Stocks rallied after robust mega-cap tech earnings, hopium that the Fed will pivot soon, and economic data that suggests the consumer is doing just fine.
Investors embraced Apple’s slight earnings beat with both the top and bottom line. The standout miss was Mac revenue which was the first decline of the pandemic, which was due to supply constraints and FX headwinds. The iPhone and services numbers were solid and will lead many to believe the consumer is still fine. The numbers out of China were surprisingly good too, despite major COVID restrictions. CEO Cook acknowledged that supply constraints came in slightly less than the low end of the range that they gave during the last call.
Apple refrained from giving guidance but said they believe year-over-year revenue growth will accelerate in the next quarter.
Inflation is still running hot and that should delay the Fed delivering the dovish pivot that so many on Wall Street are expecting. There was a lot of data that reminded us that the economy should prepare for an aggressive Fed. The closely watched Fed’s favorite wage gauge came in a little hotter-than-expected and personal income & spending data remained strong. The Fed has a clear path to continue with aggressive hikes, but many are still thinking they’ll be inclined to go at only a half point in September. A couple more inflation and employment reports will dictate how the data-dependant Fed will behave after the summer.
Oil prices rallied after both Exxon and Chevron were optimistic about the crude demand outlook and on expectations that OPEC+ would not raise production in September. The oil market will remain tight going forward as OPEC+ underproduction levels stood at 320%.
With no major signs of fuel demand destruction, oil seems like it will soon find a home above the USD 100 a barrel mark. US oil rig counts posted a gain of six, bringing the total to 605 rigs, but that should do little to think this market will find balance anytime soon.
WTI was unable to hold onto the USD 100 level as profit-taking kicked in.
Gold appears to be back in fashion. ETF data might not be suggesting investors are turning bullish on the precious metal, but the bond market is providing some promising signs. The peak in yields is in place and that will do wonders for non-interest-bearing gold. Strong economic data will support maybe tilt the expectations to price in slightly larger rate increases, but fears of the Fed over aggressively hiking are long gone.
Gold might have a date with the USD 1800 level soon, but it might take a fresh catalyst for that to happen. Next week will be key for bullion and the focus will fall on Fed speak.
Bitcoin is finishing the week near the highs, just shy of the USD 24,000 level as the cryptoverse breathes a sigh of relief. The ‘crypto winter’ might be over and that is what is needed to allow flows back into the space.
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