US Close: Stocks surge as the peak in rates is in place, 1.1 million job openings disappear, RBA downshifts, Oil surges as OPEC+ eyes potential 2 million bpd cut, Gold stronger, Bitcoin above $20k

Wall Street sees light at the end of the Fed rate hiking tunnel and the scramble to pick up stocks is on. Investors are growing confident that the peak in rates was made last week. ​ Stocks are posting the best two-day rally as Fed rate cut bets are also back on the table for next year and given markets were extremely oversold at the end of September.

Jolted

The labor market is starting to lose its tightness.  The August Jolts report showed job openings posted its first significant decline, which could be the start of data points that is needed for the Fed to pivot from their aggressive tightening stance.  In August, job openings fell by more than 1.1 million, which brought the total number of available positions to 10.05 million.  It looks like the ultra-tight labor market is finally showing chinks in the armor.

It is too early to say a Fed pivot is justified but if we continue to see a couple sharp drops with job openings, that will wake up the doves in the FOMC.  ​

RBA downshift

A dovish RBA hike has traders betting the Fed stance will soften soon.  The RBA stunned markets with a 25bp rate hike. Expectations were for a half-point rate increase and now many traders think this could be an outlier that makes other major central banks consider a slower pace of tightening.

The volatility after the RBA decision was intense, as the three-year bond yield had its biggest plunge in 14 years.

Oil

Crude prices extended gains after reports that OPEC+ is considering slashing output as much as 2 million bpd.  Delegates also said that the impact on global supply could be smaller.  With OPEC+, we have grown used to under promise and overdeliver. The Saudis run this show and they know oil prices are at a make-or-break level. Expectations were high that a significant reduction of output would be the outcome, now it seems it might be twice as large.

Oil prices were already headed towards $100 and it looks like OPEC+ just transferred from the local train to an express one. The oil market is going to remain tight all winter and it seems energy traders are confidently expecting prices to be supported.  A couple of the recent bearish drivers that include weaker Chinese economic activity and the Biden Administration use of the Strategic Petroleum Reserve (SPR) are about to turn positive for crude.

Gold

A peak in rates is music for gold’s ears.  Gold is now comfortably above the $1700 level after the RBA surprised markets with a smaller-than-expected 25-point interest-rate hike.  The RBA set the tone and now a lot of traders on Wall Street are expecting the Fed to soften their tightening pace.

Gold’s bottom is in place now that the US is showing clear signs the labor market is softening.  The key for gold will be the nonfarm payroll report.  As long as we don’t see an extraordinary strong print, gold should remain supported here and poised to test the $1750 region.

Crypto

The October risk rally continues and is pushing up crypto as investors grow optimistic peak rates are behind us. Bitcoin now above the $20,000 level is welcome news for the cryptoverse.  Still below the $1 trillion market cap, crypto is making a strong move here and that could continue if risk appetite remains healthy.

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

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