,164 points. The S&P 500 also rose 0.1%, while the Nasdaq Composite gained 0.3%. In total, there were 1,665 (Wednesday: 1,233) winners and 1,157 (1,526) losers. Unchanged closed 66 (119) titles.
Trading was marked by caution. One reason for this was the US presidential campaign. After stock market closing in the US, the two leading candidates, the incumbent US President Joe Biden and his challenger and former office holder, Donald Trump, will come together for the first television debate of the ongoing campaign. In addition, investors were waiting for the PCE Index for personal consumption expenditures, which will only be released on Friday. It is considered the preferred measure of the US Federal Reserve and could significantly influence market expectations regarding possible interest rate cuts in the later stages of the year.
The first interest rate cut by the US Federal Reserve, according to Raphael Bostic, President of the Atlanta Fed, would be the beginning of a series of rate cuts. "I think my hesitance (to lower interest rates) and my desire to be patient explain that we absolutely have to be sure that we will reach the 2% target again," Bostic said. He doesn't have that confidence at the moment. Bostic continues to assume that inflation and economic activity will decline to the point where the Central Bank can lower interest rates at the end of the year.
The latest economic data releases contained both light and shadow, but overall did not indicate that the US economy is running stronger than expected. For instance, the order intake for long-term economic goods increased by 0.1% month-on-month in May, while economists had predicted a decline of 1%. The number of initial claims for unemployment benefits fell slightly more than expected in the previous week. Regarding the Gross Domestic Product (GDP) of the first quarter, the third estimation showed a growth of 1.4%, which matched the consensus estimate; previously, a growth of 1.3% had been reported.
Meanwhile, the AI euphoria has received another setback: The chipmaker Micron provided a preview of its quarterly earnings that fell short of market expectations. Although Micron surprised the market with unexpectedly strong sales growth in the third quarter and earned more than anticipated, the stock price dropped by 7.1%.
Walgreens Boots Alliance saw a 22.2% decrease after the pharmacy chain lowered its profit forecast for the fiscal year, citing a "worse-than-expected US consumer environment" (Wall Street Journal reported that CEO Tim Wentworth also mentioned plans to close a significant number of its 8,600 US stores and reduce its stake in primary care provider VillageMD).
Levi Strauss saw a 15.4% decrease. The jeans manufacturer increased its second quarter revenue but not as much as anticipated. The full-year revenue forecast was only confirmed.
Blackberry gained 10.9%. The cybersecurity company did not fall as deep into the red in the first quarter as analysts had expected.
International Paper lost 7.2% after Brazilian Suzano called off the acquisition talks. Suzano had originally offered $15 billion for International Paper. International Paper, in turn, had announced earlier in the week that its acquisition of British packaging company DS Smith for over $7 billion in the US had hit a significant regulatory hurdle.
The US dollar gave back some ground on the forex market following the previous day's gains. The Dollar Index lost 0.1%. George Saravelos, Global Head of FX Research at Deutsche Bank, expects a stronger US dollar over the course of the year under the assumption that the Federal Reserve raises interest rates more slowly than other central banks. The US dollar is also underestimating the risks related to the US elections, which could provide safe-haven demand. "The dollar's rise in recent days is likely due in part to the market finally starting to price in a higher risk premium for this event," Saravelos said.
Bond yields retreated following the economic data, although they had risen more significantly on Wednesday. The yield on 10-year papers fell 4.1 basis points to 4.29%.
Gold prices rebounded after significant losses the previous day, supported by a weaker US dollar and declining market yields. The price of gold per troy ounce rose 1.2%.
Oil prices also rose. WTI and Brent crude prices increased by up to 1.4%. Prices were buoyed by the hope of increased demand during the current vacation season, as surprisingly high US oil inventories had weighed on them the previous day.
Further information on today's stock market action can be found here.
The US dollar's decline on the forex market was partly due to investors' perceived lower risk associated with the upcoming US elections, potentially increasing safe-haven demand for other currencies.
Wall Street analysts cited a "worse-than-expected US consumer environment" as a reason for Walgreens Boots Alliance's reduced profit forecast for the fiscal year, leading to a significant stock price decrease.
The Dow Jones Index, along with the S&P 500 and Nasdaq Composite, closed with slight gains, with the Dow Jones closing at 39,164 points, following cautious trading on US stock exchanges.
The gold price rebounded after significant losses, benefiting from a weaker US dollar and declining market yields, indicating investor caution and potential seeking of safe assets.
