U.S. Indices closed lower as both stocks and Treasuries were sold on Wednesday, while the Dollar saw a notable bid in the wake of a hawkish Fed Chair Powell. In the FOMC rate decision, the central bank held rates at 4.25-4.50%, as expected, with Governors Waller and Bowman dissenting in favour of a 25bps cut, although little move was seen. In Powell’s press conference, he said no decision has been made about the September meeting, and they will not let tariffs become inflationary, because they will make sure it does not become serious by deploying their tools. In the wake of these comments, particularly the latter, US indices and T-Notes sold off to session lows, while the Dollar rose to peaks, and Fed money market pricing became more hawkish, with only 38bps of cuts seen by year-end now vs 46bps post Fed statement. As a result, all FX G10 peers saw weakness with Antipodeans and EUR lagging, as the latter continues to see a fallout from the US/EU trade deal. On trade, Trump said India will be paying a tariff of 25%, plus a penalty from August 1st, and Trump signed an EO implementing an additional 40% tariff on Brazil, bringing the total tariff amount to 50%, which hit the INR and BRL, respectively. Copper plunged 20% after Trump’s proclamation imposed a 50% tariff on imports of semi-finished copper products, whereby participants were not expecting such exemptions. Sectors were predominantly lower, with Materials and Real Estate the laggards, while Utilities, Tech, and Communications were the only sectors in the green amid a deluge of earnings, which continues after-hours with the likes of MSFT and META. Elsewhere, there were plenty of other risk events on Wednesday – BoC was largely a non-event and held rates as expected, while in the QRA, the US Treasury maintained auction sizes and guidance but adjusted its buyback programme. Regarding US data, ADP rose much more than expected ahead of payrolls on Friday, albeit it does not have the closest relationship, while GDP (Q2) topped expectations. Lastly, the crude complex was firmer on Wednesday, and gained throughout the US session and saw a boost on Trump trade headlines while US/Russia tensions continue to boil. The Fed left rates on hold at 4.25-4.50% as was widely expected, although both Governors Waller and Bowman voted to cut rates by 25bps, albeit not too surprising given both had alluded to such a move in the run-up to the blackout period. Note, Kugler did not vote at the meeting. Within the statement, it maintained that uncertainty about the economic outlook remains elevated, but removed the description seen in June that it “has diminished”. When describing the economy, the Fed said recent indicators suggest growth of economic activity moderated in H1, whereas in June, it had said that it continued to expand at a solid pace. Elsewhere, all language was maintained, noting that the unemployment rate remains low, labour market conditions remain solid, and inflation remains somewhat elevated. There was no explicit signal or hints at upcoming rate cuts either, showing the Fed is still sticking with its wait-and-see, data-dependent approach. It maintained its view that “in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. Overall, Fed Chair Powell leaned hawkish and pushed back on calls for a September rate cut, noting there is a lot of data due before the meeting, which is why the Fed have not yet made its decision. He was also quizzed about the impact of the economy on tariffs, particularly on prices. He exclaimed that it is a reasonable base case to assume that tariffs will result in a one-time price increase, but he suggested that this is because the Fed will not allow for “serious inflation” as it would combat rising inflation by deploying its tools. Powell echoed several times that he views policy as modestly restrictive, and when quizzed about what data is needed to lower the FFR, he said that there are risks on both sides of the mandate, but if risks were fully in balance, it implies you would move to a more neutral stance. On the Fed’s mandate, Powell said that inflation is still above target while the labour market is at or near maximum employment. He said that the price stability mandate faces upside risks, while the