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L&#39;indice PMI dei servizi USA aumenta a luglio, superando le aspettative e rassicurando i mercati globali su una recessione.

Servizi USA: l&#39;indice PMI aumenta a luglio rassicurando i mercati

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I dati sull&#39;occupazione USA deludono e provocano il crollo dei mercati globali: segnali di debolezza economica e rischi geopolitici.

Dati deludenti sull&#39;occupazione USA e i mercati crollano

The Japanese Yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), weakened past 153.20 per U.S. dollar on Monday, marking its lowest <a href="https://www.benzinga.com/topic/japan">level since late July 2024. </a>
The decline follows a significant political shakeup over the weekend, as Japan&#8217;s ruling coalition – the Liberal Democratic Party (LDP) and its partner Komeito – lost its majority in the Lower House General Election. 
This unexpected result has fueled investor concerns about Japan&#8217;s future fiscal and monetary policy direction, contributing to the yen's slide, which is already weakening 6.2% in October. 
This negative performance is on par with April 2022, and with three days remaining, any further decline would mark the yen's worst monthly drop since November 2016.
<h3 class="wp-block-heading">Chart: Japanese Yen Eyes For Worst Monthly Drop Since November 2016</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="418" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285-1024x418.png" alt="" class="wp-image-618018" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285-1024x418.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285-300x123.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285-768x314.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285-1536x627.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/10/28155136/image-285.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption"><a href="https://bzresearch.myclickfunnels.com/benzinga-pro-content-webinar-registration/?utm_source=BZprocontent102824&amp;t=be2bearmibe3na1">Benzinga Pro</a></figcaption></figure>
<h2 class="wp-block-heading">Political Uncertainty Adds Pressure On Yen</h2>
&#8220;The ruling LDP and its coalition partner lost their majority in the lower house, raising concerns about the shape and policy direction of the next government,&#8221; wrote Scotiabank in a research note on Monday.
Goldman Sachs analyst Tomohiro Ota highlighted that the weakened political position of the ruling coalition could lead to calls for more fiscal expansion, as some opposition parties advocate increased government spending. 
However, he cautioned, &#8220;we do not think the election result would bring major fiscal and monetary policy change.&#8221; Instead, Ota suggests that the ruling coalition's "administrative power has inevitably become more fragile."
&#8220;We see likelihood of pressure building towards more fiscal expansion, given that some opposition parties advocate this,&#8221; Ota added.
BBVA's chief strategist Alejandro Cuadrado indicated that the political shifts could also delay any monetary tightening by the Bank of Japan (BoJ). 
"Investors felt that the LDP's ruling coalition losing its parliamentary majority could delay the BoJ&#8217;s next rate hike," Cuadrado wrote in a report.
<h3 class="wp-block-heading">US-Japan Yield Gap Widens Ahead Of BoJ Meeting</h3>
The widening interest rate differential between U.S. and Japanese bonds has also been a key driver of yen&#8217;s recent weakness. 
The yield gap between 10-year U.S. Treasuries and Japanese government bonds expanded from 2.75% in early Sept. to 3.30% as of Oct. 28. Short-term differentials have also risen, with the 2-year U.S. Treasury yield gap over its Japanese counterpart increasing from 3.15% to 3.68% over the past six weeks. 
The widening yield advantage is making the U.S. dollar increasingly attractive to investors, adding downward pressure on the yen and bolstering yen-dollar carry trade strategies.
The Bank of Japan (BoJ) is set to meet on Thursday, but analysts are not expecting any immediate policy changes. 
Luca Cigognini, a market strategist at Intesa Sanpaolo, highlighted that the political situation could impact the BoJ&#8217;s policy decisions. 
"Forming a new government becomes more complicated, and the effects could also be seen on the BoJ, which may avoid tightening monetary policy in the future," Cigognini wrote.
ING analyst Chris Turner, however, expects that a December rate hike could still be on the table and suggested investors not to chase yen-dollar carry trade opportunities ahead of volatile weeks due to U.S. elections. 
&#8220;The market sees very little chance of a rate hike this week from the Bank of Japan,&#8221; he said, adding that the political turbulence may add a layer of caution to the BoJ's approach.
&#8220;With volatility likely to rise further into next week (exactly the wrong conditions for the carry trade), we do not favour chasing USD/JPY higher from these levels,&#8221; he added. 
Read now: 
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/10/41581488/is-s-p-500-headed-for-a-lost-decade-analysts-say-we-may-have-forgotten-about-divide">Is S&amp;P 500 Headed For A Lost Decade? Analysts Say &#8216;We May Have Forgotten About Dividends&#8217;</a></li>
</ul>
Image: Unsplash

Asia

Japanese Yen Hits 3-Month Low Against Dollar, Eyes Worst Month In 8 Years As Political Uncertainty Rises In Japan

Economic activity in the U.S. services sector continued to expand in September, as the Services PMI reached 54.9%, its highest level since February 2023, <a href="https://www.benzinga.com/topic/pmi">marking a robust recovery</a>.
According to the Services ISM Report On Business released on Thursday, this increase of 3.4 percentage points from August's 51.5% reflects strong growth in business activity and new orders. 
The report raises concerns about how it may influence upcoming Federal Reserve rate cuts. With the services sector expanding for 49 of the last 52 months, the data suggests resilient demand, which could influence the Fed's decision on the size of the anticipated November cut.
According to the CME FedWatch tool, traders now see a 65.6% probability of a 25-basis point rate cut in November, with a 34.4% chance of a 50-basis point cut.
Also on Thursday, the S&amp;P Global US Services PMI Business Activity Index posted 55.2 in September. That&#8217;s slightly down from 55.7 in August. This marked the 20th consecutive month of expansion in services activity. New orders continued to rise solidly, although input prices increased at the joint-fastest pace in a year, driven by salary pressures and higher costs for manufactured goods.
Employment dropped for the second month, but companies remained cautious about hiring due to strong cost pressures. Business confidence declined sharply to its lowest level since October 2022 as concerns about an economic slowdown grew.
<h3 class="wp-block-heading">September ISM Services PMI Report: Key Highlights</h3>
<ul>
<li>The Services PMI rose to 54.9% in September, the highest reading since February 2023.</li>
<li>Business activity expanded significantly, with the Business Activity Index climbing to 59.9%.</li>
<li>The New Orders Index increased to 59.4%, up from 53% in August.</li>
<li>The Employment Index contracted to 48.1%, down from 50.2% in August.</li>
<li>The Supplier Deliveries Index returned to expansion, hitting 52.1%.</li>
<li>Panelists expressed concerns over political uncertainty and labor costs, despite positive supply chain improvements.</li>
</ul>
<h3 class="wp-block-heading">Experts React To September Data</h3>
Steve Miller, chair of the ISM Services Business Survey Committee, highlighted the continued expansion in services. "Twelve industries reported growth in September, up two from the 10 industries reporting growth in August,&#8221; he said.
&#8220;The Supplier Deliveries Index returned to expansion in September, indicating slower delivery performance,&#8221; Miller added. &#8220;The stronger growth indicated by the index data was generally supported by panelists' comments; however, concerns over political uncertainty are more prevalent than last month&#8221;
Chris Williamson, chief business economist at S&amp;P Global Market Intelligence, said, &#8220;U.S. service sector businesses reported a strong end to the third quarter, with output continuing to grow at one of the fastest rates seen over the past two-and-a-half years.&#8221; 
Still, he also noted that &#8220;companies have become increasingly concerned about the outlook… with business confidence slumping in September amid uncertainty caused by the upcoming election as well as perceptions of rising recession risks.&#8221;
<h3 class="wp-block-heading">Market Reactions</h3>
Markets were trading lower on Thursday following the data release.
The S&amp;P 500, tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), was trading 0.5% lower.
The U.S. dollar index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), was up 0.31%
Other major asset movements following the ISM Services PMI print included: 
<ul>
<li>The Nasdaq 100, as monitored through the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), was down 0.3%.</li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), tracking long-dated Treasuries, was down 0.63%.</li>
<li>Gold, as tracked by the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), was down 0.3%.</li>
</ul>
Image created using artificial intelligence via Midjourney.

Services Sector Surges In September, Raising Questions For Fed's November Rate Cut

