Tesla Drives S&P 500 Recovery, While Dollar and Global Currencies Seek Stability Amid Market Shifts | Daily Market Analysis

Key events:

• Eurozone - ECB McCaul Speaks
• USA - Durable Goods Orders (MoM) (Sep)
• USA - Michigan Consumer Sentiment (Oct)

On Thursday, the S&P 500 broke a three-day losing streak, driven by Tesla’s strong performance following its better-than-expected quarterly results. Tesla shares soared by 22%, marking its best single-day gain in over ten years, as investors responded positively to the company’s robust growth outlook.

In contrast, the Dow Jones Industrial Average dipped by 140 points, or 0.3%, while the S&P 500 saw a 0.2% increase, and the NASDAQ Composite gained 0.8%, supported by tech stocks.

Tesla’s (NASDAQ: TSLA)  earnings report not only beat expectations but also featured improved margins, with the company forecasting 20-30% sales growth for the coming year. This optimistic outlook helped ease concerns after a period of challenges, particularly in China’s competitive market and the Western EV landscape. Excluding regulatory credits, Tesla’s gross margins rose to 17.05%, up from 14.7% in the previous quarter, showing resilience despite a complex market environment.

In the currency market, the EUR/USD pair experienced mixed performance following a 60-pip rise the previous day. Although the pair saw slight downward pressure during Friday’s Asian session, it held above the 1.0800 mark, avoiding the nearly four-month low hit earlier in the week. The euro stabilized as the US Dollar paused its upward momentum, with the USD Index steadying after retreating from recent highs. This pullback in the USD came as US Treasury bond yields eased, providing relief to the EUR/USD pair and limiting further downside.

Equity market stability also reduced demand for the safe-haven USD, which supported the euro’s performance. However, any shifts in economic data or Treasury yields may impact the dollar’s strength and the EUR/USD’s trajectory in upcoming sessions.

On Thursday, the Australian Dollar weakened slightly against the USD amid global sentiment shifts. Though the AUD initially dipped, the AUD/USD pair regained some ground as the USD softened due to a dip in Treasury yields. Supporting the Aussie was a hawkish tone from the Reserve Bank of Australia, with Deputy Governor Andrew Hauser highlighting Australia’s strong labor participation and noting that the RBA remains data-driven but not overly reactionary. This nuanced stance leaves room for future tightening, potentially lending support to the AUD.

Meanwhile, the USD/CAD pair maintained its strength for a second day, trading close to a two-month high of 1.3868 as Friday’s Asian session unfolded. The USD’s resilience is largely due to expectations that the Federal Reserve will proceed cautiously with rate cuts. This has pressured the Canadian Dollar, which is also impacted by lower crude oil prices, as Canada is a key oil exporter to the US. West Texas Intermediate (WTI) crude has experienced a three-day decline, trading around $70.20 per barrel amid uncertain supply-demand conditions.

The Japanese Yen fluctuated between minor gains and losses against the USD in Friday’s Asian session. On the domestic front, Japan faces uncertainty tied to an upcoming general election, and Tokyo’s core inflation rate recently fell below the Bank of Japan’s 2% target, reducing expectations for future rate hikes in 2024. This lowered inflation outlook weakens the yen’s appeal, while recent statements from Japanese authorities have tempered large bearish positions on the JPY.

Meanwhile, the USD has remained steady following a mild pullback from recent highs, driven by expectations of gradual Fed rate cuts. This helped the USD/JPY pair hold above the mid-151.00s as markets await key US economic data for potential trading cues.

In summary, while stock indexes saw mixed results, Tesla’s earnings surprise provided a lift, and currency pairs displayed varied responses to USD movements and global yields. Investors continue to navigate central bank decisions, economic data, and geopolitical factors, each presenting distinct opportunities and risks across stock, currency, and commodity markets.