US Open: Stocks lower as economy weakens, US data, Goldman layoffs, oil slumps, gold’s bad week, crypto audits

US stocks are declining as investors can’t shake off all the hawkish rhetoric that came from central bankers this week and as the private sector clearly entered a strong downturn.  Monetary policy has quickly gotten restrictive now that the Fed has raised rates by 400 basis points in 9 months.  Recession risks will only grow now that Powell has signaled that we should expect ‘ongoing increases’.

Global bond yields are rising after central banks delivered another round of tightening and mostly signaled that more rate increases were coming.  The European flash PMIs showed the eurozone is stuck in contraction territory but the readings came in better-than-expected which could allow the ECB to remain aggressive with its rate hiking campaign. 

US data

The flash PMIs confirmed Wall Street’s fears that the economy is quickly headed towards a recession.  The S&P Global Flash Composite PMI report noted that “US private sector ends year in stronger downturn as demand weakness and price pressures bite.”   The services business activity index fell to a four-month low at 44.4. 

The headline composite PMI reading fell more than expected to 44.6, matching the August reading. Manufacturing activity tumbled to 46.2 and made a 31-month low.  The slowdown is clearly in place and with rates now in restrictive territory, the data should continue to deteriorate early next year. 

Goldman

Goldman Sachs is considering cutting as many as 4,000 jobs, which would be 8% of its employees, as they struggle to hit profitability goals.  This is big news as Goldman is one of the first big companies to consider layoffs that are not in the tech, real estate, or interest rate sensitive sectors.  Goldman has been on a hiring spree, so this announcement should be taken with a grain of salt.

If we continue to see other companies in other industries announce job cuts, that could provide some relief with wage pressures. 

Oil

Crude prices are declining as recession fears grow and over uncertainty on how smooth China’s reopening will be given the surge in COVID cases they are experiencing. The short-term crude demand outlook is a big question mark as China might struggle to ease covid curbs all the way and as global manufacturing activity widely remains in contraction territory. 

Oil might struggle to rally unless we see a disruption with crude supplies as energy traders fixate over deteriorating growth outlooks globally.     

Gold

Gold prices are poised to finish this week lower after central banks showed they plan on remaining aggressive with combating inflation.  Recession fears are only growing from here on out and right now that is not triggering ETF purchases.  It seems bullion traders won’t have the greenlight to buy gold until they are confident that the peak in yields is in place. Eventually, Wall Street will feel confident that the Fed is ready to hold and that might be when gold will be able to resume its role as a safe-haven. 

As trading volumes ease into year end, gold might find itself stuck in a range that could see $1750 as support and $1830 as major resistance. 

Cryptos

Cryptos are broadly lower as the bullseye gets bigger on Binance’s back.  The big news in the cryptoverse is that Mazars Group has ended all work with crypto clients that include Binance, KuCoin and Crypto.com.  Mazars Group was supposed to show the audits for these major exchanges and provide clarity if all their proof or reserves are in order and backed 1:1. Now they’ve removed all the documents, but this may just be a decision to distance themselves if anything happens to any of those exchanges. 

Bitcoin is declining as risk aversion runs wild on recession fears and on growing concerns that another crypto exchange could be at risk of massive withdrawals.  

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