To gain an edge, this is what you need to know today.
<figure class="wp-block-image size-large is-resized"><img decoding="async" src="https://thearorareport.com/wp-content/uploads/2024/10/2024-10-01_08h10_05.png" alt="" style="width:624px" /></figure>
<h3 class="wp-block-heading">Important Data Ahead</h3>
Please <a href="https://thearorareport.com/chart-analysis-stock-market-dip-powell-blind-money-spy-mc-10012024">click here</a> for an enalrged chart of SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) which represents the benchmark stock market index S&amp;P 500 (SPX).
Note the following:
<ul>
<li>The chart shows the dip in the market caused by Powell's remarks. Powell pushed back against aggressive rate cut bets that the momo crowd has placed. Powell clearly said that the Fed plans on two 25 bps cuts this year assuming the economy stays on the expected trajectory. The momo crowd is counting on 100 bps cut. Even non-momo investors are betting on 75 bps cuts.</li>
<li>The chart shows the dip on Powell's remarks was aggressively bought, running the stock market higher than where it was before Powell's remarks. The buying appears to be related to quarter end window dressing.</li>
<li>Momo gurus' new narrative to persuade their followers to buy stocks is to not trust the Fed.&nbsp; Prudent investors always need to be mindful that momo gurus' interest is not the same as prudent investors' best interest.</li>
<li>There are two important pieces of data ahead.
<ul>
<li>JOLTS job openings data will be released at 10am ET.</li>
<li>ISM Manufacturing index will also be released at 10am ET.</li>
<li>Both of these pieces of data may be market moving.</li>
</ul>
</li>
<li>The most important economic data this week is the jobs report, also known as the mother of all reports, that will be released at 8:30am ET on Friday.</li>
<li>Expect blind money to flow into the stock market today and tomorrow.&nbsp; Blind money is the money that flows into the stock market on the first two days of the month without any analysis irrespective of market conditions.</li>
<li>East coast port workers have gone on strike. FedEx Corp (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FDX#NYSE">FDX</a>) is a beneficiary.  As full disclosure, FDX was recently added to the portfolio that surrounds the Core Model Portfolio in The Arora Report&#8217;s ZYX Buy, taking advantage of the dip on earnings.  The Arora Report utilizes over 50 different strategies. FDX belongs to the strategy of earnings patterns that historically work. </li>
<li>In important news for prudent investors, Michael Dell has sold $1.22B in Dell Technologies Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DELL#NYSE">DELL</a>) shares.&nbsp; Michael Dell is taking advantage of the run up in Dell shares on the AI frenzy.&nbsp; The momo crowd is oblivious and has been an aggressive buyer of DELL stock.</li>
<li>Prudent investors should also note that there is a consistent pattern of insiders selling AI stocks that have run up.&nbsp; It is important to pay attention to the protection band as well as to separate articles indicating putting on hedges or taking partial profits.</li>
</ul>
<h3 class="wp-block-heading">Japan</h3>
Japan's new prime minister is likely to favor tighter fiscal policy and tighter monetary policy.  Such tighter policies will be good for the Japanese yen.  As full disclosure, there is a position in yen using Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) in The Arora Report&#8217;s ZYX Allocation.  On the negative side, tighter fiscal and monetary policies in Japan increase the risk to the carry trade.  Lately, in the carry trade, funds have been borrowing in yen and investing in U.S. stocks, especially AI stocks.
<h3 class="wp-block-heading">Magnificent Seven Money Flows</h3>
In the early trade, money flows are positive in Alphabet Inc Class C (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>), Meta Platforms Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>), NVIDIA Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>), and Tesla Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TSLA#NASDAQ">TSLA</a>).
In the early trade, money flows are negative in Apple Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>), Amazon.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>), and Microsoft Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>).
In the early trade, money flows are mixed in (SPY) and Invesco QQQ Trust Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>).
<h3 class="wp-block-heading">Momo Crowd And Smart Money In Stocks</h3>
Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>).  The most popular ETF for silver is iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>).  The most popular ETF for oil is United States Oil ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>).
<h3 class="wp-block-heading">Bitcoin</h3>
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) is range bound.
<h3 class="wp-block-heading">Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges.&nbsp; The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.&nbsp; If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.&nbsp; A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp; When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3 class="wp-block-heading">Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.&nbsp; Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter-benzinga">Generate Wealth Newsletter</a>.

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Powell Stock Market Drip Aggressively Bought, Important Data And Blind Money Ahead

To gain an edge, this is what you need to know today.
<figure class="wp-block-image size-large is-resized"><img decoding="async" src="https://thearorareport.com/wp-content/uploads/2024/09/2024-09-27_08h59_50.png" alt="" style="width:624px" /></figure>
<h3 class="wp-block-heading">Spending Disappointment</h3>
Please <a href="https://thearorareport.com/chart-analysis-stock-market-spending-disappointment-boj-carry-trade-smci-mc-09272024">click here</a> for an enlarged chart of Super Micro Computer Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SMCI#NASDAQ">SMCI</a>).
Note the following:
<ul>
<li>This article is about the big picture, not an individual stock. The chart of SMCI stock is being used to illustrate the point.</li>
<li>A fortune is to be made in artificial intelligence, but it is not going to be in a straight line. At times, it is going to be treacherous.  It is important to not make mistakes by getting carried away with the momo crowd and listening to momo gurus who have a vested interest that is not your best interest.</li>
<li>The chart shows that momo crowd favorite SMCI fell yesterday on the news of a Department of Justice (DOJ) probe due to allegations of accounting irregularities. A DOJ probe is a serious matter as it is often a criminal probe.</li>
<li>The chart shows that the enthusiasm was at its peak right after SMCI stock was added to S&amp;P 500.</li>
<li>The chart shows from the peak to the low, the stock lost 69% of its value.</li>
<li>The chart shows that the day S&amp;P 500 added SMCI stock, The Arora Report made a bold call. The Arora Report call was that SMCI was worth only $442 &#8211; $486 in the best case. The stock peaked at $1229.  As of this writing in the premarket, SMCI stock is trading at $400.95.  All Arora Report calls are 100% transparent, traceable, and auditable. Members have access to over ten years of archives, including the winners and losers – no cherry picking.</li>
<li>Right now, the momo crowd is sitting on massive losses in SMCI stock. The momo crowd was not able to distinguish between NVIDIA Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) and Super Micro Computer – the prevailing belief among the momo crowd was that NVDA and SMCI were the same.</li>
<li>The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to personal income and personal spending.  Just released personal income and spending data is disappointing.  Here are the details of the new personal income and spending data:
<ul>
<li>Personal income came at 0.2% vs. 0.4% consensus.</li>
<li>Personal spending came at 0.2% vs. 0.3% consensus.</li>
</ul>
</li>
<li>PCE is the Fed&#8217;s favorite inflation gauge.&nbsp; Here are the details:
<ul>
<li>PCE came at 0.1% vs. 0.1% consensus.</li>
<li>Core PCE came at 0.1% vs. 0.2% consensus.</li>
<li>In The Arora Report analysis, the data is in line with expectations. As such, this data should have no impact on the stock market.</li>
<li>Even though the stock market pays a lot of attention to PCE, in The Arora Report analysis, economists have become really good at projecting PCE.&nbsp; As such, investors&#8217; expectations, in general, should be that PCE will come in line with consensus.</li>
</ul>
</li>
</ul>
<h3 class="wp-block-heading">Japan</h3>
Bank of Japan (BOJ) actions are very important for U.S. investors. The reason is the carry trade.  In carry trade, funds borrow in yen and invest in the U.S. stock market. Lately, they have been buying AI stocks. Japan's ruling party LDP has chosen Shigeru Ishiba as its new leader. Ishiba is the next prime minister of Japan. In The Arora Report analysis, yen is rallying on the news as Ishiba is a supporter of BOJ.
In The Arora Report analysis, this development is negative for the carry trade and positive for the yen position using ETF Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) in The Arora Report&#8217;s ZYX Allocation.
<h3 class="wp-block-heading">Magnificent Seven Money Flows</h3>
In the early trade, money flows are positive in Apple Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>), Alphabet Inc Class C (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>), Microsoft Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>), and Tesla Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TSLA#NASDAQ">TSLA</a>).
In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>), Meta Platforms Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>), and NVDA.
In the early trade, money flows are positive in SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>).
<h3 class="wp-block-heading">Momo Crowd And Smart Money In Stocks</h3>
Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>).  The most popular ETF for silver is iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>).  The most popular ETF for oil is United States Oil ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>).
<h3 class="wp-block-heading">Bitcoin</h3>
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) is on track to have the best September ever.
<h3 class="wp-block-heading">Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges.&nbsp; The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.&nbsp; If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.&nbsp; A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp; When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3 class="wp-block-heading">Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.&nbsp; Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter-benzinga">Generate Wealth Newsletter</a>.

Market Summary

Trading Ideas

SMCI

Personal Income And Spending Disappoint, Super Micro Computer Lesson, BOJ Supporter As Japan PM

The U.S. dollar plunged to a 17-month low against the Chinese yuan after the Federal Reserve slashed rates as the People&#8217;s Bank of China held them steady overnight, raising pressures on interest-rate divergences between the <a href="https://www.benzinga.com/topic/china">world&#8217;s two major economies. </a>
The People Bank of China (PBoC) opted to hold the one-year loan prime rate (LPR)—a critical benchmark for most corporate and household loans—at 3.35% during its September fixing. The five-year LPR, a reference for property mortgages, also remained steady at 3.85%.
According to the latest monetary report, China's economy grew by 5% year over year in the first half of 2024, showing resilience despite a complex global environment.
Inflation remained subdued, with the consumer price index (CPI) increasing by just 0.1% year-over-year. The central bank noted that while economic performance was stable, domestic issues such as &#8220;insufficient effective demand&#8221; and &#8220;the transition to new growth drivers&#8221; continue to challenge the economy.
The PBoC&#8217;s accommodative monetary stance is designed to provide necessary financial support for a sustainable economic recovery. However, it highlighted that external conditions remain &#8220;complex, grim, and uncertain,&#8221; contributing to a cautious approach to navigating headwinds.
<h3 class="wp-block-heading">Chinese Stock Market Performance</h3>
Chinese domestic stocks, as tracked by the Shanghai Composite Total Return Index, closed flat for the day, reflecting market uncertainty. However, offshore Chinese stocks fared better, with Hong Kong-listed entities, tracked via the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), advancing by more than 1%.
In U.S. premarket trading, major Chinese stocks listed on American exchanges also saw gains:
<ul>
<li>XPeng Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XPEV#NYSE">XPEV</a>): +3.3%</li>
<li>Li Auto Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>): +1.5%</li>
<li>Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>): +1.3%</li>
<li>Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>): +0.8%</li>
</ul>
<h3 class="wp-block-heading">Bank of Japan Holds Rates; Yen Slips</h3>
In Eastern Asia, the Bank of Japan (BoJ) also held interest rates steady at 0.25%, aligning with market expectations. 
Japan's economy showed a moderate recovery, though signs of weakness were observed in certain sectors, according to the BoJ statement.
On the inflation front, Japan's core CPI (excluding fresh food) has risen by 2.5-3.0% year-over-year, driven by wage increases and moderate price hikes in services.
Following this announcement, the Japanese yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), fell by over 1% against the U.S. dollar. Meanwhile, Japanese equities rallied, with the Nikkei 225 index, as represented by the iShares MSCI Japan Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWJ#NYSE">EWJ</a>), surging by 1.5% after a 3% gain in the earlier session.
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Photo: Shutterstock

