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US Close – Stocks tumble after massive tech earnings, Oil surges, Gold rebounds as dollar rally exhausted, Bitcoin struggles

US stocks did not stand a chance after mega-cap tech earnings disappointed and a record quarterly gain for Fed Chair Powell’s closely watched employment cost index.  Rate hike bets continue to pile up ahead of next week’s FOMC decision.  Surging wage pressures could be what is needed to make the Fed even more aggressive with tightening at the June and July Fed meetings. 

Tech Earnings

Apple shares are under pressure as supply constraints could impact this quarter’s sales by up to $8 billion.  If it weren’t for China’s zero COVID policy, Apple’s earnings report was solid.  Headline beats with both the top and bottom line, with service, Mac, Products, and iPad revenue all beating analysts forecasts.  It is impossible for Apple to have a handle on supply constraints given all the uncertainty with commodities and China’s COVID situation. 

Amazon’s stock plunged as their massive warehouse expansion was met with weakening consumer demand.  Out of all the tech-giants, inflation seems to be having the biggest impact on Amazon.  Amazon shares are deeply in bear market territory after falling to the lowest level since June 2020. Amazon delivered a surprise earnings loss and had an uninspiring outlook for the second quarter.

Oil

Crude prices are rallying as the EU is close to announcing a phased embargo on Russian oil.  Energy traders are not expecting OPEC+ to bow to international pressure and raise output.  Oil seems like it is once again heading higher as the supply outlook won’t be increasing significantly anytime soon as US rig counts edge higher and after earnings from oil giants don’t suggest investments in new wells will lag and overall output will likely be flat. 

The fundamentals are mostly flashing green for oil and if China shows any progress in easing lockdowns, crude prices could rally another 5%. 

Gold

Gold prices are back above the $1900 level as the dollar rally takes a break.  A hot employment cost index sent Treasury yields and the dollar higher, but that was quickly faded.  Super aggressive tightening by the Fed of 75 basis points will drive concerns that they could very well send the economy to a recession much sooner than anyone was expecting.

Gold should start acting like a safe-haven as the dollar rally shows some signs of exhaustion.  Gold will likely consolidate around the $1900 level until the FOMC decision. 

Bitcoin

Bitcoin weakened as surging Fed rate hike expectations triggered a bloodbath for tech stocks and risky assets.  Bitcoin’s fundamentals are starting to weaken as crypto retail and institutional interest is waning.  Now that the $40,000 level seems like solid resistance for Bitcoin, crypto traders are anticipating a consolidation that could send prices towards the $37,5000 level.  

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya [4]

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya