Stocks & bonds fall as the tech-led rally faded and investors returned to worrying about potential inflation risks, expensive stock market valuations, more volatility in bonds including higher yields, higher rates for longer and potential signs of a slowdown of the US economy and corporate earnings.
US stock futures are trading lower again after yesterday's tech lead bounce with also European stocks trading lower.
On an overall quiet day in terms of economic data releases and with no major earnings report investors are still increasingly worried that Thursday's US inflation data could show a slowdown in disinflation. In addition, markets become worried about potential massive additional debt issuance by governments in Europe and the US, which could further decrease demand for bonds and drive yields higher.
I still see the ongoing rise in yields to continue, which will overall pressure risk markets as well as gold and result in the USD remaining in demand.
Yesterday's strong rally was also fueled by strong AI gains after Nvidia announced new artificial intelligence products for personal computers. I still believe that selling the spikes remains the right strategy for now.
Elsewhere, Bitcoin fell slightly after breaching the $47,000 mark on bets that the US will approve the launch of the first exchange-traded funds to invest directly in the world's largest digital asset. I believe it's very likely that multiple ETFs will be approved – while the immediate impact might be not as big (as largely priced in) it would certainly increase the attention on Bitcoin and lead to further money inflows into the cryptocurrency.
Oil prices rebounded from the steepest drop in about a month. However, we still see strong signs of a weaker physical market, also indicated by price cuts by OPEC+ leader Saudi Arabia.
We expected markets to edge lower yesterday and were wrong with our assumption – but I see it rather as a timing question and yesterday's rally also driven by some strong early dip buying (especially in Nvidia). Today, I expect some of yesterday's gains to be reversed and investors to turn more cautious again towards Thursday's US inflation data.
I also expect the correction in bonds (= rising yields) to continue as I don't see bonds with current yields as attractive enough especially with rising signs that rate cuts may be slower than hoped.
👁 ROB'S MARKET OVERVIEW:
January 09, 2024
🌐/🇺🇸 Global/US Markets ↕️/↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️
Energy Stocks ↗️/↘️
Materials Stocks ↘️
USD, EUR ➡️/↗️ (EUR & USD to edge higher as bond yields return to bullish momentum)
GBP, CHF, CAD ➡️/↘️
AUD ↘️ (commodities with further headwinds; Risk sentiment to worsen)
⚡️Cryptos ↕️/↗️ (remain volatile with likely more additional FOMO buying before Bitcoin ETF decision expected on Wednesday)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)