The market was spooked after first-quarter GDP growth fell short of expectations, at 1.6% versus 2.4% expected. At the same time, core PCE data for the quarter was higher than expected and reached 3.7% versus 3.4% expected. This further spooked traders ahead of the release of monthly core PCE data scheduled for release tomorrow at 8:30 a.m. ET. There have been rumors that month-over-month core PCE could rise closer to 0.5% versus the 0.3% expected in tomorrow’s announcement. The annual return is expected at 2.7% and would be higher given the figures above 0.3%.
Lower growth and higher inflation are not the ideal recipe for markets. As a result, stocks fell, bond prices fell (yields rose), and the U.S. dollar rose. Yields across the curve peaked in 2024, with the 2-year yield exceeding 5% (currently trading at 4.999%).
On the American stock market, the Dow Industrial Average lost more than -700 points at the lowest point of the session. The S&P index fell 81.04 points (-1.6%) and the NASDAQ fell -368.83 points (-2.31%).
However, the markets have stabilized. US stocks started to rise. At the end of the day:
- The Dow Industrial Average closed down -378.12 points or -0.98% at 38,085.81
- The S&P index fell -23.21 points or -0.46% to 5048.41
- The NASDAQ index fell -100.99 points or -0.64% to 15611.76.
The small-cap Russell 2000 fell -14.308 points or -0.72% to 1981.11. At the session’s lows, the index fell to -37.6 points or -1.8%.
In Forex, the US Dollar rose but retraced most of its declines against the EUR, GBP, CHF and CAD. Although AUDUSD and NZDUSD recovered from session lows, they were unable to climb back to pre-GDP release levels.
The GBP ended the session as the strongest of the major currencies, followed by the AUD. The JPY was the weakest, followed by the USD.
From strongest to weakest
USDJPY hit a new high for the year and its highest level since 1990. The BOJ will announce its latest rate decision on the new trading day. Technically, it would take a break of its 100 hour moving average at 154.977, followed by a break of the 200 hour moving average at 154.717 to give sellers hope that a temporary high is in place. The current price is trading at 155.64.
For EURUSD, its fall and low of the day stopped right at its 100 hour moving average before rebounding towards its 50% midpoint of the April trading range. This level stands at 1.07425. A move above this level on the new trading day would be more bullish.
GBPUSD’s decline stalled from its broken 38.2% retracement of the April trading range at 1.2455, then returned higher toward its 100-bar moving average on the 4 chart hours at 1.2512. This level will be the barometer for trading during the new trading day.
Bank of Japan this evening. Baseline PCE data tomorrow.
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