President Donald Trump thought about firing Federal Reserve Chair Jerome Powell but changed his mind. Reports from Bloomberg and the New York Times noted that Trump talked to Republican lawmakers before making this decision. Initially, the news caused a stir in the stock market, dropping the S&P 500 by over 0.5% and the US Dollar by 1.2%. However, after Trump’s reversal, the market calmed, and the S&P 500 losses were reduced to 0.15%.

Johnson And Johnson Earnings Report

Johnson & Johnson had a strong earnings report. Their second-quarter revenue was $23.7 billion, with an adjusted EPS of $2.77, surpassing Wall Street’s predictions. As a result, the company raised its annual forecast. Goldman Sachs saw a slight dip in stock prices, even after surpassing quarterly expectations, as the market had already adjusted its expectations based on previous bank results. Analysts raised price targets for Nvidia and Palantir, noting their connection to the growth of artificial intelligence technology. The Producer Price Index for June remained unchanged, which could hint at possible interest rate cuts coming soon. Globally, we anticipate Australia’s unemployment data, and China reported its second-quarter GDP grew by 5.2% year-on-year, despite slowdowns in investment and retail.

Market Volatility And Political Risks

The market’s rapid response to news about Trump and Powell suggests that we might see more volatility ahead. As the U.S. election approaches, we should brace for more political risks, especially since VIX futures for October 2024 are trading above 20, much higher than current levels. We think it’s wise to buy protective put options on major indices to guard against possible significant drops. The steady Producer Price Index leads us to believe that the central bank might pause rate hikes. The CME FedWatch Tool indicates a strong chance of a rate cut before the year ends. This encourages us to explore strategies that could benefit from stability or slow increases in interest-rate-sensitive sectors. The strong earnings from the healthcare sector showcase its defensive nature, which has often been a safe option during uncertain times. In contrast, the lukewarm reaction to the investment bank’s earnings shows that cyclical sectors like finance are still struggling due to economic worries. Thus, we’re thinking about purchasing call options on large healthcare indices while avoiding similar bullish positions on financial stocks for now. Analyst upgrades for the chipmaker and data analytics firm highlight the strong momentum in the artificial intelligence sector. This year, the AI industry has significantly outperformed the broader market, with several key semiconductor stocks rising over 150% since January. We will keep using call options to take advantage of this upward trend, focusing on major players in hardware and software. China’s recent GDP data, while meeting expectations, shows weak consumer and investment activity underneath. This global slowdown, along with concerns about Australia’s employment numbers, hints at potential challenges for international markets. We are also keeping an eye on the U.S. Dollar Index, which has stayed strong above 105, and may use derivatives to protect against currency fluctuations that could affect our multinational investments. Create your live VT Markets account and start trading now.

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