Global

BABA

XPEV

Interest Rate Divergence Weakens Dollar To 17-Month Low Against Yuan: XPeng, Li Auto Among 4 Stock Movers

The world's leading central banks have opened a fresh phase of interest rate cuts, spurred by a softening in<a href="https://www.benzinga.com/topic/inflation"> inflation across advanced economies.</a>
With inflation sliding closer to target levels, policymakers are keen to unwind some of the policy restrictiveness that's become a drag on growth. 
But a significant outlier on the global monetary scene is raising eyebrows—and concerns—for an interest-rate-fueled rally in the stock market.
On Thursday, the European Central Bank (ECB) took its turn, delivering a second 25 basis point rate cut following a similar move in June. 
While ECB President Christine Lagarde stopped short of promising more cuts, she hinted that future decisions would be data-driven. 
However, Frankfurt doesn't have the luxury of dragging its feet: growth is already on life support, and Germany, the region's economic heavyweight, is teetering on the edge of a recession.
"We still think that data will end up pushing the ECB to accelerate the cutting cycle," said Bank of America's European economist Ruben Segura-Cayuela in a post-meeting note.
<h3 class="wp-block-heading">Global Central Banks In Sync, Almost</h3>
Earlier this month, the Bank of Canada trimmed its key interest rate by 25 basis points to 4.25%. Policymakers there flagged concerns about missing their inflation targets on the downside—something that would have been unthinkable just a year ago, when inflation overshoot was the name of the game.
Meanwhile, an interest rate cut from the Federal Reserve next week is practically a done deal. 
The only questions lingering for markets now are the magnitude and pace: Will the Fed cut by 25 or 50 basis points? Will it move at every meeting or take a more gradual, every-other-meeting approach?
The Bank of England remains a tight call, with economists forecasting a razor-thin 5-4 vote in favor of a rate cut next week.
"At this stage, markets are only discussing the magnitude and sequencing of this cut and those to follow. But regardless of the outcome, global monetary policy convergence is set to begin," Bank of America economist Antonio Gabriel noted recently.
According to Bank of America this newfound global monetary coordination is likely to weaken the dollar from its historically elevated levels, but any dollar decline could be tempered by potential U.S. policy shifts after the upcoming election. 
<h3 class="wp-block-heading">The Bank of Japan&#8217;s Outlier Stance: A Wildcard For Markets</h3>
The one glaring outlier in this synchronized easing spree? The Bank of Japan (BOJ). 
Tokyo has clearly decided it's not playing by the same rulebook. 
While the world's major central banks are cutting, the BOJ hiked rates in July—its second hike this year following a move in March—and signaled that more hikes could be on the horizon. With annual inflation running at 2.8%, well above the BOJ's 2% target, Japan's monetary policy looks set on a divergent path.
BOJ Governor Kazuo Ueda reiterated earlier this month that the BOJ would continue raising rates if the economy and inflation behave as expected.
Ed Yardeni, the veteran market strategist, weighed in on this divergence, pointing to the ripple effects it's having across markets: "The carry trade is still unwinding. Expectations that the Fed will lower rates while the BOJ continues to hike have boosted the yen, forcing traders to unwind their carry trades."
For those not fluent in financial jargon, the carry trade refers to the strategy of borrowing yen at near-zero interest rates to invest in higher-yielding assets elsewhere, such as long-term Treasuries or even stocks. Now, with the yen appreciating, those trades are being unwound, sparking a rout in some of the market&#8217;s most richly valued stocks.
Yardeni highlighted a key inverse correlation between the yen and the Nasdaq 100, which has been holding since the start of the year.
Whenever the Japanese currency, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), strengthens, the latter, as monitored through the Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), weakens. 
<h3 class="wp-block-heading">Chart: Inverse Relationship Between Japanese Yen And U.S. Tech Stocks</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="442" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1024x442.png" alt="" class="wp-image-545503" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1024x442.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-768x331.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101-1536x662.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/12154252/image-101.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Image: <a href="https://bzresearch.myclickfunnels.com/benzinga-pro-content-webinar-registration/?utm_source=BZprocontent091224&amp;t=be2bearmibe3na1">Benzinga Pro</a></figcaption></figure>
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Image created using artificial intelligence via Midjourney.

Eurozone

Major Central Banks Slash Rates In Sync, But One Holdout Threatens To Derail Bulls' Momentum: 'Carry Trade Is Still Unwinding'

The U.S. Treasury market rallied sharply on Friday after August labor data showed weaker-than-expected job growth, bolstering bets on Federal Reserve <a href="https://www.benzinga.com/topic/interest-rates">interest rate cuts. </a>
The U.S. economy added 142,000 nonfarm payrolls last month, an increase from 89,000 in July but missing the expected increase to 160,000. The unemployment rate ticked down by 0.1% to 4.3% as expected, while wages displayed higher-than-forecasted growth.
Market-implied odds of a 50-basis-point rate cut in September surged to 61% as of 11:05 a.m. in New York, overtaking the 39% probability of a 25-basis-point cut, according to the CME Group&#8216;s FedWatch data.
<h3 class="wp-block-heading">September Rate-Cut Probabilities After August Jobs Data</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>September Rate Cut</td>
<td>Now&#x2A;</td>
<td>1 day ago (Sept. 5, 2024)</td>
<td>1 Week ago (Aug. 30, 2024)</td>
</tr>
<tr>
<td>50 basis points (0.5%)</td>
<td>61%</td>
<td>40%</td>
<td>30%</td>
</tr>
<tr>
<td>25 basis points (0.25%)</td>
<td>39%</td>
<td>60%</td>
<td>70%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">&#x2A; Data as of Sept. 6, 2024 11:05 a.m. ET, CME FedWatch</figcaption></figure>
Traders poured into bonds amid growing expectations of declining interest rates, driving yields sharply lower across the Treasury curve.
The policy-sensitive two-year yield dropped over 10 basis points, reaching 3.59% at 11:15 a.m. in New York, its lowest level since March 2023.
The 10-year Treasury yield fell 6 basis points to 3.67%, marking its lowest point since June 2023.
This movement has led to a positive slope in the Treasury yield curve from the 10-year onward, effectively ending the more than two-year period of yield curve inversion.
<h3 class="wp-block-heading">Chart: US Yield Curve Normalizes, Ending 2-Year Inversion</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="508" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1024x508.png" alt="" class="wp-image-534918" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1024x508.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-300x149.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-768x381.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57-1536x762.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/09/06112245/image-57.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">Market Reactions</h3>
Rate-cut expectations and falling Treasury yields triggered sharp moves across asset classes, with bonds rallying, the dollar weakening against the yen and equity markets sliding.
&#8220;No sooner than the payroll print hit, the algorithms marched into high gear, pushing Treasury yields lower as the disappointing headline number, coupled with a series of downward revisions, suggested a more dire economic backdrop perhaps requiring a heavier dose of Fed medicine on Sept. 18,&#8221; said Quincy Krosby, chief global strategist for LPL Financial.
Markets are wrestling with whether the August payroll data signals a labor market returning to pre-COVID norms or an economy losing critical momentum, Krosby said. 
<ul>
<li>Treasury-related ETFs surged, with the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rising 1.1% to $100.65, on pace for its highest close since late July 2023.</li>
<li>The Japanese yen strengthened as well, with the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) gaining over 1%, poised to close at its highest level since early January 2024.</li>
<li>Volatility spiked, as the CBOE Volatility Index (VIX) jumped 14% to 23.</li>
<li>Wall Street flipped to the red, with the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) dropping 1.5% on Friday, extending its weekly decline to 3.9%, on track for the worst weekly performance since March 2023.</li>
<li>Tech stocks were hit hardest, with the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) down 2.4%, pushing its weekly loss past 5%.</li>
<li>Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) tumbled 4%, extending its weekly loss to 14%, its worst performance in two years.</li>
</ul>
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Photo via Shutterstock.

Treasury Yields Plunge, TLT ETF Tops $100, VIX Spikes As 50-Basis-Point Rate Cut Odds Soar In Response To Jobs Data

Lower-than-expected private employment growth in August triggered positive reactions Thursday in interest rate-sensitive assets like gold and the Japanese yen, while pushing Treasury yields lower as traders bolster their bets on a 50-basis-point rate cut by the <a href="https://www.benzinga.com/topic/interest-rates">Federal Reserve this month.</a>
U.S. private employers added 99,000 jobs in August, the lowest reading since January 2021 and down from a downwardly revised 111,000 in July, the ADP <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40728795/private-employment-grows-by-99-000-in-august-sharply-misses-forecasts-of-140-000-">National Employment report revealed. </a>
The outcome fell short of the predicted 140,000, highlighting a surprising cooling in labor market conditions last month.
While weekly jobless claims were in line with expectations and offered little new insight, signs of further weakness in the labor market surfaced in the Challenger Job Report, which recorded 75,891 job cuts in August — a sharp 193% increase from the 25,885 cuts in July.
A day earlier, official statistics revealed that job openings fell to 7.673 million in July,&nbsp;the lowest in over three years, with vacancies now almost closing the gap with <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40711148/july-job-openings-fall-to-3-year-lows-gap-with-unemployment-narrows-to-near-parit">the level of unemployment. </a>
Following the slew of Thursday&#8217;s labor market data, market-implied probabilities for a 50-basis-point cut surged to 45%, as per CME Group&#8216;s FedWatch tool, ahead of the highly anticipated official jobs report on Friday.
<h3 class="wp-block-heading">Market Reactions</h3>
Treasury yields moved lower across the board, with the policy-sensitive two-year yield down by 3 basis points to 3.72%, hitting the lowest yield in a month.
The benchmark 10-year yield dropped to 3.73%, marking its lowest level in a month. It also officially surpassed the two-year yield for the first time since July 2022, marking the end of the U.S. yield curve inversion.
In premarket trading, the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was 0.3% higher at 9:00 a.m. in New York, after closing 1.3% higher on Wednesday.
The Japanese yen rose against the dollar, amid narrowing yield differentials between the two regions. The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) was 0.4% higher. 
Gold prices rallied on the back of disappointing employment data, with the commodity surging to $2,515 per ounce. The SPDR Gold Trust ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) was up by 0.9%.
U.S. major indices are set to open slightly in the red, with S&amp;P 500 futures down 0.1% and Nasdaq 100 futures slipping 0.3%.
Sector-wise, technology stocks, as tracked by the Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>), lagged, down 0.6%. Utilities, as tracked by the Utilities Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>), strengthened the most, up 0.7%. 
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</ul>
Illustration created using artificial intelligence via Midjourney.

