July 25 2024: Global stocks declined on Wednesday, driven by disappointing earnings from Tesla (NASDAQ: TSLA) and European luxury brands. Meanwhile, oil prices rose after trading near six-week lows due to concerns over weak global demand.
The U.S. dollar edged lower as traders anticipated an inflation reading on Friday and a Federal Reserve meeting next week. The yen climbed to a seven-week high ahead of a central bank meeting.
Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions in Boston, commented, “I think the big story is clearly the earnings front and you’ve kind of seen reports all over the map, with Tesla probably the disappointing one.”
Market Performance:
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.7%, while Japan’s Nikkei fell 1%.
On Wall Street, all three main indexes finished lower, led by technology, consumer discretionary, and communication services stocks.
Tesla’s shares slumped 12.3% after reporting its lowest profit margin in five years amid waning demand for electric vehicles. Other “Magnificent Seven” stocks, including Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT), closed down between 2.8% and 6.8%.
Index Performance:
The Dow Jones Industrial Average fell 1.25% to 39,853.87.
The S&P 500 lost 2.31% to 5,427.13.
The Nasdaq Composite lost 3.64% to 17,342.41.
The pan-European STOXX 600 index fell 0.61% to 512.30 points.
James St. Aubin, chief investment officer at Sierra Mutual Funds in Santa Monica, California, noted, “It’s the curse of high expectations, that’s what the market was coming into earnings season with, especially for the tech companies that have been the darlings of the market.”
Rate Cut Expectations:
Subdued global stock trading reflected markets looking for direction, digesting themes including the U.S. election, rate cut expectations, and weak corporate earnings.
Oil prices settled higher due to falling U.S. crude inventories and supply risks from Canadian wildfires, but remained near month-and-a-half lows amid lackluster demand.
Brent crude futures closed 0.9% higher at $81.71 a barrel.
U.S. West Texas Intermediate crude rose 0.8% to $77.59 per barrel.
U.S. GDP data on Thursday and personal consumption expenditure data on Friday could help investors adjust expectations for future interest rate cuts.
Markets are pricing in 62 basis points of easing this year, with a cut in September at 95%, according to the CME FedWatch tool.
Thomas Hayes, chairman at Great Hill Capital in New York, remarked, “The rotation is in full force. Magnificent 7 earnings growth are decelerating, while un-magnificent 493 growth are accelerating. Fed cut will add fuel to this new trend for cyclicals, small caps, and dividend stocks picking up the mantle.”
Other Markets:
Gold prices slipped after early gains. Spot gold lost 0.45% to $2,398.45 an ounce, while U.S. gold futures settled 0.3% higher at $2,415.70.
The Japanese yen strengthened 1.06% against the greenback at 153.97 per dollar.
In cryptocurrencies, bitcoin gained 0.01% at $65,848.00, while Ethereum declined 3.18% at $3,372.50.