The Dow Jones closed green again on Monday (24/07/23) and recorded 11 consecutive winning days (the longest winning streak in six years) as investors bet on sectors beyond technology in a week filled with 2Q23 earnings reports; as well as welcoming this week’s FOMC Meeting. As noted, the tech-heavy Nasdaq Composite Index has rallied 34.3% this year, outperforming its peers as rate-sensitive megacap growth companies rose on optimism about artificial intelligence and an end to the Fed’s tightening cycle. Now investors are finally turning to non-tech stocks that are price laggards, causing a sector rotation into energy and bank stocks. The Dow posted its longest winning streak since February 2017, buoyed by Chevron shares which rose nearly 2% as the oil giant reported an upbeat quarterly earnings forecast over the = weekend. Energy stocks were also buoyed by rising oil prices to April highs amid speculation that OPEC+ supply cuts will tighten market conditions. Overall, 2Q/2023 earnings are expected to decline by 7.9%, cited from Refinitiv data. Meanwhile, traders ignored the S&P Global Composite PMI (July) survey that showed US business activity in July was still at a five-month low contraction (although it had started to pick up compared to the previous month), dragged down by slowing growth in the services sector. Meanwhile from the US interest rate, the Federal Reserve is holding its FOMC Meeting on Tuesday-Wednesday July 25-26, where a planned 0.25% rate hike is now almost fully anticipated by market participants, according to Investing.com’s Fed Rate Monitor Tool. The majority of economists expect this month’s 25 bps hike could be the last hike of the current monetary tightening cycle, after data shows signs of disinflation; thus putting the Fed Funds Rate peaking at 5.375% for the year. In anticipation of another rate hike, Treasury yields rose on Monday, with the 2-year Treasury yield, which is more sensitive to Fed rate hikes, rising to 4.9%. Update on yesterday’s PMI data releases: from Japan, as well as Germany, France, Euro Zone, and the UK; none of them showed expansionary business activity in July, both from the manufacturing and services sectors, all of which showed weakness from the previous month which had already entered contractionary territory. From the Asia, South Korea has reported its Q2/2023 GDP this morning, where growth managed to beat expectations, to 0.6% qoq and 0.9% yoy. Indonesia will today await the outcome of the Bank Indonesia Board of Governors Meeting (RDG BI) on the BI7DRR benchmark interest rate where it is expected to remain at 5.75%. In the afternoon, Germany will release the German IFO Business Climate Index (July) which will describe current business conditions and expectations for the next 6 months. Later in the evening, market participants will monitor the US Consumer Confidence (July) data where it is expected to strengthen to 111.5 from June’s 109.7.
JCI has increasingly driven into positive territory yesterday, moving closer back towards the critical Resistance of 6950-6970. Closing definitively above that area will end the Sideways trend since the beginning of this year and put JCI back in the head 7 territory. Therefore, ADVISE: Gradual AVERAGE UP is the wisest to apply at this time.
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