Gold Rallies, Yen Surges, Treasury Yields Fall As Disappointing Payrolls Data Supports Large Rate-Cut Bets

The Japanese yen sent shockwaves through the markets at the start of September, triggering alarms for traders already on edge in what is shaping up to be <a href="https://www.benzinga.com/24/09/40676774/september-market-seasonality-why-this-month-is-historically-the-toughest-for-investors">a highly volatile month.</a>
The yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), appreciated over 0.9% by 11:30 a.m. ET, fueled by hawkish remarks overnight from Bank of Japan (BoJ) Governor Kazuo Ueda and disappointing U.S. manufacturing data.
In a parliamentary speech Tuesday, Ueda reaffirmed that the central bank would continue to raise interest rates if the economy and inflation evolve as expected. Ueda reiterated that the economic environment remains accommodative, despite the July rate hike, as real interest rates continue to be significantly negative.
&#8220;Traders hoping for a dovish pivot didn't get it,&#8221; said analyst Michael Gayed.
According to Gayed, with the Federal Reserve likely to cut rates by 75-100 basis points by the end of the year and the BoJ potentially hiking at least once more during the same period, the interest rate gap could narrow significantly.
Gayed also added, &#8220;This could ultimately trigger the next rally for the yen and potentially drive stock prices higher in the longer term.&#8221;
<h3 class="wp-block-heading">US Manufacturing Sector Contracts, Analysts See Mixed Yen Performance</h3>
In August, the U.S. manufacturing sector remained in a contractionary phase for the fifth consecutive month. However, the pace of decline eased slightly compared to July, according to the <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40689835/us-manufacturing-activity-extends-contraction-for-fifth-month-demand-continues-to">Institute for Supply Management (ISM)</a>.
&#8220;This should be positive news for equities and keeps the door open for more rate cuts,&#8221; said Gina Bolvin, president of Bolvin Wealth Management Group.
Jeffrey Roach, chief economist at LPL Financial, commented, &#8220;Manufacturing employment contracted for the third consecutive month as activity in the sector slowed. While manufacturing now represents a smaller portion of the macroeconomy than in previous cycles, investors should still prepare for a broader slowdown throughout the remainder of the year.&#8221;
Treasury yields fell sharply following Tuesday&#8217;s data release. The yield on the 10-year bond fell 7 basis points to 3.85%. 
Bloomberg reported that Arif Husain, head of fixed income at T. Rowe Price, expects further volatility as the yen-dollar carry trade unwinds, predicting more episodes similar to the one seen in early August.
Husain believes the yen is on an appreciating trend due to Japan&#8217;s ongoing structural transformation, driven by demographic shifts. He also highlighted that persistent inflation is likely to accelerate corporate reforms and influence household asset allocation.
&#8220;The ideal macro environment for yen appreciation usually occurs when U.S. real rates and equities decline together, typically during a U.S. recession,&#8221; said Kamakshya Trivedi, an economist at Goldman Sachs.
Contrarily, Daysuke Takato, an economist at Bank of America, argued, &#8220;The yen&#8217;s weakness has been driven by two main factors: the interest rate differentials between Japan and the rest of the world, and structural capital outflows from Japan.
While the potential for further yen depreciation may be limited in the short term, we believe the yen will resume its downtrend by year-end, as structural outflows persist.&#8221;
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Image: Shutterstock

Japanese Yen Rallies On Bank Of Japan's Rate Hike Pledge, US Manufacturing Activity Contraction

The U.S. dollar, oil prices and tech stocks surged Thursday following an upward revision of the second-quarter real gross domestic product growth to 3%, signaling the continued strength<a href="https://www.benzinga.com/government/24/08/40624663/us-economy-expands-by-3-in-q2-surpasses-earlier-estimates-jobless-claims-little-moved-last-week"> of the U.S. economy.</a>
More defensive assets like bonds and the Japanese yen fell as expectations for interest rate cuts were slightly tempered.
What Happened: The U.S. economy continues to display robust health, boasting a notable real GDP growth rate of 3% in the second quarter, revised higher from the initial estimate of 2.8% on Thursday. This represents more than double the 1.4% growth recorded in the first quarter, marking the eighth consecutive quarter of sequential growth for the U.S. economy.
The boost was primarily driven by consumer spending, which surged by 2.9% in the second quarter, an upward revision from the previously reported 2.3% and significantly higher than the 1.5% growth in the first quarter. Corporate profits also showed improvement, flipping from a 2.7% contraction in the first quarter to a 1.7% expansion in the second.
Positive signs also emerged from price pressures, as Personal Consumption Expenditure prices were revised downward in the second estimate.
The revised data also included downward adjustments to nonresidential fixed investment (4.6% vs. 5.2% earlier reported), exports (1.6% vs. 2%), private inventory investment (7.5% vs. 8.4%), government spending at both federal (3.3% vs. 3.9%) and local (2.3% vs. 2.6%) levels, and residential fixed investment (negative 2% vs. negative 1.4%). Imports were adjusted slightly higher (7% vs. 6.9%).
Why It Matters: The resilience of the U.S. economy reduces recession risks that had surfaced earlier this month following a cooler-than-expected July jobs report. 
For markets sensitive to domestic economic conditions, such as small- and medium-cap stocks, a healthy economy signals improved risk sentiment among investors.
The concurrent decline in price pressures bolsters the Federal Reserve&#8217;s confidence that inflation is trending toward its 2% target, paving the way for a September interest rate cut. 
The strong economic activity also represents a factor that could refrain the Fed from making large or swift rate cuts to avoid reigniting inflationary pressures.
Market-implied odds for a 50-basis-point rate cut in September slightly eased from 38% a day ago to the 32.5%, as per CME Group&#8216;s FedWatch data. 
Market Reactions:
<ul>
<li>U.S. Dollar: The U.S. Dollar Index, tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), rallied 0.4% in response to the GDP data, building on a 0.5% gain from Wednesday.</li>
<li>Bonds: Treasury yields edged higher, causing the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) to decline by 0.5%.</li>
<li>Japanese yen: The USD-JPY pair rose 0.7% on Thursday to 145.35 levels. The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) fell 0.7%. </li>
<li>Stocks: The S&amp;P 500 as tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up by 0.3%. The tech-heavy Nasdaq 100, tracked by the Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), climbed 0.8%, despite a 2.2% drop in Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>).</li>
<li>Sector Performance: The Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) led sector gains, up 0.9%.</li>
<li>Oil: The United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>) rose by 2.2%, fully reversing Wednesday&#8217;s losses.</li>
<li>Gold: The SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) rose 0.4% to $2,515 per ounce.</li>
</ul>
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</ul>
Illustration created using artificial intelligence via MidJourney.

Select Sector SPDR-Consumer Discretionary

US Dollar, Oil Prices, Tech Stocks Rise As GDP Roars By 3% In Q2; Bonds, Yen Slip As Bets For Large Rate Cuts Ease

The dollar-yen exchange rate experienced hours of turbulence after the Bank of Japan delivered hawkish remarks overnight, just ahead of Fed Chair Jerome Powell&#8216;s highly anticipated speech at Jackson Hole, set for <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40513380/could-powells-jackson-hole-speech-keep-the-door-open-for-50-basis-point-rate-cut">10:00 a.m. ET on Friday.</a>
During a parliamentary hearing on Friday, BoJ Governor Kazuo Ueda reiterated his commitment to keep raising interest rates if inflation continues to align with the country&#8217;s 2% target, indicating that recent market volatility would not deter the bank&#8217;s long-term strategy for rate hikes.
However, Ueda warned that market jitters could influence the BoJ&#8217;s inflation forecasts, indicating that fluctuations in the yen and stock prices will be pivotal in determining the timing of the next rate hike.
&#8220;Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being,&#8221; Ueda stated.
This seems more in line the previous BoJ&#8217;s reassurances when earlier this month Deputy Governor Shinichi Uchida had vowed not to raise interest <a href="https://www.benzinga.com/markets/asia/24/08/40223986/traders-resume-yen-dollar-carry-trade-as-bank-of-japan-pledges-no-rate-hikes-during-market-volatilit">rates if market volatility persisted.</a>
The yen, tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), gained approximately 0.8% between 8:00 p.m. ET on Thursday and 2:50 a.m. ET on Friday, before slightly paring back those gains.
On Thursday, Japan&#8217;s latest inflation report showed that consumer prices rose by 2.8% year-over-year in July 2024, unchanged for the third straight month and holding at their highest level since February.
<h3 class="wp-block-heading">A Look At The Markets, But Also At The Economy</h3>
Although Ueda stated that the BoJ is monitoring market developments, he also reiterated that if the economy shows clear evidence that prices are moving toward the target, there is no change in the central bank&#8217;s basic stance on normalizing its accommodative monetary policy.
This means that the BoJ remains committed to gradually raising borrowing costs from their current ultra-low levels.
&#8220;Japan&#8217;s short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral,&#8221; Ueda commented, adding that there is still &#8220;very high uncertainty on where rates will eventually rise to.&#8221;
<h3 class="wp-block-heading">BoJ, Fed On Different Policy Paths</h3>
On July 31, the BoJ hiked its key short-term interest rate by 15 basis points to 0.25%, and opted to halve its bond-buying program to JPY 3 trillion from next year. 
This decision, along with unexpectedly weak U.S. economic data, triggered an unwinding of the yen-dollar carry trade. Traders who had been betting on interest-rate differentials between the Fed and the BoJ were hit hard by the rate reversal and subsequent margin calls.
The next BoJ meeting is scheduled for Sept. 20, just two days after the Federal Open Market Committee (FOMC) meeting. The U.S. central bank is widely expected to lower interest rates, with market-implied probabilities favoring a 25-basis-point cut. If the BoJ raises interest rates, it could deliver another blow to the dollar-yen pair, further challenging the resilience of the carry trade.
Read now: 
<ul>
<li><a href="https://www.benzinga.com/general/hedge-funds/24/08/40470248/hedge-funds-swap-yen-for-dollar-in-new-carry-trade-strategy-report">Hedge Funds Swap Yen For Dollar In New Carry Trade Strategy: Report</a></li>
</ul>
Image: Shutterstock

