North American News
US stocks have an up and down ride today. Close lower on the day
- Modest declines for the major indices
The major indices had a roller coaster of the day. The day started with the indices down. Then they rallied after Fed’s Powell testimony in front of the Senate Banking Committee talked about “demand destruction” – implying perhaps a scenario where the Fed might not have to make it to 3.4% by year end. Later, the indices sold off when he did not rule out not having to raise rates by 100 basis points (although it was more or less an admission that “anything is possible”).
Later toward the close, the stocks move higher and lower, closing modestly lower in all the major indices.
The final numbers are showing:
- Dow industrial average fell -47.12 points or -0.15% at 30483.14. At session highs the index was up 0.81% and at the lows the index was down -1.19%
- S&P fell -4.9 points or -0.13% at 3759.90. At the high the index was up 0.98%. At the lows the index was down -1.25%
- NASDAQ fell -16.21 points or -0.15% at 11053.09. At the high the index was up 1.33%. At the lows the index was down -1.19%.
- Russell 2000 fell -3.75 points or -0.22% at 1690.27
The top performing stocks in the Dow 30 were:
- United health, +1.9%
- Johnson & Johnson, +1.58%
- Procter & Gamble +1.5%
- McDonald’s +1.38%
- Merck and Company +1.26%
The biggest decliner’s today included:
- Dow, -4.71%
- Caterpillar -4.33%
- Chevron -4.2%
- Nike, -3.52%
- Honeywell -1.54%
US treasury auctions off $14 billion of 20 year bonds at a high yield of 3.488%
- WI level at the time of the auction 3.486%
- High yield 3.488%
- tail +0.2 basis points. The 6 month averages -0.6 basis points
- bid to cover 2.6X vs. six-month average of 2.55X
- dealers 12.4% vs. six-month average of 13.0%
- directs 20.2% vs. six-month average of 18.7% six-month average
- in-directs 67.4% vs. six-month average of 68.3%
Commodities
Gold Price Forecast: XAU/USD demand sighted around $1,826 for a push towards $1,875
- Gold moves higher on US dollar weakness following Powell’s testomony.
- Gold is trading between two levels of resistance & support, $1,810, or thereabout, on the downside and $1,875, or there about on the upside.
The nearest test demand area, or order block, is located at around $1,826. There is a price imbalance between there and the current spot price that could be mitigated in the near term, drawing the market towards the demand zone. If the bulls commit, then there will be a case for a move higher towards areas of imbalance above on the way towards $1,875.
At $1,840, the price of gold is a little lower than the highs but still, the bulls are 0.4% higher on the day. The price has travelled between a low of $1,823.45 and a high of $1,847.93 so far. A threat in US Treasury yields and the US dollar has bolstered bullion’s appeal amid growing recession concerns but it has started to give up early gains as investors move into US stocks and risk assets despite higher interest rates.
Bond yields fell ahead of testimony by Federal Reserve chair Jerome Powell to Congress and his delivery was taken as less hawkish. The softer yields are bullish for gold since the yellow metal offers no interest. The yield on the US 10-year note was last seen down 3.8% to 3.156%, falling from a high of 3.283% to a low of 3.124%. Meanwhile, US stock markets have reversed course from early losses and moved higher, with the Dow Jones up 0.6% and the S&P 500 index last seen up 0.75%. The NASDAQ is higher by 0.9%. The US dollar edged down 0.3% as measured by the DXY index, falling from a high of 104.95 to a low of 103.858.
Federal Reserve Chair Jerome Powell said the US central bank is “strongly committed” to bringing down inflation, but there was a sigh of relief that Powell was not any more hawkish than he was when the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point, its biggest hike since 1994.
While Powell said that the Fed was strongly committed to returning inflation to its 2% objective, he did not state that this commitment is unconditional, as the Monetary Policy Report did last week. Additionally, during the Q&A he tried to convince the audience that a soft landing is possible, but that price stability is his first priority right now. However, recession fears are mounting.
