Gold Retreats Amid Risk-On Appetite: Do We Continue To Rally?

Six of the 11 S&P 500 sectors finished with a gain of at least 1.0%, and the overall market sentiment was bolstered by healthy gains in major indices.

Market Open

The stock markets started the week on an optimistic note after a down week previously, with the S&P 500 sectors all opening in the green. Traders were eagerly anticipating the CPI inflation data in the U.S., set to release on Thursday, and had an eye on the 10-year yield, which was up slightly to 4.08%. Oil prices slipped, with WTI crude oil falling nearly 1% to around $82.

The market also showed anticipation regarding the inflation data scheduled for the week, with the headline CPI expected to come in at 3.3% year-over-year, up from last month’s 3.0% reading. Observers were keen to note potential easing in core inflation, reflecting recent home and rental price reductions.

With about 85% of S&P 500 companies reporting positive earnings surprises for the second quarter, the earnings season seemed to be exceeding expectations. The technology, consumer discretionary, and health care sectors led in positive surprises, lifting the projected earnings growth to -6.1% year-over-year, better than the expected -9.0%.

Intraday Developments

Throughout the day, the stock market showcased a summer-like grinding quality, with gains largely acquired at the start of trading. A mix of factors contributed to a relatively calm market, including light economic data, low volume, and minimal market-moving corporate news.

However, a “buy-the-dip” strategy prevailed, favoring blue-chip stocks and value plays. This led to a day marked by robust gains for the Dow Jones Industrial Average, with only three of its 30 components ending in the red.

Major highlights included

  • The Nasdaq Composite’s gradual climb, boosted by gains in companies like Amazon and NVIDIA, partially offset by weaknesses in Apple and Tesla.
  • A strong showing from the communications services sector, led by Alphabet and Meta Platforms, and financials, boosted by Berkshire Hathaway’s pleasing Q2 results.
  • Consumer credit for June surged by $17.9 billion, surpassing the expected $13.0 billion.
  • Gold futures settled lower, while the U.S. Dollar Index ticked up.
  • Notable gains in stocks like Monster Beverage and Booking Holdings, and general strength in industrials.
  • Moderna struggled, continuing recent losses that mirrored the broader biotech industry.

In the Treasury market, there was an imbalance between shorter tenors ticking higher and longer tenors giving back some gains. The 2-year note yield settled the session down one basis point to 4.77%, while the 10-year note yield settled up two basis points to 4.08%.

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Market Close

As the trading day came to a close, traders were met with a largely neutral landscape in both domestic and international markets. Gains across major U.S. indices reflected bullish sentiment around economic indicators and corporate performance. Here’s a detailed look at how the key indices and assets rounded off the session:

  • NASDAQ Composite Index: The tech-heavy index closed at 13,984.45, up 75.21 points or 0.54% from the previous session.
  • S&P 500 Index: This broader market gauge finished at 4,515.43, an increase of 37.40 points or 0.83%, extending its rally.
  • Dow Jones Industrial Average: The DJIA finished the day at 35,473.13, or +1.16% on the day. 
  • Gold Continuous Contract: The precious metal retreated to $1,971.40, down $4.70 or 0.24%, as investors favored riskier assets.

Six of the 11 S&P 500 sectors finished with a gain of at least 1.0%, and the overall market sentiment was bolstered by healthy gains in major indices.

Looking Ahead

Traders are setting up for tomorrow, focusing on economic data releases such as the July NFIB Small Business Optimism Index, the June Trade Balance Report, and the June Wholesale Inventories Report. Earnings results from companies like Lucid Group, Palantir Technologies, Duke Energy, and UPS will also be in the spotlight.

The countdown to the July inflation report on Thursday continues, seen as a vital factor for the Federal Reserve’s decision-making regarding interest rate hikes. Moreover, traders will likely pay close attention to upcoming earnings reports as the earnings season begins to wind down. The week promises to present a nuanced picture of the economy, potentially determining whether or not the markets put in another long-term high, or the markets continue to rally. 

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