S&P 500 Hits Historic Peak, Tesla on Edge, and Gold Treads Water Amidst Market Shifts | Daily Market Analysis

Key events:

• Eurozone - ECB's Elderson Speaks
• UK - BoE MPC Member Mann
• Eurozone - ECB's Lane Speaks
• USA - Initial Jobless Claims
• USA - 30-Year Bond Auction

On Wednesday, the S&P 500 marked a historic high, coming within reach of the 5,000 level, propelled by continued bullish sentiments in the stock market. Consumer stocks took the lead, spearheading the surge, particularly boosted by Chipotle and Ford's positive earnings reports.

The S&P 500 index showed a 0.4% gain, closing at 4,995.22, just a hair's breadth away from the coveted 5,000 mark. The Nasdaq Composite, dominated by technology stocks, experienced a 1% rise, while the Dow Jones Industrial Average, consisting of blue-chip stocks, advanced by 0.4%.

Meanwhile, employees at Tesla Inc. (NASDAQ: TSLA) are bracing for potential layoffs, following instructions to managers to assess the necessity of each employee's role, according to a report from Bloomberg News on Wednesday. This move comes after Tesla paused some of its semiannual performance evaluations, aligning with CEO Elon Musk's cost-cutting focus amid a slowdown in the company's revenue growth.

Musk, recognized for his rigorous management style, previously set stringent expectations at Twitter in late 2022, providing employees with the option to adhere to a "hardcore" work ethic or exit the company. Despite a significant workforce expansion, reaching over 140,000 global employees in 2022, Tesla implemented targeted staff reductions.

Shifting gears to the gold market, the XAU/USD price exhibited a sideways consolidative movement during the Asian session on Thursday. Traders remained uncertain about the Federal Reserve's potential interest rate cuts this year, debating the timing and pace. Market sentiment leans towards expectations of rate cuts starting in May, if not March, keeping the US Dollar subdued and benefiting gold.

However, recent statements from influential Fed officials have indicated a measured approach to lowering borrowing costs, given the resilient US economy. This stance supports higher US Treasury bond yields, limiting the upside for gold, a non-yielding asset. Additionally, the prevailing risk-on environment hinders the safe-haven appeal of gold, contributing to subdued and range-bound price action as traders refrain from aggressive directional bets.

Today morning, the Australian Dollar rebounded from recent losses, benefiting from an overall risk-on sentiment in the market. Despite the US Federal Reserve emphasizing its commitment to maintaining elevated interest rates until inflation consistently returns to the 2% target, the US Dollar encounters challenges. Additionally, improved conditions in the Australian money market contribute to supporting the Aussie Dollar, strengthening the AUD/USD pair.

The Australian currency found support in hawkish comments from Reserve Bank of Australia Governor Michele Bullock after the interest rate decision on Tuesday. The RBA opted to keep its Official Cash Rate steady at 4.35%. While Governor Bullock refrained from making explicit statements about future policy actions, futures markets currently indicate expectations of two potential interest rate cuts by the RBA this year, with the first anticipated in September.

Meanwhile, the Japanese Yen experienced a slight decline against its American counterpart for the second consecutive day on Thursday, remaining within a familiar range since the start of the week. Bank of Japan Deputy Governor Uchida Shinichi sounded less hawkish, stating that the central bank would not aggressively hike rates upon ending negative rates. This, combined with the prevailing risk-on sentiment, undermines the safe-haven JPY. However, subdued US Dollar price action poses a challenge for the USD/JPY pair.

In the case of the NZD/USD pair, it maintains positive ground above 0.6100 during the early Asian session on Thursday. Strong New Zealand Q4 labor market data, coupled with a reevaluation of the odds of further Reserve Bank of New Zealand policy tightening, has boosted the New Zealand Dollar. The unemployment rate in Q4 rose slightly from 3.9% to 4.0%, below the forecast of 4.2%. This data could influence the RBNZ's policy outlook, potentially leading to another interest rate hike this month, providing support for the Kiwi and potentially limiting the downside of the NZD/USD pair in the near term.

Looking ahead, traders will closely monitor US weekly Initial Jobless Claims, Wholesale Inventories, and a speech by the Fed's Barkin (Richmond). Next week, attention will turn to RBNZ Governor Orr's speech, with these events likely to provide clear directions for the NZD/USD pair.