Yen-Dollar Carry Trade Shakes Ahead Of Powell's Speech As BoJ's Ueda Hints At Continued Rate Hikes

The July Consumer Price Inflation report made another step toward the Federal Reserve&#8217;s 2% target, though less pronounced than June&#8217;s, sustaining optimism for <a href="https://www.benzinga.com/topic/inflation">imminent interest rate cuts.</a>
Last month, a basket of goods and services purchased by U.S. consumers rose by 2.9% year-over-year, slightly below the previous and expected 3%, marking the fourth consecutive decline in annual inflation and the <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40365730/july-inflation-rate-falls-more-than-expected-supports-hopes-for-large-fed-rate-cu">lowest rate since March 2021.</a>
The annual core inflation rate also eased as anticipated, from 3.3% to 3.2%, the lowest since April 2021. 
However, the July report was marred by an increase in the shelter component, which, due to its significant weight in the basket, accounted for about 90% of the headline inflation rise.
The decline in annual inflation rates wasn&#8217;t sufficient to bolster expectations for a 50-basis-point rate cut in September. 
Market-implied probabilities for such a substantial cut dropped from 50% to 43% following the report, while the likelihood of a smaller 25-basis-point cut increased to 57%.
<h3 class="wp-block-heading">Market Reactions: Stocks Rise, Yields Steady, But Dollar Strengthens Against Yen</h3>
The July inflation data sparked a positive reaction in stocks, especially in the tech sector, with small caps outperforming their larger-cap counterparts. Treasury yields remained largely stable, while the U.S. dollar gained ground against the low-yielding Japanese yen.
Here are the premarket price reactions of the following exchange-traded funds (ETFs) to the inflation data:
<ul>
<li>The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up 0.2% at 09:10 a.m. in New York. Major premarket gainers were Kellanova (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/K#NYSE">K</a>) and Cardinal Health Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CAH#NYSE">CAH</a>), up 7.2% and 5.5% respectively. </li>
<li>The tech-heavy Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) rose 0.3%. Top gainers were Arm Holdings plc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ARM#NASDAQ">ARM</a>) and Micron Technology Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MU#NASDAQ">MU</a>) up 3.1% and 3%, respectively. </li>
<li>Semiconductors were the strongest-performing industry, with the VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) up 0.9%. Micron Technology Inc. and ASML Holding N.V. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>) led gains, with the latter up 2.1%. </li>
<li>The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) rallied 0.5%, with Victoria&#8217;s Secret &amp; Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VSCO#NYSE">VSCO</a>) and AnaptysBio, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ANAB#NASDAQ">ANAB</a>) making the larger gains in the premarket, up 16% and 13%, respectively. </li>
<li>The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) fell 0.2%.</li>
</ul>
Read now: 
<ul>
<li><a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/08/40355203/stocks-now-dismiss-recession-fears-but-bond-markets-tell-investors-to-stay-on-alert">Stocks Now Dismiss Recession Fears, But Bond Markets Tell Investors To Stay On Alert</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

ANAB

ASML

VSCO

S&P 500 Rises, Small Caps Outperform As July Consumer Price Index Fuels Fed Rate Cut Hopes: 5 ETFs to Watch Wednesday

The U.S. dollar-Japanese yen exchange rate endured one of its most turbulent weeks in recent years, with sharp swings driven by pivotal economic events that have left traders reassessing the future of the <a href="https://www.benzinga.com/markets/asia/24/08/40223986/traders-resume-yen-dollar-carry-trade-as-bank-of-japan-pledges-no-rate-hikes-during-market-volatilit">dollar-yen carry trade.</a>
The USD/JPY pair opened the week at 146.36, but quickly plunged to a low of 141.68 on Monday as traders fully priced in a 50-basis-point rate cut by the Federal Reserve in September, with some even speculating on an emergency intermeeting cut. 
The dollar rebounded against the yen later in the week, buoyed by dovish remarks from the Bank of Japan (BoJ) and U.S. economic data that pushed back against fears of an imminent recession.
By the end of the week, the yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), has largely remained unchanged from its previous week&#8217;s close.
This volatile week has traders questioning how much carry trade positioning is left in USD/JPY and whether it&#8217;s time to re-enter the long dollar-short yen trade as a hedge against potential U.S. inflation surprises, or if shorting USD/JPY might be a more effective strategy to guard against a possible recession.
<h1 class="wp-block-heading">Analyst Weigh On Yen-Dollar Carry Trade Strategy</h1>
Adam Turnquist, chief technical strategist for LPL Financial, explained that &#8220;ultra-low rates and easy monetary policy made the yen an attractive funding currency for the carry trade,&#8221; where investors borrow in low-yield currencies like the yen to fund investments in higher-yielding securities elsewhere, such as U.S. Treasuries.
However, recent tightening measures from the BoJ have &#8220;pulled the proverbial thread on this crowded trade, and it started to unravel,&#8221; sparking a surge in yen buying as investors covered short positions.
According to Turnquist, estimating the size of the yen carry trade is challenging due to the opaque nature of currency positioning and transactions. The overall yen borrowing could range from $1 to $4 trillion, with recent reports suggesting that 75% of carry trades have been closed following this week&#8217;s volatility events. 
Turnquist indicated USD/JPY is no longer on an uptrend, implying that the risk of additional downsides remains elevated.
It&#8217;s too early to consider the recent rebound as anything more than a &#8220;relief rally off oversold levels.&#8221; He stated that a close below the 141 support level could signal another potential leg lower, while a rally above 152 would suggest a return to the previous uptrend, reducing carry trade volatility and downside risk.
Read Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40199218/yen-carry-trade-is-only-halfway-unraveled-wall-street-analyst-says-how-much-more-ro">Yen &#8216;Carry Trade&#8217; Is Only Halfway Unraveled, Wall Street Analyst Says: How Much More Room For Traders To Get Pummeled?</a>
David Morrison, senior market analyst at Trade Nation, observed that the USD/JPY pair hit its lowest level since the beginning of the year on Monday but has since rallied nearly 4%, indicating that the market has &#8220;steadied and most of the unwinding has been completed.
However, Morrison cautioned there is still concern that &#8220;there could be more unwinding of the yen carry-trade to come.&#8221; If this occurs, it could lead to further yen strength, accelerating the unwinding process and putting additional downward pressure on risk assets.
Morrison also noted that the BoJ released minutes from its latest monetary policy meeting, where it unexpectedly tightened policy. Although the minutes suggested that further rate hikes could be on the horizon, the market largely ignored this as dovish comments from the BoJ&#8217;s deputy governor &#8220;effectively neutralized the minutes.&#8221;
Shusuke Yamada, a foreign exchange analyst at Bank of America, suggested that much of the short-term yen carry-trade unwinding &#8220;has run its course&#8221; based on positioning measures and signs of stabilization in equity markets.
However, Yamada warned that &#8220;cyclical hedgers would sell USD/JPY&#8217;s rally to hedge against a U.S. hard-landing scenario.&#8221;
Yamada also highlighted structural outflows, such as corporate foreign direct investment (FDI) and retail investors&#8217; outward equity investments, &#8220;remain intact&#8221; as these trades are not driven by short-term interest rate differentials.
Bank of America has revised its end-2024 USD/JPY forecast to 155 but maintains a &#8220;structurally bearish yen view.&#8221;
Read Now:
<ul>
<li><a href="https://www.benzinga.com/markets/asia/24/08/40274194/mohamed-el-erian-slams-bank-of-japans-soft-tone-pushes-for-reduction-of-risky-yen-carry-trades">Mohamed El-Erian Slams Bank Of Japan&#8217;s Soft Tone: Pushes For Reduction Of Risky Yen Carry Trades</a></li>
</ul>
Photo: Shutterstock

Dollar-Yen Volatility Sparks Debate Over Carry Trade Positioning: 'We Maintain A Structurally Bearish Yen View,' Analyst Says

