Stocks Decline for 3rd Day Despite Positive Earnings

Stocks decline for a third consecutive day despite the positive earnings data over the past 24 hours. Applied Materials, Inc and Walmart confirmed earnings and revenue were higher than expected. However, all three US indices sharply declined, mainly due to higher interest rates being priced into the market. The main concern for investors is bond yields, which were on the rise again. Higher bond yields can create lower demand for the stock market as investors will deem bonds with high yields as a safer investment with attractive returns. 

The ten-year T-Bills saw yields increase to 4.307%, and the 30-year yield rise to 4.411% marking the highest settlement since 2011. In addition to this, investors are cautious that another interest hike can sharply trigger lower consumer demand. The main concern from the Federal Reserve is the risk of inflation rising or becoming more difficult to bring down 2%. The US inflation rate rose from 3% to 3.2%, and core inflation data fell from 4.8% to 4.7%. If inflation for August does not read lower, the Federal Reserve will become more willing to hike despite the economic risks it will bear. 

The US Dollar Index experienced bearish and bullish impulse waves over the past 24 hours. This is mainly due to investors attempting to determine the true intrinsic value of the Dollar now higher interest rates are becoming a reality. The Dollar this morning is declining by 0.11%; however, if the stock market and Gold struggle throughout the day, the Dollar may rise again. The weakest currency during this morning’s Asian session is the British Pound. The Pound is declining against all major currencies due to poor Retail Sales data, which sharply fell to -1.2%. The figure is the poorest since October 2022; economists advise it is mainly due to poor weather conditions. However, investors are also contributing to the decline partially to high mortgage rates and low consumer confidence. 

NASDAQ - Stocks Decline for 3rd Day Despite Positive Earning

The NASDAQ was the worst-performing index for a third consecutive week. The price this week so far has declined by 2.30% and by 6.55% over the past three weeks. The extremely high bond yields, positive US economic data and poor Chinese data are influencing the NASDAQ’s decline. 

However, investors contemplate purchasing the discounted price as the index reaches a previous support level. The price action theory indicates buyers re-enter the market as the price declines. The price has significantly declined and is trading close to oversold levels on the Relative Strength Index. In addition to this, the price is also at a support level from June 26th. Buy indications may arise if the price breaks above $14,733. However, investors should note an upward price movement may find resistance at $14,798.50.

NASDAQ 12-Hour Chart on August 18th

The fundamentals are not all doom and gloom. Investors are also aware that company earnings from this week have been generally positive. Last night, Applied Materials, the 25th most influential stock within the NASDAQ, saw positive quarterly earnings data. The company’s earnings read 9% higher than expectations, and revenue was 4.25% higher. The individual stock rose by 1.79%. The day before, Cisco Systems, the 13th most influential stock, announced higher-than-expected earnings and revenue. Cisco System stocks rose by 3.20%. 

So we can see here there are some positive price movements amongst components. Investors hoping to buy the discounted price will ideally aim for bond yields to retreat which may support the stock market. Traders will also be closely monitoring this, and individuals will want to avoid catching a falling knife. The main driver of the downward trend is the top ten influential stocks which have all declined expected Alphabet stocks. 

A critical earnings report next week will be from NVIDIA on Wednesday after the market closes. NVIDIA is the fourth most influential stock holding a weight of 4.28%. Analysts expect NVIDIA to report significantly higher earnings and revenue than in previous quarters. 

EUR/CHF 

The exchange rate has been declining over the past 2-weeks mainly due to the depreciation of the Euro against the market as a whole. However, the rise has risen recently as the price fell to the previous support level. The current indications from the Stochastic Oscillator and Moving Averages are that the price will continue to grow between 0.95667 to 0.95848. However, traders should note that the price action has only formed a retracement. For a stronger buy signal, traders will monitor a breakout of the 0.95764 level. 

The main concern for traders is that both currencies are depreciating within the market. Ideally, traders will want to see one currency appreciating against the whole market while the other depreciates against the market. Traders will be monitoring Europe’s Final Consumer Price Index. If the data reads higher than 5.3%, the price of the Euro may find support. Additionally, the German Producer Price Index on Monday and the Swiss Trade Balance on Tuesday can create some volatility for the exchange rate.

EUR/CHF 1-Hour Chart on August 18th

Summary:

• US Stocks declined for a third day despite the positive earnings from Walmart, Cisco Systems, and Applied Materials.
• Higher bond yields press the stock market and the risks associated with higher interest rates. 
• The Pound is the worst-performing currency this morning due to poor Retail Sales data, which fell to -1.2%.
• A critical earnings report next week will be from NVIDIA on Wednesday after the market closes. The stock has risen by 3.81% over the past five days. 
• Euro traders have their eyes fixed on the European Final CPI release.