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Wall Street loses at the end of the session after opening with gains. Worsening sentiment is driven by S&P Global's downgrade of regional banks and hawkish comments from Fed member Thomas Barkin.
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Barkin's statements, along with the strength of the US dollar, put pressure on risky assets. EURUSD records around a 0.5% drop, strengthening the US dollar, which is one of the strongest currencies today.
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S&P Global downgraded several regional banks in the US due to liquidity concerns, following a similar move by Moody's. They highlighted the risk of recession and expect a decline in commercial real estate (CRE) to test regional banks' strength.
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Barkin stated clearly that if high inflation persists and demand doesn't show significant cooling signals, Fed policy will need to tighten. Strong consumer spending and economic strength allow for US economic acceleration before inflation cools.
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US bond yields reached the highest level in 16 years, with markets predicting the Fed to maintain interest rates until at least Q1 2024.
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The regional Fed Richmond index indicated -7 points, compared to -10 previously and -9 expectations. US home sales dropped 2.2% YoY, compared to a previous 3.3% decline and 0.24% forecast (4.07 million vs. 4.15 million forecasts and 4.16 million previously).
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Charles Schwab (SCHW.US) continues to decline despite Morningstar raising its recommendation. SEC filings indicate the company plans cost savings through job cuts and office sales. This move is linked to integrating operations with the acquired TD Ameritrade, raising concerns about the company's debt.
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Macy's (M.US) shares decline despite beating Q2 revenue and earnings forecasts. Weaker Q3 projections reflect rising US consumer credit card debt beyond expectations, emphasizing macro uncertainty and consumer weakening risks.
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The Euro weakens against most currencies, pushing the EURUSD pair close to key support levels, with EURUSD trading around 1.0851, down about 0.50%.
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Precious metals gain slightly but are hampered by the retreat of major Wall Street indices. Gold is up 0.15%, trading around $1897.
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Energy commodities show mixed sentiment. WTI and Brent crude decline around 0.5%, while NATGAS drops over 2%.
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Cryptocurrency market sentiment remains weak, with Bitcoin struggling to stay above $26,000. The federal court reportedly needs an additional 240 days to consider Grayscale's reapplication for a Bitcoin ETF.
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