To gain an edge, this is what you need to know today.
<figure class="wp-block-image size-large"><img decoding="async" src="https://thearorareport.com/wp-content/uploads/2024/08/2024-08-05_09h14_55.png" alt="" /></figure>
<h3 class="wp-block-heading">Carry Trade Unwinds</h3>
Please <a href="https://thearorareport.com/chart-analysis-stock-market-global-stock-carnage-fxy-mc-08052024">click here</a> for an enlarged chart of Invesco Currency Shares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>).
Note the following:
<ul>
<li>The chart shows the rapid rise in the yen.</li>
<li>The chart shows that the rapid rise occurred after the Bank of Japan raised rates.</li>
<li>As full disclosure, ZYX Allocation by The Arora Report has a long position in yen ETF (FXY). <a href="https://blog.thearorareport.com/fxy-080124/">Click here</a> to read where we previously wrote that FXY would act as a hedge. That call has now proven spot on. FXY is rising while stocks are experiencing carnage.</li>
<li>We have been sharing with you for a while to keep an eye on actions from the Bank of Japan as they may have a large impact on global stocks, including U.S. stocks.</li>
<li>Last week we shared with you that the Bank of Japan raised rates and the carry trade was beginning to unwind. Funds have been borrowing money in yen and buying stocks across the globe. Most notably, funds have been using money borrowed in yen to buy AI related semiconductor stocks and the Magnificent Seven stocks. This is the reason the Magnificent Seven and other AI stocks are now seeing aggressive selling.</li>
<li>There are several other factors entering into the mix to drive stocks lower.
<ul>
<li>We have been sharing with you that sentiment had reached the extreme zone. We have also been sharing with you that when sentiment reaches the extreme, it is a contrary signal, i.e. a sell signal. Now we are seeing the aftermath of sentiment reaching the extreme.</li>
<li>Warren Buffett has become defensive.
<ul>
<li>Buffett's company, Berkshire Hathaway Inc Class B (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BRK#NYSE">BRK</a>), sold about half of its Apple Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>) position.</li>
<li>BRK.B has reached a record $277B cash position on June 30 vs. $189B on March 31. This largely reflects Buffett selling about half of the AAPL position.</li>
<li>This is especially very important because it was only back in May when Buffett said AAPL was a core holding like Coca-Cola Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KO#NYSE">KO</a>) and American Express Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AXP#NYSE">AXP</a>). He has held KO and AXP for a very long time.</li>
</ul>
</li>
<li>Delay in NVIDIA Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) next generation Blackwell chip.</li>
<li>Economic data is beginning to show slowing U.S. growth as we shared with you in Morning Capsules last week.  Please read last week's Morning Capsules, <a href="https://blog.thearorareport.com/stock-market-080324/">click here</a> for details. The most notable pieces of data are:
<ul>
<li>ISM</li>
<li>Jobless claims</li>
<li>Jobs report</li>
</ul>
</li>
<li>The momo crowd is facing forced selling due to margin calls.
<ul>
<li>Expect selling pressure to lift when early margin calls are done.</li>
<li>Expect another couple of waves of margin calls during the day unless the market rallies substantially.</li>
<li>Historically, the two times of heavy forced liquidation are around 10:30am ET and 1pm ET.</li>
</ul>
</li>
</ul>
</li>
<li>In addition to the protection band that is protecting The Arora Report members' portfolios, there are additional hedges in the form of gold and silver, as well as hedges on semiconductor stocks and all of the Magnificent Seven stocks with the exception of Tesla Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TSLA#NASDAQ">TSLA</a>). TSLA is not a portfolio holding.
<ul>
<li>These additional hedges on semiconductor stocks and the Magnificent Seven stocks have now become profitable. Consider starting to book profits in small tranches on these hedges starting right now.  </li>
</ul>
</li>
<li>The stock market is very oversold and can quickly bounce after forced selling is done.</li>
</ul>
<h3 class="wp-block-heading">Magnificent Seven Money Flows</h3>
In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>), NVDA, Microsoft Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>), Alphabet Inc Class C (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>), Meta Platforms Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>), TSLA, and AAPL.
In the early trade, money flows are negative in SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>).
<h3 class="wp-block-heading">Momo Crowd And Smart Money In Stocks</h3>
Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>). The most popular ETF for silver is iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>). The most popular ETF for oil is United States Oil ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>).
<h3 class="wp-block-heading">Bitcoin</h3>
The Arora Report call that Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) is not a hedge is being proven right now. Bitcoin is being aggressively sold and is now approaching $50,000. Bitcoin whales unloaded bitcoin to unsuspecting retail investors last month.
<h3 class="wp-block-heading">Protection Band And What To Do Now</h3>
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.&nbsp; When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.&nbsp; High beta stocks are the ones that move more than the market.
<h3 class="wp-block-heading">Traditional 60/40 Portfolio</h3>
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever <a href="https://thearorareport.com/generate-wealth-newsletter-benzinga">Generate Wealth Newsletter</a>.

The Real Reason Behind Global Stock Carnage – Carry Trade Unwinds

Traders rekindled their bullish bets on the yen-dollar carry trade Wednesday after dovish signals from the Bank of Japan prompted a rethink <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40199218/yen-carry-trade-is-only-halfway-unraveled-wall-street-analyst-says-how-much-more-ro">of recent market movements.</a>
The Japanese yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), tumbled over 1.9% past 147 per dollar by 10:00 a.m. in New York as Bank of Japan (BOJ) Deputy Governor Shinichi Uchida pledged not to hike interest rates if markets are volatile. 
&#8220;As we&#8217;re seeing sharp volatility in domestic and overseas financial markets, it&#8217;s necessary to maintain current levels of monetary easing for the time being,&#8221; Uchida said in a meeting with business leaders in Japan. 
&#8220;Personally, I see more factors popping up that require us being cautious about raising interest rates,&#8221; Uchida added in a post-meeting news conference.
Also Read: <a href="https://www.benzinga.com/markets/equities/24/08/40220673/mortgage-rates-fall-to-15-month-lows-boost-homebuyer-demand-as-federal-reserve-hints-at-rate-cut">Mortgage Rates Fall To 15-Month Lows, Boost Homebuyer Demand As Federal Reserve Hints At Rate Cuts</a>
<h2 class="wp-block-heading">Is The Yen-Dollar Carry Trade Strategy Back On Track?</h2>
&#8220;Today's announcement from BOJ about a halt on rate increases suggests the damage from the unwinding of the carry trade still needs to play out, as it&#8217;s possible many hedge funds, etc. still remain offsides,&#8221; said John Lynch, chief investment officer for Comerica Wealth Management.
&#8220;This dampened fears that the BOJ would rush to raise rates further, as it was last week's bigger-than-expected hike which was seen as one of the triggers for the stock market rout. The speech has helped to soften the yen and give back some of last month's outsized gains. That should take some pressure off those still exposed to the yen&nbsp;carry-trade, of which there are still significant numbers,&#8221; said David Morrison, senior market analyst&nbsp;at Tradenation. 
The yen-dollar carry trade has become an increasingly popular trading strategy since the Federal Reserve began raising rates in March 2022, as traders bet on the Bank of Japan maintaining ultra-low interest rates, allowing them to leverage cheap yen borrowing to invest in higher-yielding U.S. dollar assets like Treasuries.
Interest rate differentials between the Federal Reserve and the Bank of Japan drove the dollar up by 40% against the yen between March 2022 and July 2023.
The yen-dollar carry trade abruptly imploded last week after the Bank of Japan raised rates while the Federal Reserve pledged to start cutting interest rates, triggering a sharp reversal in short-term yield differentials between the two regions.
A lower-than-expected U.S. jobs report for July, released last Friday, further accelerated the unwinding of the yen-dollar carry trade as investors increased their bets on Fed rate cuts amid rising recession risks.
However, a stronger-than-expected U.S. services sector report released on Monday prompted a reassessment of recession fears, leading traders to revise again their <a href="https://www.benzinga.com/markets/24/08/40168342/us-services-activity-returns-to-growth-in-july-global-market-selloff-stalls-are-recession-fears-over">expectations on interest rates.</a>
After dropping to a low of 141.60 on Monday, the dollar-yen exchange rate rallied 3.8% by Wednesday morning.
<h3 class="wp-block-heading">Yen-Dollar Carry Trade Unwind Pauses Amid Easing US Recession Concerns, Dovish BOJ Comments</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1024x576.png" alt="" class="wp-image-481960" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1024x576.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-300x169.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-768x432.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35-1536x864.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07101635/image-35.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Read Next:
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40212775/move-over-yen-yuan-carry-trades-could-be-next-ticking-bomb-warns-strategists-but-it">Move Over Yen, Yuan Carry Trades Could Be Next Ticking Bomb, Warns Strategists: &#8216;But It&#8217;s Below The Danger Levels We Monitor&#8217;</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

Traders Resume Yen-Dollar Carry Trade As Bank of Japan Pledges No Rate Hikes During Market Volatility

