Global stock prices rose broadly on Friday as further good earnings reports from US companies and an overall positive risk sentiment offset the Fed's further reduced interest rate cut expectations.
After a mixed start yesterday, with many investors taking profits, there was the strongest inflow into US equities in more than seven weeks, according to Bank of America analysts. Once again, it was technology stocks, which initially showed signs of weakness, that drove Wall Street higher. Applied Materials, the largest US chipmaker (which actually makes chips), jumped 12% in after-hours trading after issuing a positive revenue forecast that suggested some of the largest semiconductor companies would continue to increase investment in new production facilities. Applied Materials' earnings update also sent other chip stocks/manufacturers such as ASML sharply higher.
At the end of a data-heavy week, US PPI data is next in focus, especially after the Consumer Price Index roiled financial markets earlier in the week. The US CPI report has drastically changed traders' views on the Fed's rate cuts in 2024. However, even though bets on rate cuts have fallen dramatically – as we have always said were way too optimistic – the positive market sentiment remains as there is hope that the recent hot inflation data is just another sign of a very strong and resilient US economy that continues to grow rapidly and does not need rate cuts.
The S&P 500 posted a record close on Thursday, erasing all of this week's losses. However, it is important to point out that much of Wall Street's strength is centered on the mega tech companies: The five largest stocks in New York are responsible for 75% of year-to-date gains. We're also seeing mega-cap stocks trading well in the green in pre-market trading today, with Nvidia (we're LONG) and Tesla (!) leading the gains with a 1.7% gain.
Markets (especially in Europe) also benefited from renewed China optimism. A strong Chinese holiday travel season shows that Chinese consumers appear to be stronger than expected. China-sensitive stocks in particular, such as mining companies, rose sharply.
In commodities, oil prices gave back some of yesterday's gains but appear to remain in an overall uptrend. Gold prices continued to recover as we predicted, but face a slight headwind as yields rose ahead of US PPI and US consumer sentiment data. There has been some USD weakness over the last two days, but this is likely to be temporary as the market does not expect the Fed to cut rates before June (I think late July or later is more likely).
👁 ROB'S MARKET OVERVIEW:
February 16, 2024
🌐/🇺🇸 Global/US Markets ↕️/↗️ (tech moving higher following yet another strong sign that the AI boost results in rapid revenue growth)
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ↗️ (in outperformance)
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️
Materials Stocks ↗️ (Boost from China optimism)
💱 Forex
USD ➡️/↗️ (ending recent weakness)
AUD ➡️/↗️ (benefiting from China boost / higher commodity prices & positive risk sentiment)
EUR ↗️/➡️
CAD ↘️/➡️
GBP, CHF, JPY ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ↘️/↕️/↗️ (likely moving higher in second half of US-trading)
Natural Gas prices ↕️
Metal prices ↗️ (Boost from China optimism)
Gold ↗️/➡️ (potentially pausing recent strong rebound with USD stabilizing)
⚡️Cryptos ➡️/↗️ (remains in bullish price channel – likely to rise further towards $54K – $55K range in upcoming sessions)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
