Dow's Resilience Amid Fed Signals, Tech Sector Developments, and Global Economic Insights | Daily Market Analysis


Key events: 

  • New Zealand - RBNZ Interest Rate Decision
  • USA - GDP (QoQ) (Q3)
  • USA - FOMC Member Mester Speaks
  • USA - Beige Book

On Tuesday, the Dow saw an upward trend, supported by a decline in Treasury yields, fueled by dovish statements from certain Federal Reserve officials, intensifying expectations of imminent rate cuts.

The Dow Jones Industrial Average experienced an increase of 83 points, equivalent to 0.2%, while the S&P 500 exhibited a 0.1% rise, and the NASDAQ Composite recorded a 0.3% increase.

NDX, SPX, and DJI indices daily chart

November has been a robust month for the main Wall Street indices, with the DJIA anticipated to conclude the month 6.9% higher, the S&P 500 up by 8.5%, and the technology-heavy Nasdaq showing an impressive 10.8% gain.

Federal Reserve Board Governor Christopher Waller expressed growing confidence in the current policy's effectiveness in slowing the economy and steering inflation back to the 2% target. Additionally, he signaled a possibility of a Fed rate cut early next year if data reveals prolonged disinflation, stating that the Fed might consider lowering the policy rate due to lower inflation.

Waller's remarks had an impact on Treasury yields, causing the yield on the United States 2-Year to drop nearly 12 basis points to around 4.74%, and the yield on the United States 10-Year fell by 6 basis points to 4.330%.

US02Y and US10Y treasury yields

These statements preceded the release of the Fed's preferred inflation gauge, the personal consumption expenditures price index, on Thursday, with expectations of a modest 0.1% increase in November, down from 0.4% in September.

Positive sentiment among retailers was fueled by ongoing indications that consumers are in good financial shape, supported by a surprising rise in consumer confidence in November. Cyber Monday sales reached a record high, with consumer spending expected to surpass $12 billion on this prominent US online shopping day.

In the tech sector, Amazon's cloud business, Amazon Web Services, introduced a new chip for developing artificial intelligence applications and announced its collaboration with Nvidia by offering their latest chips. This move follows Microsoft's recent announcement of its own AI chip and access to Nvidia's GPUs for Azure cloud platform customers. stock daily chart

Furthermore, Amazon revealed Amazon Q, a new AI-powered chatbot in the style of chatGPT, designed to assist customers in resolving queries related to AWS.

On Wednesday, the Reserve Bank of New Zealand (RBNZ) maintained interest rates as anticipated, emphasizing that inflation levels remained uncomfortably high, leaving open the possibility of further rate hikes to curb price pressures.

The RBNZ kept its official cash rate (OCR) at 5.50% for the fourth consecutive month, signaling a prolonged pause after indicating a hiatus in its rate hike cycle earlier this year. Having raised the OCR by a cumulative 525 basis points between August 2021 and May 2023, the bank's announcement indicated a shift in stance, cautioning that elevated interest rates had not curbed demand to the extent expected.

Despite experiencing a technical recession earlier this year, the New Zealand economy rebounded sharply in the third quarter, sustaining inflationary pressures. The RBNZ's decision led to a 1% surge in the New Zealand dollar, as additional interest rate hikes are likely to enhance the currency's attractiveness.

NZD/USD daily chart

In the realm of commodities, gold prices climbed in Asian trade on Wednesday, reaching nearly a seven-month high. Dovish signals from Federal Reserve officials intensified expectations of an early shift by the central bank, contributing to a decline in the dollar to near four-month lows and a retreat in US Treasury yields to a two-month low.

XAU/USD daily chart

The Australian Dollar continued its winning streak for the fifth consecutive day on Wednesday, propelled by an augmented risk appetite in the market and the upward trajectory of commodity prices.

AUD/USD dailly chart

Simultaneously, the US Dollar Index touched its lowest level since August 11, despite better-than-expected Housing Price Index and Consumer Confidence data from the United States.

US Dollar Currency Index daily chart

Investor attention is anticipated to shift toward the preliminary Gross Domestic Product Annualized (GDP) data for the third quarter in the US, providing insights into the pace and trajectory of economic growth during that period. Later in the day, the Federal Reserve is set to release the Beige Book, offering a comprehensive overview of overall economic growth in the United States.