This is offering support to gold bugs looking for a peak in market pricing for Fed hikes, analysts at TD Securities noted. ”Markets are increasingly discounting a recession looming on the horizon, which historically has led a pivot in Fed policy. However, this hiking cycle differs from recent historical analogs as the Fed’s ability to control inflation is limited, given that the supply-side is disrupted.”
”In turn, gold bugs sniffing out a potential stagflationary outcome associated with lower growth but lingering inflation should also consider that central banks, facing a credibility crisis, could also continue to raise rates for longer than they otherwise would. In this scenario, pricing for a Fed pivot would be less associated with recession odds than in prior episodes,” the analysts explained further.
”In the immediate term, CTA trend followers are also supporting the yellow metal, after Chair Powell tactfully manufactured a sell-the-news rally in gold following a 75bp hike, which has manifested as a whipsaw for CTA trend followers.”
WTI crude oil futures settle at $106.19
- Down -$3.33 or -3.04%
The price of WTI crude oil futures are settling at $106.19. That’s down $3.33 or -3.04%
The high price reached $109.76. The low reached $101.53. The settle is near the middle of that range.
EU News
European indices recover of lows but still close lower on the day
- Declines of -0.8% to -1.1% in the major indices
The European indices have recovered off there lows but are still closing lower on the day with declines of -0.8% to -1.1%. Concerned about slower growth due to higher inflation taken more center stage. Yields are down sharply.
A look at the closing levels shows:
- German DAX, -1.11%
- France’s CAC, -0.81%
- UK’s FTSE 100, -0.88%
- Spain’s Ibex, -1.1%
- Italy’s FTSE MIB, -1.35%
Looking at the benchmark 10 yields in Europe, declines range from -14.3 basis points to -16.4 basis points.
- Germany, 1.627%, -14.4 basis points
- France, 2.164%, -15.9 basis points
- UK, 2.487%, -16.7 basis points
- Spain, 2.694%, -17 basis points
- Italy, 3.642%, -17.5 basis points
Other News
Powell: You will see continued expeditious progress towards higher rates
- Comments from Powell in the Q&A
- We are strongly committed to reducing inflation
- Price stability is the bedrock of the economy
- We understand the full scope of the inflation problem
- Most recent indicators suggested we needed to accelerate pace of rate hikes
- There are parts of the economy where demand exceeds supply and that’s what we’re focused on
- We haven’t yet seen impacts of China lock downs on supply chains but there are signs of a pickup in Chinese growth now
- Want to raise rates to a ‘modestly restrictive level’
- We don’t think it’s necessary to provoke a recession but we think it’s essential to achieve price stability
- Asked about 100 bps, said he will never take anything off the table
The comments are ongoing. I’ll try to stick to the relevant ones.
Cryptocurrency News
Bitcoin falls back through $20,000. What’s next?
- Bitcoin under pressure
Bitcoin is through the Asian lows and $20,000 to the worst levels since Monday.
The crypto held up well in the early going even as US equities sunk but it’s now leading broader markets lower as the mood sours. At times, bitcoin has been a leading indicator of intraday sentiment.
Technically, this looks like a head-and-shoulders pattern with a target near $18,500.
The market is carefully watching for ongoing signs of strain in the alt space, among brokers and in the dangerous crypto lending space. Solana is under some pressure today after a five-day rebound and the Solend fiasco.
Ethereum is down $62 today to $1059. It fell as low as $879 on the weekend but has bounced back. Still, before that it had fallen in a straight line from $1800 so the bounce isn’t impressive and points to lurking sellers.
The space is having a crisis of confidence and there are even signs of a civil war. Bitcoin evangelist Michael Saylor yesterday tore into alt currencies and crypto lending.
“What you have is a $400 billion cloud of opaque, unregistered securities trading without full and fair disclosure, and they are all cross-collateralize with Bitcoin,” he told Fortune.
He argued that bitcoin is being dragged down by the mess of 19,000 cryptos and some bad actors within the space, including conflicts in leverage trading.
“The crypto exchanges, offshore and onshore, are unregistered, unregulated and offer 20x leverage, they don’t have mature Chinese walls,” Saylor said.