US equities are starting the holiday-shortened week on a cautious note, although the latest earnings reports continue to paint a picture of a strong US economy and a resilient US consumer. Concerns about higher long-term interest rates and recurring doubts that the Chinese economy will emerge from its difficulties continue to weigh on market sentiment.
Futures on the S&P 500 and the Nasdaq 100 are trending slightly weaker after the holiday on Monday. Part of the headwind is coming from Nvidia, which is dragging down chip stocks ahead of its highly anticipated earnings report on Wednesday. Retail giant Walmart surged (+5%) after beating earnings estimates and agreeing to buy smart TV maker Vizio Holding for about $2.3 billion. Medtronic climbed after the medical device maker increased sales. Home Depot, on the other hand, fell by almost 3% after the company reported its fifth consecutive quarterly decline in sales.
Yields are also holding steady after last week's sharp rise, providing some headwinds for growth stocks, although the importance of rate cuts has diminished.
Swap markets have further reduced rate cut expectations after economic data, as well as Tuesday's CPI data, continued to surprise to the upside. If concerns over further tightening of monetary policy increase, interest rate worries could lead to a stronger headwind for the equity market. It will become increasingly difficult for stocks to reach new highs in the coming weeks – although tomorrow's Nvidia report will be crucial for Wall Street's short-term performance. Any signs of concern that Nvidia's massive growth may be slowing could lead to a major setback for the markets. For this reason, we see generally cautious trading ahead of Nvidia's earnings report – even though we expect Nvidia's update to be very positive.
Mining companies such as Anglo American and Rio Tinto led commodity stocks lower after a slump in iron ore/industrial metal prices. BHP, the world's largest mining company, which reported solid earnings and said demand from China remains robust, is also trading lower.
Gold prices continue to recover despite high yields – a sign of generally higher demand for safe havens. Oil prices continue to hover near a three-month high despite ongoing tensions in the Red Sea, but faced some headwinds as concerns over China resurfaced after Beijing slashed its key five-year lending rate in a bid to boost real estate demand (which I think will have limited impact given the strong distrust of Chinese real estate at present).
👁 ROB'S MARKET OVERVIEW:
February 20, 2024
🌐/🇺🇸 Global Markets ↘️/↕️ (weak start, then mixed markets, cautious trading ahead of Nvidia report)
Cyclical Stocks ↘️/↕️
Tech/Growth Stocks ↘️/➡️
Financial Stocks ↘️/➡️
Defensive Stocks ↘️/➡️
Energy Stocks ↗️/➡️
Materials Stocks ↘️/➡️ (mixed performance of commodity prices)
💱 Forex
AUD, EUR, GBP ↗️/➡️
CHF ➡️
USD, CAD, JPY ↘️/➡️
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (slight early losses but remain bullish)
Natural Gas prices ↗️/↕️
Metal prices ↘️/↕️ (weakness in iron ore / steel prices overall weigh on industrial metal prices)
Gold ↗️ (gold & other precious metal with gains on weaker USD / more safe haven demand)
⚡️Cryptos ➡️/↗️ (remains in bullish price channel, trying to push into the $53K – $54K range)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