Global equity markets have been under pressure in recent sessions amid fears of a potential U.S. recession, triggered by cooling labor market conditions <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40141685/s-p-500-falls-for-third-straight-week-middle-east-in-turmoil-fed-holds-steady-but-u">and struggling manufacturing activity. </a>
Despite last month&#8217;s business surveys showing expansion in services activity, investors remain worried that the world&#8217;s largest economy may be slowing down, which could curb U.S. household discretionary spending and reduce corporate profits.
Risky assets have been at the epicenter of the current market turmoil, as stocks worldwide experienced heavy declines. 
<ul>
<li>Over the past three sessions, Japan&#8217;s Nikkei 225 index plummeted by 19.5%, marking its worst three-day drop since the index&#8217;s inception in 1950.</li>
<li>The Russell 2000 index, which tracks U.S. small-cap stocks, experienced a 10% decline during the same period.</li>
<li>The Nasdaq 100, represented by the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), has seen a 12% drop from its all-time highs in July.</li>
<li>The CBOE Volatility Index (VIX), often referred to as the market fear index, surged to briefly hit 60 points on Tuesday, its highest level since March 2020.</li>
</ul>
<h3 class="wp-block-heading">What Has Happened To Interest Rate Futures? </h3>
Recession fears, coupled with global equity market turmoil, have sparked wild speculation about Federal Reserve interest rate cuts.
A week ago, the market assigned only an 11.4% chance to a 50-basis-point rate cut in September, a probability that has now surged to 97.5%, according to the CME Group FedWatch tool.
Similarly, a week ago, the probability of year-end interest rates falling to 4-4.25% was zero, but as of Monday, it has rocketed to 72%.
<h4 class="wp-block-heading">Market-Implied Probabilities For Sept. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Rate-cut event</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago July 29, 2024</td>
</tr>
<tr>
<td>50bp to 4.75-5%</td>
<td>97.5%</td>
<td>74%</td>
<td>11.4%</td>
</tr>
<tr>
<td>25bp to 5-5.25%</td>
<td>2.5%</td>
<td>26%</td>
<td>88.2%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:20 ET</figcaption></figure>
<h4 class="wp-block-heading">Market-Implied Probabilities For Dec. 18&#8217;s Fed Meeting</h4>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Year-end fed funds rate</td>
<td>Now&#x2A;</td>
<td>1 Day Ago</td>
<td>1 Week Ago, July 29, 2024</td>
</tr>
<tr>
<td>4-4.25%</td>
<td>71.8%</td>
<td>66.8%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.25-4.5%</td>
<td>28.2%</td>
<td>33.2%</td>
<td>0.0%</td>
</tr>
<tr>
<td>4.5-4.75%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>65.1%</td>
</tr>
<tr>
<td>4.75-5%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>34.9%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: CME Group as of August 5, 2024 11:25 ET</figcaption></figure>
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40160872/goldman-sachs-raises-us-recession-odds-treasury-yields-tumble-yen-rallies-as-trader">Goldman Sachs Raises US Recession Odds: Treasury Yields Tumble, Yen Rallies As Traders Bet On Heavy Fed Rate Cuts</a>
<h3 class="wp-block-heading">5 ETFs Rallying On Global Market Turmoil</h3>
While global equity markets have experienced significant declines, safe-haven assets have maintained their status and effectively shielded investor portfolios from volatility.
Moreover, leveraged and inverse investment strategies on equity indices or stocks have also seen sharp rallies amid market selloffs. 
Here are 5 exchange-traded funds (ETFs) that have rallied over the last few sessions: 
<ul>
<li>The Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) has been a significant beneficiary of the global market rout, as declining interest rate expectations in the United States have reduced the dollar&#8217;s &#8220;carry trade&#8221; advantage against the yen. Over the past four sessions, the FXY ETF has surged by 6.6%, marking its strongest rally since October 2008.</li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has posted gains for eight consecutive sessions, surging over 3.1% last Friday as fears of a cooling U.S. labor market emerged.</li>
<li>The ProShares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>) skyrocketed by over 20% on Monday alone, and by nearly 66% over the last three sessions. </li>
<li>The ProShares UltraPro Short QQQ (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SQQQ#NASDAQ">SQQQ</a>), which aims to achieve investment results equal to three times the inverse of the daily performance of the Nasdaq 100 index, has surged by over 23% in the past three sessions.</li>
<li>The ProShares UltraPro Short Russell 2000 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SRTY#NYSE">SRTY</a>), designed to seek an investment performance equal to three times the inverse of the daily move of the Russell 2000 index, has rallied by nearly 33% in the last three sessions.</li>
</ul>
<h3 class="wp-block-heading">Chart: Inverse And Leveraged ETF Strategies on US Small Caps Spike Amid Market Turbulence</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="440" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png" alt="" class="wp-image-476859" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1024x440.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-768x330.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16-1536x660.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/05115719/image-16.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
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Business sentiment in the U.S. services sector returned to expansion in July, after plummeting in June at the fastest pace since May 2020 and potentially quelling recent market concerns on an ongoing recession for <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40160872/goldman-sachs-raises-us-recession-odds-treasury-yields-tumble-yen-rallies-as-trader">the world&#8217;s largest economy.</a>
The ISM Services Purchasing Managers&#8217; Index (PMI) barometer rose from 48.8% to 51.4%, outpacing expectations of a surge to 51%.
A similar services-related survey, released by S&amp;P Global, confirmed expansionary conditions for the U.S. private sector activity, although at a slower-than-expected pace. The S&amp;P Global Composite PMI edged down from 54.8 to 54.3, missing an increase to 55. The S&amp;P Global Services PMI eased from 55.3 to 55, falling short of a rise to 56. 
<h3 class="wp-block-heading">July ISM Services PMI Report: Key Highlights</h3>
<ul>
<li>The ISM Services PMI rose from 48.8% to 51.4% in July, above market expectations of 51% as monitored by TradingEconomics.</li>
<li>The subindex for Business Activity rose from 49.6% to 54.5% in July.</li>
<li>The subindex for New Orders rose from 47.3% to 52.4% in July, overcoming consensus estimates of 49.8%. </li>
<li>The subindex for Prices rose from 56.3% to 57, above the predicted 55.8%. </li>
<li>The subindex for Employment rose from 47.1% to 51.1%, well above the expected 46.5%.</li>
</ul>
<h3 class="wp-block-heading">Economists React</h3>
"The increase in the composite index in July is a result of an average increase of 5 percentage points for the Business Activity, New Orders, and Employment indexes, offset by the 4.6-point drop in the Supplier Deliveries Index."&nbsp;Steve Miller, chair of the ISM Services Business Survey Committee, said.
Miller noted that businesses maintained a cautious approach ahead of the upcoming presidential election, with one respondent expressing worry about possible tariff increases.
Respondents also indicated that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually.
&#8220;Another strong expansion of business activity in the service sector, which over the past two months has enjoyed its best growth spell for over two years, contrasts with the deteriorating picture seen in the manufacturing sector, where output came close to stalling in July,&#8221; commented Chris Williamson, chief business economist at S&amp;P Global Market Intelligence. 
<h3 class="wp-block-heading">Market Reactions</h3>
Global financial markets experienced a significant broad-based selloff on Monday, driven by widespread investor fears regarding U.S. economic growth following last week&#8217;s disappointing data.
The release of the ISM Services PMI has temporarily halted risk aversion and sparked an attempt to reverse the recent market movements.
The U.S. dollar index (DXY) rose minutes after the release, although the broader dollar gauge, tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), remained in the red by 0.5%.
U.S. major equity indices gained amid diminishing recession fears, with the S&amp;P 500, tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), trimming session losses to 2.3%.
Other major asset movements following the ISM Services PMI print included: 
<ul>
<li>The Nasdaq 100, as monitored through the Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), rallied by 500 points to 17,950 levels, shrinking the daily drop to negative 2.4%.</li>
<li>The Japanese yen, as tracked by the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), slightly reversed gains vis-à-vis the U.S. dollar. </li>
<li>Long-dated Treasuries, as followed by the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), trimmed gains. </li>
<li>Gold, as tracked by the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), extended losses to -2%.</li>
</ul>
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US Services Activity Returns To Growth In July, Global Market Selloff Stalls: Are Recession Fears Overdone?

Wall Street is experiencing a sharp decline on the last trading day of the week, with all indices in the red at noon in New York, as a cooler-than-expected July jobs report rattled risk sentiment and sparked concerns that the Federal Reserve may have erred in delaying a <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">rate cut until September.</a>
Nonfarm payrolls slowed to 114,000 in July, a decline of 65,000 from June and well below the expected 150,000. More alarmingly, the unemployment rate increased <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">from 4.1% to 4.3%.</a>
As a result, market-implied probabilities over a 50-basis-point cut in September have spiked to 73%, according to CME Group FedWatch tool. 
The tech-heavy Nasdaq 100 has <a href="https://www.benzinga.com/markets/equities/24/08/40135090/old-school-summer-risk-off-vix-up-over-50-nasdaq-100-enters-correction-chipmakers-officially-in-">entered a correction phase</a> after surpassing a 10% drawdown since its July peak. Mega-cap, high-quality tech stocks offered no refuge to investors, as the Magnificent Seven giants all suffered losses except for Apple Inc., buoyed by an upbeat earnings report. Collectively, the Magnificent Seven lost over $300 billion in market value on Friday alone.
The CBOE Volatility Index (VIX), popularly known as the market&#8217;s fear gauge, surged over 30% to reach the high-20 levels.
Small caps were again the weakest segment of the market, given their heightened sensitivity to economic fundamentals. The Russell 2000 tumbled over 3%, extending declines after a 3.4% loss on Thursday.
Consumer discretionary and technology were the worst-performing sectors, while semiconductors led the selloff among industries. The iShares Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) plummeted over 5%, marking a double-digit loss in the last two sessions, its worst performance since March 2020.
Nvidia Corp. fell an additional 3.4% following a 6.7% decline on Thursday, as the chipmaker came under investigation by the U.S. Department of Justice for potential antitrust violations.
Treasuries were the biggest gainers among major assets, reflecting a broad-based flight-to-quality sentiment. The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rallied 2.9%, its strongest performance since the U.S. regional bank crisis in March 2023.
The Japanese yen also gained significantly, with the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) up 1.8%.
Gold edged down slightly by 0.6%, while oil prices fell more than 4% for the day, with West Texas Intermediate (WTI) light crude retreating to $72 a barrel.
Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) fell over 3%.
<h3 class="wp-block-heading">Friday&#8217;s Performance In US Major Indices, ETFs</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Major Indices</td>
<td>Price</td>
<td>1-day Chg %</td>
</tr>
<tr>
<td>Dow Jones</td>
<td>39,492.36</td>
<td>-2.1%</td>
</tr>
<tr>
<td>S&amp;P 500</td>
<td>5,321.21</td>
<td>-2.3%</td>
</tr>
<tr>
<td>Nasdaq 100</td>
<td>18,355.31</td>
<td>-2.8%</td>
</tr>
<tr>
<td>Russell 2000</td>
<td>2,110.14</td>
<td>-3.4%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Updated at 1:05 p.m. ET</figcaption></figure>
According to <a href="https://www.benzinga.com/pro/?utm_source=BZprocontent080224&amp;t=be2bearmibe3na1">Benzinga Pro</a> data:
<ul>
<li>The&nbsp;SPDR S&amp;P 500 ETF Trust&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)&nbsp;was 2.2% lower to $531.13.</li>
<li>The&nbsp;SPDR Dow Jones Industrial Average&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIA#NYSE">DIA</a>)&nbsp;fell 1.9% to $395.39.</li>
<li>The tech-heavy Invesco QQQ Trust Series (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) fell 2.6% to $447.80.</li>
<li>The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) fell 3.5% to $208.99.</li>
<li>Sector-wise, the Consumer Staples Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLP#NYSE">XLP</a>)&nbsp;outperformed, up 0.1%, while the&nbsp;Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) tumbled by 3.4%.</li>
</ul>
<h3 class="wp-block-heading">Friday&#8217;s Stock Movers</h3>
Stocks reacting to earnings reports were: 
<ul>
<li>Amazon, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>) <a href="https://www.benzinga.com/analyst-ratings/price-target/24/08/40135676/10-amazon-analysts-assess-q2-earnings-strong-aws-growth-retail-challenges">down nearly 10%.</a> </li>
<li>Apple, Inc. up by 2.9%</li>
<li>Block, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SQ#NYSE">SQ</a>) up 0.5%, </li>
<li>Booking Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BKNG#NASDAQ">BKNG</a>) down about 8%, </li>
<li>Chevron Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CVX#NYSE">CVX</a>) down 3.2%,</li>
<li>Cloudflare, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NET#NYSE">NET</a>) up over 7%, </li>
<li>Coinbase Global Inc. down 2.8%,</li>
<li>DraftKings Inc. down over 9%,</li>
<li>EOG Resources Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EOG#NYSE">EOG</a>) down 1.9%,</li>
<li>Exxon Mobil Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XOM#NYSE">XOM</a>), down 0.6%,</li>
<li>Intel Corporation, down nearly 28%,</li>
<li>MercadoLibre Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MELI#NASDAQ">MELI</a>) up 11%,</li>
<li>Microchip Technology Incorporated (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MCHP#NASDAQ">MCHP</a>) down over 8%, </li>
<li>Opendoor Technologies Inc. (NASDAQ: OPEN down about 10%, </li>
<li>Twilio Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TWLO#NYSE">TWLO</a>) up over 10%.</li>
<li>Vertex Pharmaceuticals Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VRTX#NASDAQ">VRTX</a>) down 2%. </li>
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Magnificent 7 Lose Over $300B As Volatility Index Surges, Traders Question Fed's Timing: What's Driving Markets Friday?

