As the world of finance remains ever-volatile, key players like Tesla and Netflix are in the spotlight with their recent earnings reports. But that's not all that's shaking the markets: oil prices are surging amidst geopolitical tensions, while the $EURUSD pair takes cues from Fed Chairman Powell's insights. Furthermore, as US Treasury bond yields ascend, investors are keenly observing the potential impacts on the Dollar's strength.
Dive in for insights on these and more ⬇️
Surging bond yields are the stock market's biggest problem now
Treasury yields have surged, with the 10-year Treasury rate reaching 4.9%, its highest since 2007, causing a decline in stock prices. As investors offload bonds, prices drop and yields ascend. The market's trajectory toward a significant 5% for the 10-year yields is acting as a psychological magnet, reminiscent of how Dow 30,000 had a similar pull for investors in 2020.
Although history suggests stocks might rally towards the end of the year, the ongoing bond sell-off could jeopardize the otherwise robust year for equity markets. The rapid pace of change in bond prices and rates is unsettling for investors, as bonds are traditionally viewed as a stable asset.
This upheaval in bond values is underscored by the Federal Reserve's current rate-hiking cycle.
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Tesla ($TSLA) third-quarter earnings slow, missing forecasts
Tesla experienced a decline in third-quarter earnings, not meeting Wall Street's projections. The company's adjusted earnings were $2.3 billion, a 37% decrease from the previous year, marking the lowest profit in two years. While earnings of 73 cents a share were anticipated, Tesla reported 66 cents a share.
Their third-quarter revenue, although up by 9% from the prior year at $23.4 billion, fell short of the anticipated $24.1 billion. Amid increasing competition in the electric vehicle sector, Tesla has reduced its vehicle prices to enhance sales.
Profit margins have slimmed down, with a notable decrease in gross margin to 17.9% and adjusted automotive margin (excluding regulatory credits sales) dropping to around 18%.
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Oil prices surge amid Iran-Israel tensions and drop in US stockpiles
Oil prices saw a significant rise following Iran's call for a crude embargo against Israel in the wake of the Israeli-Hamas conflict and a noticeable decrease in US stockpiles indicating heightened crude demand. Brent crude surpassed $91 per barrel with an almost 2% increase, while West Texas Intermediate similarly spiked, trading over $88 per barrel.
The backdrop to this includes Iran's reaction to a bombing incident in Gaza and global concerns over potential disruptions to Iran's daily oil output affecting global crude prices.
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Euro could rebound if Powell adopts a dovish tone
Following a speech by Fed Chairman Powell, the EUR/USD pair experienced fluctuations, showing a downward trend. On Wednesday, increased US Treasury bond yields and a cautious market atmosphere strengthened the US Dollar, causing the EUR/USD to lose momentum.
By early Thursday, the pair was consolidating below 1.0550, with indicators suggesting a cautious outlook among investors. If the currency pair dips further, it could approach key support levels near 1.0500, while a rise might face resistance around 1.0570 before possibly reaching 1.0600.
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This concludes our weekly recap. Have a great weekend and see you next week! 👋
