Tech Stocks Hit Ahead of Earnings – Nasdaq Down 1.3%
US tech stocks took a hit in trading yesterday as investors looked ahead to key earnings reports from ‘magnificent 7’ companies in the sessions ahead. The Dow rose 0.5% but both the S&P and Nasdaq lost ground on the day, losing 0.5% and 1.28% respectively. US Treasury yields hit a 4-month low as traders factored in a more dovish Fed later today, the 2-year off 2.6 basis points to 4.360% and the 10-year losing 3.1 basis points to 4.147%. The dollar traded in tight ranges against most of the majors, except for the Yen which saw appreciation against the greenback and on the crosses as the market priced in a potential hike from the Bank of Japan later today. Oil prices dropped to a 7-week low as demand concerns continued to weigh, Brent and WTI both losing 1.4% on the day to close at $78.63 and $74.73 a barrel respectively and Gold jumped 0.8% to finish up at $2,403 per ounce.
Bank of Japan to Hit the Yen
Traders are preparing for more volatility in Yen today as the Bank of Japan delivers its latest rate decision and associated statement. The market is split 50/50 on whether we see a rate hike today, making the decision ‘live’ and creating several potential scenarios that should see more hard and fast moves in the Yen. A hike should see more appreciation in the Yen and breaks of recent lows in UsdJpy and the crosses whereas a ‘hold’ and a more conservative or dovish message will see the pairs push back higher into recent ranges. Traders looking at UsdJpy will be more than aware that the Fed will be making their rate call just a session and half later so there is the possibility of a perfect storm scenario from a rate differential perspective with the biggest bang likely coming with a hike from the BOJ and more dovish Fed – whatever happens in the sessions ahead, most traders are expecting the Yen to be trading a very different levels in 24 hours’ time.
The Biggest Trading Day of the Year
It may not turn out to be, but some traders are looking at the event calendar today and calling the coming three sessions biggest trading day of the year. We have two major central banks on the cards and six or seven major tier 1 data releases scheduled. The early focus in the Asian session will be on Australia where both the CPI data and Retail Sales numbers are due out, with another strong CPI print possibly locking in a hike from the RBA. The focus moves north to Japan for the much-anticipated Bank of Japan rate call which should hit markets around lunchtime in Tokyo. The European session has the key Core CPI numbers due out for the Eurozone before New York opens and we are hit by several updates including the ADP Non-Farm, Employment Cost Index and Pending Home Sales numbers in the US and GDP data in Canada. These are all released earlier in the session before investors then settle in for a few hours to wait for the latest update from the FOMC – no change is expected but expectation is for Jermone Powell to indicate that a cut will come in September. Throw in some more big name earnings reports, including from Facebook and we could be in for a very hectic day.