Global markets experienced a major downturn on Friday, continuing the negative sentiment that began the previous day, further exacerbated by U.S. jobs data that came <a href="https://www.benzinga.com/economics/macro-economic-events/24/08/40129796/job-creation-tumbles-in-july-higher-unemployment-strengthens-case-for-interest-ra">in cooler than expected.</a>
The U.S. economy is showing signs of underlying weaknesses, as the pace of job creation slowed significantly in July, and the unemployment rate unexpectedly increased, causing concern for the Federal Reserve which last week decided to delay an interest rate cut until September.
U.S. employers added 114,000 nonfarm payroll jobs last month, a significant slowdown from the 179,000 jobs created in June and well below the economist consensus estimate of 175,000, according to TradingEconomics. The unemployment rate unexpectedly rose from 4.1% to 4.3%, the highest level since October 2021. 
Average hourly earnings increased by 0.2% from the previous month, falling short of expectations of 0.3% and indicating a slowdown in wage growth. Overall, the jobs report was weaker than anticipated from every angle.
In response to these disappointing numbers, the market-implied probability of a 50-basis-point rate cut in September spiked to nearly 70%, up from 22% a day earlier, according to the CME Group&#8217;s FedWatch tool.
Meanwhile, geopolitical risks in the Middle East remain extremely high, as Iran&#8217;s allies have vowed to retaliate against Israel <a href="https://www.benzinga.com/markets/asia/24/08/40115510/israeli-stocks-suffer-worst-week-since-october-2023-as-irans-allies-vow-retaliation-for-recent-attac">following this week&#8217;s attacks.</a>
<h3 class="wp-block-heading">Traders Price In Higher Likelihood On A Larger Rate Cut In September</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>September rate cut</td>
<td>Current probability implied by Fed futures</td>
<td>August 1, 2024</td>
<td>26 July, 2024</td>
</tr>
<tr>
<td>50 basis points</td>
<td>69,5%</td>
<td>22,0%</td>
<td>11,5%</td>
</tr>
<tr>
<td>25 basis points</td>
<td>30,5%</td>
<td>78,0%</td>
<td>88,2%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Source: CME Group FedWatch Tool</figcaption></figure>
While only time will tell if the Fed was too late to act, investors are opting to take some chips off the table and seek refuge in safer assets. 
On Friday, equity markets worldwide experienced declines, with negative sentiment beginning in the Asian session. 
The Japanese Nikkei index fell nearly 6%, marking its worst day since March 2020, and the downturn extended to Europe, where all indices traded sharply in the red. 
In premarket trading in New York, major U.S. averages also saw significant drops, with Nasdaq 100 and S&amp;P 500 futures down 2.3% and 1.5%, respectively, at 08:50 a.m.
Here are the major premarket moves in 10 key exchange traded funds:
<ul>
<li>Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) down 0.8%.</li>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) up 1.8%, potentially on track for its strongest session year to date. </li>
<li>SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) up 1%, nearing record highs. </li>
<li>Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>) up 1.8%. </li>
<li>United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), which tracks the performance of crude WTI futures, down 2.8%. </li>
<li>Technology Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) down 2.6%. </li>
<li>iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) down 3.3%, after similarly closing 3.3% lower on Thursday. </li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>) down 3.6%, extending drops following a 4.4% decline on Thursday. </li>
<li>VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) down 4.6%, after closing 6.5% lower a day earlier. </li>
<li>Utilities Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>) up 0.8%, on track to hit the highest since September 2022. </li>
</ul>
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Market Turmoil: July Jobs Report, Geopolitical Risks Spark Stock Sell-Off As Traders Flee To Treasuries, Yen, Gold

Markets are on edge as investors digest a slew of geopolitical events, corporate earnings, and economic data in this final session of July, which promises to be highly volatile ahead of the Federal <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/40042583/will-powell-hint-at-september-rate-cut-what-major-us-investment-banks-expect-from">Open Market Committee (FOMC) meeting.</a>
<h3 class="wp-block-heading">Geopolitical Tensions Flare Up In Middle East, BoJ Moves, US Data Disappoint</h3>
The situation in the Middle East reached a critical turning point after the political leader of Hamas, Ismail Haniyeh, was killed by Israeli forces in Tehran, Iran, on Wednesday morning. Reuters reported that Hamas&#8217; armed wing stated Haniyeh&#8217;s killing would &#8220;take the battle to new dimensions and have major repercussions,&#8221; while Iran declared three days of national mourning and vowed to retaliate, potentially leading to a dangerous escalation in the region.
This incident followed another assassination on Tuesday in Beirut, where Israeli forces killed Fuad Shukr, Hezbollah's most senior military commander and Hassan Nasrallah's right-hand man. According to the Israeli Defense Forces, Shukr was responsible for the death of 12 children in a soccer field on Saturday and had orchestrated 30 years of Hezbollah terrorist attacks.
On the macroeconomic front, the Bank of Japan (BoJ) increased interest rates by 0.15 percentage points to 0.25%, marking the second such move since March. Japan's monetary authorities also announced the reduction in their bond-buying program from JPY 6 trillion to JPY 3 trillion for January-March 2026.
Inflation in the Eurozone unexpectedly rose to 2.6% from 2.5%, contrary to forecasts of a slowdown to 2.4%, raising some questions on the imminent need of further European Central Bank&#8217;s rate cuts. Core inflation, excluding energy and food, remained at 2.9%, missing the expected drop to 2.8%. However, services inflation eased for the first time in three months.
In the U.S., private employers added 122,000 jobs in the past month, the lowest since January 2024 and down from the revised 155,000 jobs in June, according to the ADP National Employment Report. This figure missed the <a href="https://www.benzinga.com/24/07/40066427/us-private-employment-rises-by-122-000-in-july-misses-estimates-if-inflation-goes-back-up-it-wont-be">projected 150,000 job additions.</a>
Mortgage applications fell by 3.9% in the fourth week of July, following a 2.2% drop the previous week, marking the sharpest weekly decline in mortgage demand in nearly two months. This occurred despite 30-year mortgage rates holding at February lows of 6.82%. Applications for new home purchases fell by 1.5%, the third consecutive decline.
<h3 class="wp-block-heading">Market Reactions: Oil Spikes, Dollar Falls</h3>
The most immediate market reaction to the tense situation in the Middle East was a spike in oil prices. West Texas Intermediate (WTI) prompt futures, tracked by the United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), rallied over 3.5% on Wednesday morning amid fears of supply disruptions due to Iran's involvement. Oil is on track for its strongest session since mid-November 2023.
The U.S. dollar weakened against major currencies, affected by disappointing U.S. labor market data and higher-than-expected Eurozone inflation.
The U.S. dollar index, as tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), fell over 0.4% at 08:40 a.m. in New York.
The Japanese yen, monitored through the Invesco CurrencyShares Japanese Yen Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXY#NYSE">FXY</a>), rallied 1.6% following the BoJ&#8217;s rate hike.
U.S. equity futures surged in premarket trading, with contracts on the tech-heavy Nasdaq 100 up over 2%, poised to recover losses from the previous day.
Semiconductor gains drove overall U.S. major indices higher on Wednesday, following positive results from Advanced Micro Devices Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMD#NASDAQ">AMD</a>). Notably, ASML Holding NV (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>) rose over 5.7% in European markets, as Reuters reported the company would not be affected by U.S. export restrictions on chipmaking to China.
Shares of NVIDIA Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) were nearly 7% higher in premarket trading. The VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) soared over 5%.
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Image created using artificial intelligence via Midjourney.

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