U.S. stocks rallied as investors both viewed the Fed’s minutes as a pledge to only gradually tighten policy to fight inflation and after a few retailers provided an upbeat outlook. The Fed locked itself into granting a few half-point rate hikes until the Jackson Hole symposium, which eliminated the risk of aggressive tightening in the near term. For some traders, having a clear idea of when the Fed will end its bullish cycle is key to giving everyone the green light to buy stocks and that could happen at the end of the summer.
The past few trading sessions have seen weakness in the stock market due to pessimistic outlooks from Target, Walmart and Snapchat, but today that has temporarily changed. Macy’s, William Sonoma and Dollar General gave reasons to be somewhat optimistic about the American consumer. Macy’s raised its full-year EPS forecast and noted that it continued to see strong sales of luxury items.
Williams Sonoma noted that this year should meet its long-term financial goals, which comes as no surprise to some, as middle-to-high income households are still feeling the current wave of price pressures. The exceptional earnings update came from Dollar General as they were able to raise their guidance despite continued uncertainties stemming from inflation in product costs and continued pressure on the supply chain. The impact of inflation is hitting low-income households the hardest and Dollar General seems to be benefiting from it. If Dollar General lowered its forecast, it would be very troubling to bet on the American consumer.
The latest round of U.S. data breathed a sigh of relief for the labor market as initial jobless claims fell, temporarily halting the upward trend. The hot job market seems to be staying in place and that’s good news for the economy. The second review of first quarter GDP and personal consumption showed a weaker number for growth and an increase in consumer spending.
Bearish sentiment remains the theme for cryptos as bitcoin edged lower despite a modest rebound with risky assets. Ethereum is selling off as many crypto traders are beginning to doubt that Ethereum 2 will succeed. The Ethereum 2 merger has been delayed until August, but it won’t really allow Ethereum to scale; they will use a multi-chain system and connect to a multitude of layer 2 scaling solutions. Ethereum has too many competitors that can do a better job of scaling and this latest update might force people to jump ship.
This article is for general information purposes only. It is not investment advice or a solution for buying or selling securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for everyone. You could lose all your deposited funds.