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Date: 15th August 2024.

Earnings and Inflation Boost the Dow Jones, Eyes Turn to Walmart’s Report!

* US inflation falls from 3.00% to 2.90% making a September rate cut certain.
* According to the CME Group, there is a 64% chance of the September rate cut being 25-basis points.
* Japanese GDP data confirms the economy grew 0.8% in the past quarter. The UK economy sees no growth in the latest month.
* Wednesday’s best performing index was the Dow Jones after Cisco Systems beat earnings and revenue expectations.

USA30 – The Dow Jones Is Wednesday’s Best Performing Index!

The Dow Jones is rarely the best performing index due to its exposure to more stable and less volatile stocks. The upward momentum is largely due to the earnings data from Cisco Systems and Caterpillar. Investors will now turn their attention to the last major quarterly earnings report for the week, Walmart.

80% of the Dow Jones’ stocks rose in value on Wednesday due to the significant rise in investor sentiment. Confidence in the stock market improved after the US inflation rate fell from 3% to 2.9% and the core inflation rate remained unchanged at 3.2%. The lower than previously expected inflation saw the market’s confidence rise and particularly support the Dow Jones.

The Dow Jones also saw momentum rise after Cisco made public their latest quarterly earnings report. Earnings per Share was 2.49% higher than Wall Street’s predictions and the revenue rose by almost $1 billion from the 1st to 2nd quarter. As a result, the stock rose by 5.75% after market close. The best performing stocks on Wednesday were American Express and Goldman Sachs. Investors will now turn their attention to Walmart which will release their earnings report before the market opens.

For Walmart, analysts predict the earnings per share to rise from $0.60 to $0.65 and for revenue to rise from $159 billion to $167 billion. The company has beat earnings expectations over the past 12 months due to investors looking to shop on a budget due to recent high inflation. On Wednesday, Walmart stocks rose 0.78% and a further 0.52% after market close. The rise and bullish momentum indicate investors believe the company will continue to perform well on their earnings reports. Walmart holds a weight of 1.12% and Cisco Systems 0.74%.

Dow Jones – Interest Rates and Upcoming Economic News.

After the lower inflation data for consumers and producers there is a 64% chance of the September rate cut being 25-basis points. According to many analysts the Federal Reserve will cut 0.75% by the end of 2024. However, some experts believe the Fed will cut a full 1.00%. This is also something which can be seen on the CME Group which indicates a 44% chance of a 1.00% cut by December.

Investors will now turn their attention to the US Retail Sales, Core Retail Sales and Weekly Unemployment Claims. Ideally shareholders would like to see the data slightly stronger than expectations, but not strong enough to suggest no rate cuts are needed. The Empire State Manufacturing Index and Philly Fed Index will also trigger volatility but to a lesser extent. The only concern for shareholders is a potential rise in tensions within the Middle East!

Currently the VIX trades with no major changes. As do Bond Yields, but a decline throughout the day would benefit the stock market.

Dow Jones – Technical Analysis!

Technical analysis indicates buyers are holding momentum. On the 2-Hour chart, price trades above the 75-Period EMA and the 100-Period EMA. The price also continues to trade above 70 on the RSI but is not indicating an overbought price. On the 5-Minute chart, the price continues to form bullish crossovers and trade above the VWAP. The price movement throughout as we approach the US session will depend largely on the global stock market performance and Walmart’s earnings report.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

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Michalis Efthymiou
Market Analyst
HFMarkets

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