The European Cash Market Open is about to take place, and all stocks are in the red — the market condition. The poor performance within the futures market reflects yesterday’s selloff. During yesterday’s market, even the Dow Jones sharply depreciated. Previously, Dow Jones showed strong resilience while other competitors declined. The Dow ended the Day 0.98% lower. However, the European indices, such as the DAX and CAC, are correcting upwards, but Asian indices are down. What is driving stocks lower?
Dow Jones - Will Cisco Earnings Boost the Price?
The Dow Jones has been the most resilient US equity-based index due to positive earnings and exposure to defensive stocks. The index declined by 1.59% in August compared to 3.30% for the S&P 500 and 4.41% for the NASDAQ. However, short-term traders should note that even though the Dow Jones is experiencing strong bullish waves at times, sellers are quickly entering the market. Yesterday, the Dow Jones saw its most significant decline since May 2023.
Multiple factors influence the decline. Firstly, Chinese data were significantly poorer than previous expectations. Industrial Production levels in China read lower than the 4.3% prediction. Industrial Production read 3.7%, and Chinese Retail Sales read only 2.5%, the weakest since January. Chinese data is known to be an indication of the global economic condition. Currently, the data indicates a worldwide slowdown and stagnation. Economists also noted that China is a significant market for many large US Tech companies. An economic slowdown can also be seen in other regions, such as the UK, which saw Monthly Unemployment Claims rise to 29,000, 10,000 more than expected.
Additionally, robust retail sales data from yesterday added doubt that the Federal Reserve’s inflation battle is over. Investors are concerned that another interest rate hike and a slowing economy can significantly pressure stocks. However, some investors also lean towards the positive retail sales data, which indicates resilience, while company earnings this week have been better than expectations. Yesterday, Home Depot, which holds a weight of 6.15%, saw earnings and revenue higher than Wall Street’s previous predictions. Home Depot's earnings per share read 4% higher than expected, and the company Revenue read 1.57% higher. Investors should note that only two of the 30 stocks within the Dow Jones rose did not decline on Tuesday.
The European stock market started the day in the red but rose quickly after the session opened. As a result, US stocks have also slightly risen, but indications will likely materialise if the price rises above $35,061. However, if the price declines back below the 75-bar moving average, sales signals can again arise. This evening, Cisco will also release its earnings per share and can influence the price movement of the Dow Jones. Cisco declined in the latest session but is expected to see higher earnings and revenue compared to the previous quarter. Higher than-expected earnings and revenue can support the stock individually as well as the Dow Jones.
XAU/USD
The price of Gold against the Dollar is experiencing a downward trend but is experiencing smaller waves and quick corrections. As a result, traders are mainly concentrating on short-term trades to avoid the price moving against them. The US Dollar is declining in value this morning, despite economists believing the Fed will again hike. Due to the Gold-Dollar correlation, the price of Gold has risen today after two days of consecutive declines. However, if the price declines below $1,902.65, the Moving Averages and the Parabolic SAR will indicate a drop back to $1,899.
Investors will be monitoring the FOMC Meeting Minutes tonight, as it is likely to indicate how potential interest rate hikes are. Further interest rate hikes can pressure the stock market and support the US Dollar. As a result, the price of Gold may also decline. However, if rate hikes become less likely, the Dollar will likely fall, and Gold may find some support.
According to the US Commodity Futures Trading Commission, last week, sellers closed 16.445K contracts, while buyers added 0.633K contracts, indicating the beginning of the consolidation of the short positions in the asset. However, investors should note that there are still more than double the sales contracts compared to buyers.
Summary:
- Asian stocks decline; European stocks start in the red but bounce back. The Dow Jones saw its most significant decline since May 2023, but can this provide an opportunity for buyers to purchase the discounted price?
- Home Depot's earnings per share read 4% higher than expected, and the company Revenue read 1.57% higher.
- Analysts expect Cisco to see higher earnings and revenue compared to the previous quarter, which may support the Dow Jones.
- Gold Traders close sell positions while buyers add, but sellers still hold the lead.
