S&P 500 Edges Up Amid Tech Surge; USD Trends Amid Fed Policy Uncertainty | Daily Market Analysis

Key events:

• USA - GDP (QoQ) (Q1)
• USA - Initial Jobless Claims

Wednesday saw the S&P 500 managing a slight uptick, albeit amid pressure from climbing Treasury yields and softness in industrial sectors. However, a surge in Tesla shares bolstered the tech sector ahead of looming earnings reports from major tech players.

The S&P 500 inched up by 0.02%, while the NASDAQ Composite advanced by 0.1%. Conversely, the Dow Jones Industrial Average dipped by 0.1%, or 42 points.

Boeing experienced a notable decline of over 2% following a credit rating downgrade by Moody's Ratings, downgrading Boeing’s credit rating to Baa3 from Baa2, hovering just above "junk" status. Despite an initial intraday rise of over 4% post a first-quarter revenue beat, sentiments soured as US Transportation Secretary Pete Buttigieg indicated that Boeing must satisfy the Federal Aviation Administration regarding quality control issues within the 90-day deadline before ramping up production of its 737 MAX jets.

Meta Platforms reported a softened revenue outlook for the current quarter, as the social media giant plans to increase annual spending beyond prior projections to capitalize on the artificial intelligence surge. For Q2, the company anticipates total revenue to range between $36.5B to $39B, with $37.75B at the midpoint, missing estimates of $ 38.3 B. This outlook adjustment accompanies an increase in full-year 2024 capital expenditures to $35B to $40B, up from a prior range of $30B to $37B, as the company aims to "continue to accelerate our infrastructure investments to support our artificial intelligence roadmap."

Despite surpassing analyst estimates in Q1, the subdued guidance and heightened spending overshadowed Meta's initial performance.

During the early European session on Thursday, the USD/CHF pair is trading with a downward bias near 0.9145. Additionally, any developments concerning escalating tensions in the Middle East could potentially boost safe-haven assets such as the Swiss Franc.

The US Federal Reserve's policymakers have affirmed the central bank’s stance to maintain its current policy. While the Fed's hawkish tone has lent some support to the Greenback in recent weeks, investors remain uncertain about the timing of future monetary policy adjustments. The upcoming US GDP growth data for Q1, expected to show a slower pace at 2.5% compared to the previous reading of 3.4%, could offer insights into the performance of the US economy. A stronger-than-expected GDP figure might fuel speculation that the Fed will postpone its anticipated rate cuts, potentially lifting the US Dollar.

Recent data from the Centre for European Economic Research revealed an improvement in Switzerland’s ZEW Survey Expectations for April, which could further support the CHF. Moreover, ongoing geopolitical tensions in the Middle East may enhance demand for the CHF as a traditional safe-haven currency, consequently weighing on the USD/CHF pair.

Meanwhile, the Japanese Yen continues its downtrend, weakening below the 155.50 level against the US Dollar, reaching its lowest level since June 1990 during the Asian session on Thursday. Expectations of a persistently wide interest rate differential between Japan and the United States are contributing to the JPY's decline. Concerns about potential intervention by Japanese authorities persist, although this does little to alleviate bearish sentiment ahead of the Bank of Japan policy decision on Friday.

The BoJ is expected to maintain its policy settings and bond purchase amounts after raising interest rates in March for the first time since 2007. In contrast, market sentiment suggests that the Federal Reserve will likely delay its rate-cutting cycle until September due to persistent inflationary pressures. This outlook implies upward momentum for the USD/JPY pair, although USD bulls may remain cautious until further clarity on the Fed's policy trajectory emerges.

On another note, the Australian Dollar is strengthening for the fourth consecutive session on Thursday. The AUD gained ground against the USD following robust Australian CPI figures released on Wednesday. Furthermore, easing tensions in the Middle East have fostered a positive market sentiment, benefiting risk-sensitive currencies like the AUD and supporting the AUD/USD pair.

The AUD's gains are further propelled by higher 10-year yields on Australian government bonds, which have surged above 4.49%, nearing five-month highs. This increase in yield reflects growing expectations of a more hawkish stance from the Reserve Bank of Australia regarding its interest rate trajectory.

Overall, the market awaits the release of the preliminary US GDP Annualized for Q1, with expectations of a growth slowdown. The GDP figures will serve as a gauge of the US economy's strength and may influence the Fed's future actions. A better-than-expected report could lead to speculation of a delayed rate cut cycle by the Fed.