US stocks were unable to hold onto gains as recession worries run wild and as global bond yields surge higher after former Fed’s Dudley pushed back on expectations that the Fed will blink once the unemployment rate starts to climb higher. Also supporting the move higher in yields was the surge with gilt yields as investors unload the holdings of UK debt ahead of the BOE’s January bond sales.
We might not get much of a Santa Claus stock market rally as Wall Street rushes to price in credit and earnings risks.
Tesla shares rallied after a Twitter Poll paved the way for Elon Musk to focus on what he does best, which is to dominate the Electric Vehicle space. Musk tweeted that he would abide by the results of his Twitter poll, which has many believing that he probably has a candidate in mind to run the troubled social media giant.
Overnight, Musk also tweeted, “No one wants the job who can actually keep Twitter alive. There is no successor.” Tesla shareholders and probably Musk himself want someone new to deal with the running of Twitter.
The German IFO survey provided optimism that the business climate is rebounding across almost all areas of both manufacturing and the service sectors. Trade improved significantly which is helping alleviate concerns that the eurozone’s largest economy was going to have a bad recession.
The headline IFO business climate improved to 88.6, stronger than the consensus estimate of 87.5 and the upwardly revised 86.4. Expectations posted the biggest beat, rising from 80.2 to 83.2 and 1.2 points above forecasts.
The NAHB homebuilder sentiment extended its record decline as the housing market clearly remains stuck in recession territory. The key housing gauge fell 2 points to 31, which when you avoid the pandemic low seen a couple of years ago, it was the lowest level seen since the summer of 2012.
Expectations for the next six months showed their first improvement since April. High rates are only going to get higher and the consumer will weaken as we head towards a recession, but a bottom will likely get put in at some point next year.
Energy traders might be stuck in wait-and-see mode as there might not be a clear catalyst for the next major move with crude prices. The oil demand outlook will be key for how high crude prices can go and that might struggle for clarity as we see mixed signals with China’s reopening.
Earlier oil rose after the German IFO report showed the eurozone’s largest economy might not have that bad of a recession.
Gold prices edged lower as global bond yields surged after former Fed’s Dudley told investors not to fight the Fed. Dudley sees the Fed firmly locked in a very hawkish stance and is pushing back on the idea that policymakers could cut rates at the end of next year. Gold is still holding up relatively well this month and that could gain traction as investors position their portfolios a little more on the defensive side.
It is no surprise that today’s big news involves Binance and what might be the end of a long journey for Voyager. Months ago, Voyager’s distressed assets were supposed to be bought by FTX, but then the collapse occurred. Binance, who is still under tremendous scrutiny over how its operations are being run, reached a deal to buy Voyager Digital’s assets out of bankruptcy in a deal worth $1.022 billion. Binance might still be in the market to buy more distressed assets, which could also be viewed as an attempt to show some strength in their health given the massive redemptions that have been occurring.
Bitcoin is following the broader markets and is down on the day.
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