They say that the more wins you have, the closer you are to a loss, and the end of the winning streak for the Dow will inevitably end at some point.
But for the time being the Dow has been nonchalantly racking up the gains as we navigate through the Q2 earnings season.
While not all results have been rosy, so far there has been more to cheer than to fear when delving into the earnings data.
Meanwhile, sentiment continues to be fuelled by the falling inflation story, with investors already eyeing 2024 when interest rates are likely to start heading south.
This combination of good earnings and a lower interest rate outlook is keeping the market in good spirits, hence the impressive win streak we have seen on the DJIA.
Netflix and Tesla stock took a step back with their results being a reminder that not everything is smooth sailing in corporate America. And the S&P and Nasdaq took a tumble accordingly.
But overall, results so far are not signalling any Doomsday scenarios and as such ‘hard landing’ fears continue to recede.
But let’s see how the rest of the earnings season shapes up, particularly when some of the big retailers and logistics companies report to see how the retail sector is looking.
The USD staged something of a more meaningful bounce-back courtesy of a rise in US treasury yields. Both the two- and ten-year notes popped higher which allowed the greenback to make up some ground against its major counterparts.
The DXY reclaimed the 100 level but whether this is the start of a bigger recovery or not could depend on what sort of messaging we see from the FOMC next week.
If expectations hold for ‘one more and done’ from the Fed, then further gains for the USD could be harder to come by until such time as the interest rate outlook for other central banks are also assessed lower on cooling inflation trends.
Gold eased back on rising treasury yields and subsequent USD appreciation. But if the greenback recovery starts to lose steam, then the precious metal will likely once again have designs on hitting the US$2k level.
Meanwhile the oil price continues to be unfazed by the disappointing economic indicators witnessed from China this week. OPEC and the IEA are still sounding upbeat about the direction Chinese oil demand will take in the second half of the year.
As such, some of the improved sentiment in the oil market is predicated on a Chinese growth recovery that is yet to materialise.
Therefore, risks to the downside remain in play given the current lacklustre state of Chinese economic indicators.
But for the time being, oil is finding support on expectations that the tide is starting to turn regarding both inflation and interest rates.
Market commentary from Tim Waterer, chief market analyst at KCM Trade.
