US Stock Market Sees Slight Wobble Amidst Longest Winning Streak, Fed Caution, and Earnings Highlights  | Daily Market Analysis

Key events:

• Canada - BoC Gov Council Member Lane Speaks
• UK - BoE MPC Member Pill Speaks
• USA - Initial Jobless Claims
• USA - Fed Chair Powell Speaks

On Wednesday, the US stock market experienced a slight wobble as major indexes aimed to extend their longest winning streak in two years. The Dow Jones Industrial Average remained flat, with only a one-point change, while the S&P 500 and the NASDAQ Composite showed little movement, with both starting the day on an upward trajectory.

Recent weeks have seen a robust performance from Wall Street, boosted by soft job data that bolstered expectations that interest rates had reached their peak. Notably, the benchmark S&P and tech-heavy Nasdaq achieved their seventh and eighth consecutive days of gains, respectively, marking their longest winning streak since 2021. The Dow also posted its seventh straight day in the green.

However, Federal Reserve commentary this week has cautioned against complacency in the battle against inflation. All eyes are now on Fed chief Jerome Powell for insights into the duration of restrictive monetary policy. While Powell's recent appearance at the Federal Reserve's Division of Research and Statistics centennial conference did not delve into monetary or economic policy matters, he is scheduled to speak on Thursday at another conference panel.

Amidst this backdrop, the quarterly earnings season remains a focal point for investors. Approximately 80% of S&P 500 companies that have reported earnings this season have exceeded estimates, although only 59% have outperformed revenue expectations.

In other market news, Amazon.com confirmed significant layoffs in its Music division, impacting employees in Latin America, North America, and Europe. The retail giant's workforce has witnessed several rounds of layoffs over the past year, affecting more than 27,000 employees.

Disney reported quarterly earnings yesterday after the closing bell. In addition to highlighting its success with ESPN+ and the ongoing expansion of theme parks, Disney revealed a decline in ad revenue that impacted its overall performance. To counter this, the company announced plans to intensify cost-cutting efforts, aiming for an additional $2 billion reduction to achieve a total target of $7.5 billion.

For the fiscal fourth quarter ending on Sept. 30, Disney reported a net income of $264 million, or 14 cents per share, surpassing the previous year's figures of $162 million or 9 cents per share. Following this positive announcement, the company's stock saw a more than 4% increase after Wednesday's closing bell.

Meanwhile, gold prices experienced a notable drop to a three-week low on Thursday, extending a series of recent losses. The decline was fueled by warnings from Federal Reserve officials against assumptions that the central bank had completed interest rate hikes. Factors contributing to this trend included a strengthening dollar, rising Treasury yields, and diminished safe haven demand for gold amid reduced risk premiums related to the Israel-Hamas conflict.

Bank of America's CEO, Brian Moynihan, expressed his optimism on Wednesday, anticipating a smooth economic trajectory for the United States, with a recession being avoided despite a slowdown in consumer spending and commercial borrowing. In October, consumer spending at the bank dwindled to a range of 4% to 4.5%, approximately half of the earlier pace seen this year. Additionally, commercial customers are exhibiting reduced borrowing activity.

Moynihan has consistently emphasized the sound state of consumer finances and spending as indicators that the US economy can sidestep a recession, setting his views apart from the prevailing pessimism among industry peers.

According to Bank of America's economists, the US economy is expected to achieve a growth rate of 2.7% this year and 0.7% in 2024. In the scenario often referred to as a "soft landing," economic growth decelerates while remaining in positive territory.

On Wednesday, the US Dollar experienced a surge in its value, as reflected by the DXY index, which measures the USD against a basket of global currencies. It reached a peak of 105.90 earlier in the trading session but subsequently reversed course and dipped to around 105.55.

This decline was attributed to falling Treasury yields, and the session witnessed no significant developments.

Markets have been relatively subdued this week, with investors eagerly awaiting fresh catalysts to inform their decisions in anticipation of the next Federal Reserve (Fed) decision in December.