Dow Slides, Earnings Reports Vary, and Global Indicators Send Mixed Signals | Daily Market Analysis

Key events:

• UK - CPI (YoY) (Dec)
• Eurozone -CPI (YoY) (Dec)
• USA - Core Retail Sales (MoM) (Dec)
• USA - Retail Sales (MoM) (Dec)

The Dow concluded the trading session with a decline on Tuesday, as investors processed a flurry of earnings reports and a surge in Treasury yields following remarks from Fed Governor Christopher Waller, who played down the urgency for rapid rate cuts.

Closing 231 points lower, or 0.6%, the Dow Jones Industrial Average experienced a dip, with the S&P 500 also seeing a 0.4% decrease, and the NASDAQ Composite recording a 0.2% drop.

Goldman Sachs (NYSE: GS) witnessed a nearly 1% increase after unveiling fourth-quarter results that surpassed expectations. The firm credited the robust performance in equity sales and trading for offsetting weaknesses in its core investment banking unit.

On the other hand, Morgan Stanley (NYSE: MS) reported a mix of outcomes in its fourth-quarter results, with earnings falling short of analyst predictions. Profit took a hit with $535 million in charges, leading to a 4.2% decline in its shares.

Tesla (NASDAQ: TSLA) closed the day with little change after CEO Elon Musk expressed his preference to "build products outside of Tesla" unless the board raises his stake in the EV company to 25%, nearly doubling his current 13% stake. This statement comes amid ongoing discussions between the Tesla board and Musk, pending the resolution of a lawsuit concerning Musk's previous compensation.

Apple Inc (NASDAQ: AAPL) experienced a 1% decline following the US Supreme Court's rejection of the tech giant's appeal. The appeal aimed to overturn a lower court decision that would compel Apple to modify its App Store policies. The decision poses a potential threat to revenue from Apple's App Store, which imposes a 30% commission on in-app purchases. App developers could now offer alternative payment methods, potentially impacting Apple's revenue model.

The New York Fed Empire State Manufacturing Index for January took a substantial hit, dropping to -43.7, well below the estimated -5 and December's reading of -14.5. Marking the lowest figure since May 2020, this decline hints at a potential worsening of the economy beyond earlier expectations. Although the index reflects only manufacturing businesses in New York, offering a limited snapshot of the broader country, it follows a significant miss in the December data.

Gold prices continued their descent in Asian trade on Wednesday, influenced by hawkish signals from Federal Reserve officials, casting doubt on early interest rate cuts. The dollar's rebound further weighed on prices.

Gold's fall from the $2,050 level on Tuesday followed remarks from Fed Governor Christopher Waller, signaling a cautious stance on rate cuts and emphasizing the US economy's recent resilience, potentially delaying any reductions. Waller's comments propelled the dollar to a one-month high and triggered a sharp rise in Treasury yields, with the 10-year rate surpassing the 4% mark.

Market attention is now on upcoming industrial production and retail sales data for December. Positive indicators, particularly in consumer spending, could provide the Fed with more flexibility to maintain higher rates.

The Australian Dollar struggled against the US Dollar as it continued its losing streak, influenced by a stronger Greenback driven by upbeat US Treasury yields. Heightened tensions in the Middle East and a decline in commodity prices, reflecting fears of weaker demand from China, contributed to investor caution regarding the Aussie Dollar.

The Japanese Yen faced its third consecutive day of weakening against the US Dollar, reaching its lowest level since December 6. Concerns about the Bank of Japan delaying plans to shift away from its ultra-dovish stance, coupled with a devastating earthquake in central Japan, falling inflation rates in Tokyo, and weak wage data, all undermined the JPY. The underlying bullish sentiment around the USD lifted the USD/JPY pair to the 100-day Simple Moving Average support turned resistance.

The GBP/USD pair encountered selling pressure above 1.2600 during the early European session. Investors awaited the UK Consumer Price Index (CPI) for December to gain fresh insights. The estimated 3.8% YoY growth in the headline UK inflation and a 4.9% YoY rise in Core CPI could impact GBP/USD.

Currently trading near 1.2607, the pair has lost 0.18% on the day and holds below the 100-hour Exponential Moving Averages (EMAs) on the four-hour chart, suggesting a favorable outlook for further downside.