labour market faces downside risks. However, inflation is further from their target than employment. Ahead of PCE, he sees the June headline at 2.5%, with core at 2.7%. Meanwhile, ahead of NFP on Friday, Powell said that when looking at the labour market, the unemployment rate is the main figure to watch. On the consumer, he said spending has been very, very strong for the last few years, and now maybe it has finally slowed down, but it is at a healthy level. When quizzed about the dissents from Waller and Bowman, he said it is not surprising that there are differences, and he would call this meeting one of the better meetings. The Advanced US GDP print for Q2 saw growth of 3.0%, well above the 2.4% forecast and bouncing back from the -0.5% in Q1. This is more aligned with the Atlanta Fed estimate of 2.9%, which was lifted after the prior day’s trade data. The narrowing deficit driven by a fall in imports boosted the headline, and the RSM US LLP Principal & Chief Economist Brusuelas highlighted that “once one excludes trade and inventory data, growth advanced at a much softer pace of 1.1% implied by final sales to private domestic purchasers”. While the headline beat is welcomed, the 30.3% decline in imports (prev. +37.9%) primarily reflects the increase in GDP growth, distorting the headline data. Real final sales to private domestic purchases rose 1.2% (prev. 1.9%), the weakest reading since the end of 2022. Consumer spending accelerated in Q2, rising 1.4% (prev. 1.5%), driven by 2.2% growth in goods (prev. 0.1%), although, was the slowest growth in consecutive quarters since the COVID pandemic. Slightly offsetting the rise in the headline was a decline in investments, weighed by contractions in investment for structures and residential investment, with equipment and fixed investment experiencing slowdowns. Meanwhile, PCE Prices eased notably to 2.1% (exp. 2.9%, previous 3.7%), GDP Sales rebounded sharply to 6.3% (exp. 2.5%, prev. -3.1%), and the GDP Deflator eased to 2.0% (exp. 2.1%, prev. 3.8%). The Q2 adv report highlights the significant impact Trump’s trade policies are having on import-related US data, with ongoing trade frictions between India, Brazil, and China suggesting the theme of uncertainty and volatile moves in net exports may linger in the near term. Pantheon Macroeconomics writes, stripping out goods consumption and equipment investment—affected heavily by the timing of pre-tariff purchases—would put underlying growth in Q2 at just 0.5%. “We think a GDP print close to that pace is likely in Q3, given the mounting headwinds for the economy, and we see growth remaining weak in Q4 too”. Elsewhere, Oil closed higher by 1.14% while a stronger Dollar saw Gold end Wednesday’s session with a loss of 1.4%.
To mark my 3225th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 90 points yesterday and is now ahead by 3753 points for July after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 0.12% lower at a price of 6362.
The Dow Jones Industrial Average closed 171 points lower for a 0.38% loss at a price of 44,461.
The NASDAQ 100 closed 0.16% higher at a price of 23,345.
The Stoxx Europe 600 Index closed 0.02% lower.
This Morning, the MSCI Asia Pacific closed 0.4% lower.
This Morning, the Nikkei closed 1.02% higher at a price of 41,069.
Currencies
The Bloomberg Dollar Spot Index closed 1.08% higher.
The Euro closed 1.2% lower at $1.1404.
The British Pound closed 0.81% lower at $1.3233.
The Japanese Yen fell 0.72% closing at $149.43.
Bonds
U.K.’s 10-Year Gilt closed 2 basis points lower at 4.64%.
Germany’s 10-Year Bund Yield closed 1 basis points higher at 2.71%
U.S.10 Year Treasury closed 2 basis points higher at 4.37%.
Commodities
West Texas Intermediate crude closed 1.14% higher at $70.00 a barrel.
Gold closed 1.39% lower at $3276.10 an ounce.
This morning on the Economic Front we already had the release of German Import Price Index which printed 0.00% versus -0.2% expected. Next, we have German Unemployment at 8.55 am and Euro-Zone Unemployment Rate at 10.00 am. This is followed by German CPI and at 1.00 pm and U.S. Weekly Jobless Claims and the Employment Cost Index at 1.30 pm. Finally, we have the Dallas Fed Cost Index at 2.00 pm and the Atlanta Fed GDPNOW at 4.30 pm.
