Fed still has work to do
Stocks dropped on Wednesday as more quarterly results and signs of a weakening economy dampened market optimism. Loretta Mester, president of the Cleveland Fed, said on Thursday that the Fed needs to do more to address the US inflation rate that is still too high.
Mester did add, though, that “Fed is much closer to end of the rate-hike journey.“ The Dow Jones lost 0.5%, the Nasdaq lost 0.8%, and the S&P 500 dropped by 0.7%.
After the electric car manufacturer posted results that fell short of Wall Street forecasts due to a recent round of price cuts, Tesla saw a 10% decline. Tesla’s willingness to forgo margins for long-term demand gain stoked fears of a price war in the industry. This fact is driving other automakers such as Ford and GM more than 3% lower. The worries over margins increased after Tesla’s CEO Elon Musk promoted more cost cuts to increase sales.
A significant Dow component, AT&T, fell more than 10% on worries about the company’s ability to reach its expectations. AT&T dropped also with disappointing Q1 results revealing a missed sales target.
The US dollar’s advance has been cut short by Fed
The performance of the US dollar against its main competitors doesn’t appear to be much impacted by the Fed’s remarks. The previous buy momentum disappeared and the US dollar index saw a loss of 0.05%.
US dollar index 1D chart, source: tradingview.com
Following news that the US economy is continuing to deteriorate, the EUR/USD rises, recovering some of its losses from Wednesday. As a result, investors looking for safety purchased the euro at the expense of the US dollar. The EUR/USD exchange rate is unchanged at 1.0959, up 0.05% from the start.
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GBP/USD is also unchanged, although it is under pressure closing down 0.05%. As profit taking increases, the value of the pound is sliding from its 1.2467 high. The GBP/USD exchange rate has so far fluctuated between a low of 1.2404 and a high of 1.2467.
Oil keeps correcting and gold gains more traction
For the third time in four days, crude prices fell by more than 2.5% as rising anticipation for the tenth US rate hike weighed on the oil markets. Recent days already counteracted a significant lift from a recent OPEC+ output cut decision.
After hitting a three-week low at $77.19, WTI oil ended the day down 2.4%, at $77.29 a barrel. Brent crude also posted similar results. The world’s standard for oil ended the day down 2.4%, at $81.10. Brent is down roughly 6% on the week, similar to WTI.
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Gold futures for June delivery recovered some losses from a day ago, as investors turn to the safe haven. The yellow metal posted a green day at $2,017 with a 0.5% increase. Silver ended the session without a change at exactly 0%.