Credit Fears Resurface Dragging Wall Street Lower, Gold Breaks $4300/oz – Market wrap for the North American session - October 16

Log in to today's North American session Market wrap for October 16

US stocks fell on Thursday, adding to a week of unstable trading, as new concerns about the quality of bank loans made investors nervous about the overall health of the financial market.

The initial market gains, which were driven by another positive forecast for Artificial Intelligence (AI) demand, quickly disappeared after two regional banks, Zions Bancorp (down 13%) and Western Alliance Bancorp (down 11%), announced they had to write off bad loans. This revived old worries about hidden weaknesses in the banking system, coming shortly after the collapse of auto lender Tricolor Holdings had already forced a large write-off at JPMorgan Chase.

As investors sought safety, the broader S&P 500 fell 0.6%. Safe-haven assets jumped: Bonds saw strong demand, pushing the yield on 10-year Treasury notes below 4%, and gold climbed to another record high. Even Bitcoin slumped, while a closely watched regional bank fund plunged over 6%.

On the positive side, Oracle's stock rose after the company gave an ambitious forecast for its AI infrastructure business.

This mirrored the optimism in the chip sector, where Taiwan Semiconductor Manufacturing extended its rally after projecting stronger demand linked to the AI boom, following a similar bullish outlook from ASML. The volatility is expected to continue with $3.4 trillion in stock options expiring on Friday.

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All in all another blockbuster day for safe havens with Gold in particular continuing its strong performance to breach the $4300/oz. The precious metal seems to be unstoppable at present.

Rising rate cut bets aided the precious metals run today while weighing on the US Dollar.

The US dollar weakened against several major currencies on Thursday, pushing the dollar index lower.

As you can see from the chart above, CHF and JPY lead the way today as safe haven currencies benefited from rising uncertainties.

The overall dollar index fell by 0.33%. It dropped significantly against the safe-haven Swiss franc, falling 0.49%. The dollar also continued to lose ground against the Japanese yen, falling 0.46% after a public comment by a Japanese official (Shimizu).

Meanwhile, the euro hit a one-week high and was up 0.36%.

In Australia, the dollar slipped 0.48% after data showed that unemployment hit its highest level in nearly four years, which increases the likelihood that Australia’s central bank will cut interest rates.

The Asian session will be a quiet one in terms of data releases.

Attention will be on the European session tomorrow where we will get Euro CPI data from September and speeches from two BoE policymakers.

The US session remains light with the highlights being a industrial production data release and some Fed Policymaker comments.

Markets will likely be watching to see if there will be any fallout from credit concerns as well as developments on the US-China front. Both of these could stoke volatility ahead of the weekend.

Safe Trades!

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