Cash S&P 500
The S&P closed lower after the Fed held rates steady, with Jay Powell signaling during the press conference that he is comfortable waiting for additional data before considering any cuts. The market is now pricing in only one full rate cut in 2025, as December Fed Funds Futures broke out and climbed above 4%. The Dollar Index also surged, breaking through resistance at 99 following stronger-than-expected ADP and GDP reports. It now appears poised to move toward 101. In other news today, Meta reported better-than-expected revenue and provided stronger-than-anticipated revenue guidance. However, the company also noted that both capex and expenses would be higher than previously indicated. It seems that as long as companies continue delivering above-consensus revenue growth, rising expenses simply do not matter—a bit surprising, given that was not the market’s reaction when Alphabet reported similar news. The earnings call will likely offer more clarity. Yesterday marked a significant Treasury settlement date and tomorrow will be another. Consequently, the Treasury General Account (TGA) rose by roughly $60 billion, reaching nearly $420 billion. Should the Dollar continue strengthening and the TGA keep climbing—as expected—the combined effect will lead to a reduction in overall liquidity. Copper slumped by 17% after President Trump imposed a 50% tariff on Copper, but made an exemption for refined materials from the new tariff. It is a significant move in copper, as the market was obviously caught off guard by Wednesday’s news. I cannot imagine this will good news for any of the copper producers. Just before the close the S&P traded lower to my 6348 exit level on my latest 6334 average short position. This was an excellent exit with the S&P trading 60 Handles higher from last night’s Chicago close at 6422 this morning. Markets at 209% market cap to GDP, housing the most expensive ever hovering at 115% equity to GDP, and an utter retail frenzy chasing everything under the moon with leverage makes it extremely difficult not to be short. With the RSI stuck over 70 I will be a seller of the S&P from 6430/6450 with a wider 6471 ‘Closing Stop’. The S&P has support below from 6210/6230 where I will be a strong buyer with a 6189 ‘Closing Stop’. If I am taken short, I will have a T/P level at 6372. If I am taken long, I will have a T/P level at 6278.
EUR/USD
The Euro closed lower for the fifth consecutive trading session as the loss has exceeded over 3% which is not insignificant but long overdue. I am still flat. The Euro has support below from 1.1320/1.1400 where I will be a buyer with a 1.1255 ‘Closing Stop. I no longer want to be short the Euro at this time.
Dollar Index
The Dollar never came close to Wednesday’s buy range and I am still flat as the Dollar rose a further 1%. The Dollar has resistance from 100.50/101.30 where I will be a seller with a 102.05 ‘Closing Stop’. I no longer want to be short the Dollar at this time.
Russell 2000
I am still flat the Russell as the market never came close to Wednesday’s sell range. I will now lower my sell level to 2250/2320 with a lower 2375 ‘Closing Stop’. If triggered, I will have a T/P level at 2195.
FTSE 100
I am still short the FTSE at a price of 9140. I will now raise my T/P level to 9090. I will add to this position at 9210 while leaving my 9275 ‘Closing Stop’ unchanged. If any of the above levels are hit, I will be back with a now update for my Platinum Members.
Dow Rolling Contract
No Change: Today, I will continue to be a seller on any further rally to 45200/45450 with the same 45605 tight ‘Closing Stop’. If I am taken short, I will have a T/P level at 44910.
Cash NASDAQ 100
Following the much better than expected earnings from Meta the NDX hit my 23500-sell level before rallying to my second sell level this morning at 23650 as emailed to my Platinum Members. I am now short at an average rate of 23575. I will have a ‘Closing Stop’ on this position at 23805. Given how overvalued the NDX is trading at this time I will have a T/P level on this position at 23360. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
December BUND
I am still flat as the Bund never came close to Wednesday’s buy range. Today, I will continue to be a buyer of the Bund on any dip lower to 128.40/129.20 with the same 127.75 ‘Closing Stop’. If I am taken long, I will have a T/P level at 129.70. I still do not want to be short the Bund at this time.
Gold Rolling Contract
My Gold plan worked well as the market sold off to my 3270-buy level before rallying this morning to my revised 3293 T/P level and I am now flat. Gold has support below from 3230/3250 where I will again be a buyer with a lower 3215 ‘Closing Stop’. If I am taken long, I will have a T/P level at 3278.
Silver Rolling Contract
The stronger Dollar saw Silver trade lower to my second buy level at 37.20 for a now 37.60 average long position. I will leave my 35.95 ‘Closing Stop’ unchanged while lowering my T/P level to 38.10. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Please note: As our youngest daughter Rachel is getting married in Puglia tomorrow my next Daily Commentary will be on Monday August 11 as I need time to spend with our family and friends over the next week. Any of my calls that are not triggered today and are subsequently executed over the coming days will see me return with updated emails for my Platinum Members.
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