The market got a scare after Q1 advance GDP growth came in lower than expected at 1.6% versus 2.4% expected. Meanwhile core PCE data for the quarter was higher-than-expected and 3.7% versus 3.4% expected. That scared traders further ahead of the monthly core PCE data scheduled for release tomorrow at 8:30 AM ET. There were whispers that the core PCE month-to-month could rise by closer to 0.5% versus the 0.3% expected when announced tomorrow. The YoY is expected at 2.7% and would be higher given numbers higher than 0.3%.
Lower growth and higher inflation is not the recipe for markets. As a result, stocks fell, bond prices fell (yields rose), and the US dollar moved higher. Yields across the curve moved to their highest level in 2024 with the 2-year yield moving above 5% (in his trading at 4.999% currently).
In the US equity market, the Dow Industrial Average average was down over -700 points at session lows. The S&P index fell as much as 81.04 points (-1.6%), and the NASDAQ fell as much as -368.83 points (-2.31%).
However, markets steadied. US stocks started to move higher. At the end of the day:
- Dow Industrial Average average closed down -378.12 points or -0.98% at 38085.81
- S&P index fell -23.21 points or -0.46% at 5048.41
- NASDAQ index fell -100.99 points or -0.64% at 15611.76.
The small-cap Russell 2000 fell -14.308 points or -0.72% at 1981.11. At session lows, the index was down as much as -37.6 points or -1.8%.
In the Forex, the US dollar moved higher but retraced most of the declines versus the the EUR, GBP, CHF, CAD. Although the AUDUSD and the NZDUSD recovered off of session lows, they could not move up to pre-GDP release levels.
The GBP is ending the session as the strongest of the major currencies followed by the AUD. The JPY was the weakest followed by the USD.
The strongest to the weakest
The USDJPY moved to yet another high for the year and highest level since 1990. Tha BOJ will announce their latest rate decision in the new trading day. Technically,, it would take a break of its 100-hour moving average at 154.977 followed by a break of the 200 hour moving average at 154.717 to give the sellers some hope that a temporary high might be in place. The current price is trading at 155.64.
For the EURUSD its fall and low for the day stalled right at its 100-hour moving average before bouncing back up toward its 50% midpoint of the April trading range. That level comes in at 1.07425. A move above that level in the new trading day would be more bullish.
The GBPUSD’s move lower stalled against its broken 38.2% retracement of the April trading range at 1.2455, and then snapped back higher toward its 100 bar moving average on the 4-hour chart at 1.2512. That level will be the barometer for trading in the new trading day.
Bank of Japan tonight. Core PCE data tomorrow.