On Thursday afternoon, new inflation data came in cooler than expected, however, concerns over regional banking weighed on the stock market resulting in mixed results.

The S&P 500 closed down by 0.17%, while the Dow Jones Industrial Average shed 221 points, or 0.66%. Conversely, the Nasdaq Composite experienced a slight increase of 0.18%.

PacWest Bank’s Stock Drops 22.7% Due to 9.5% Deposit Decrease in May

After PacWest Bank’s SEC filing revealed a 9.5% decrease in deposits during the first week of May, the regional bank’s stock slumped by 22.7%.

Disney’s Shares Plunge 8% After Earnings Report, Despite Disney+ Price Hikes

Shares of Disney (DIS) experienced a more than 8% drop following the release of an earnings report that was slightly weaker than analysts’ expectations.

Despite Disney+’s price increases that helped offset subscriber losses, the media giant continues to face ongoing challenges, including a restructuring plan and a battle with Florida’s governor.

Robinhood Reports Better-Than-Expected Revenue, Shares Rise 6%

Robinhood (HOOD) announced better-than-anticipated revenue for the first quarter, leading to a 6% rise in shares and the unveiling of plans to introduce 24-hour trading services for specific securities in the near future.

Tech companies including Sonos (SONO), Peloton (PTON), and Beyond Meat (BYND) reported their earnings prior to Thursday’s opening bell.

Sonos CEO Patrick Spence cited “softening consumer demand” and consequently, the company cut its revenue and EBITDA guidance for the year. This led to a 23% decrease in share prices, the largest fall in nine months. 

Meanwhile, Peloton saw an 8.9% drop in shares after the company recalled more than two million bikes. Beyond Meat also experienced a decline in shares due to issuing softer than expected guidance, falling by 18% – the sharpest drop since October 2019.

Producer prices increased less than predicted in April, with a 0.2% monthly rise and a 2.3% annual increase. Despite economist predictions of a 0.3% monthly rise and a 2.5% yearly increase, according to Bloomberg’s consensus data. This follows March’s 0.5% monthly decrease and a 2.7% yearly increase. 

Thursday’s numbers came after Wednesday’s Consumer Price Index report showed prices rose at their slowest annual pace in two years. It is predicted with a 93% chance that there will be a rate-hike pausing in June.

Initial jobless claims for the week ending May 6 exceeded expectations with 246,000 claims, compared to an expected 245,000.

UK GDP Data In Focus

• UK economy contracted slightly in March, but Q1 growth remains positive
• 3-month average for March GDP growth came in at expected 0.1%
• YoY growth rate was slightly lower than expected at 0.3%
• Preliminary GDP growth rate for Q1 met expectations at 0.2%

New quarterly estimates for UK real gross domestic product have been released, indicating a 0.1% growth in the economy during Quarter 1 (Jan to Mar) 2023. The monthly estimates reveal that GDP fell by 0.3% in March 2023, following a 0.5% increase in January 2023.

In Q1, the services industry saw growth thanks to information and communication activities increasing by 1.2%, along with a 1.3% increase in administrative and support service activities.

Meanwhile, the construction industry grew by 0.7%, with manufacturing and the production sector seeing growth at 0.5% and 0.1% respectively.

However, on the consumption side, household spending remained stagnant as high inflation continues to take a toll on incomes.

On a positive note, gross fixed capital formation experienced a 1.3% growth, fueled by investments from both businesses and the government. Despite these developments, the UK economy remains 0.5% smaller than it was pre-Covid-19.

The UK economy maintains resilience despite rising prices, with the Bank of England upgrading growth forecasts for 2023. Chancellor Hunt states that while this is good news, continued focus on competitive taxes, labor supply, and productivity is necessary to meet the government’s growth priorities. 

Fiscal support in Hunts Spring Budget is seen as a supporting factor. While there is optimism, the UK economy stalled in February and contracted in March. 

The ONS attributes this to the weather, particularly the 6th wettest March since 1836, which kept consumers indoors and impacted retail sales.

It is important to monitor the UK’s performance in the upcoming summer months and determine whether the decrease in February and March was due to weather or other factors.

How The Market Reacted

Following the news, GBPUSD initially dropped by 15 pips before rebounding slightly to trade at 1.2530 for the day. From a technical perspective, yesterday saw a decline in GBPUSD’s price near recent highs and a crucial resistance point at the 1.2660 mark. 

The decline led to the price dropping to 1.2500, but the bullish pattern remained unchanged. However, if the daily candle closes below 1.2460 level, the bullish structure will lose validity, and the price may decrease further with 1.2360 support as its target, aligning with the 50-day MA.

Overall sentiment will also play a significant role in today’s market, where any rise in demand for the dollar in the haven market will continue the recent recovery trend. Conversely, positive overall sentiment could drive the price towards recent highs.

Disclaimer:

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