Stocks and US futures rose in early Thursday trading as investors moved back into equities, coming to terms for now with the realization that rate cuts may be delayed beyond the first quarter. Global equities started positively, with Asian equities rising after yesterday's heavy losses in China/Hong Kong – however, a sharp rise in ETF trading suggested state (Chinese) fund participation. European stocks are trading positively, which has led to a positive close in the US every day this year.
Chipmakers have outperformed once again, in part because Taiwan Semiconductor Manufacturing, a major supplier to Apple and Nvidia, announced that they expect solid growth again this quarter. Microchip Technology, AMD and Applied Materials are all up more than 2% – and heavyweights Apple and Nvidia have also gained around 1.7% in pre-market trading, leading to a strong recovery on Wall Street. Shares in the chip industry in Europe also rose – such as the Dutch company ASML.
Boeing, one of the worst performers this year or in previous sessions, is also trading well in the green after India's newest airline ordered 150 of its troubled 737 Max jets.
Although the outlook for interest rate cuts has worsened, investors overall are still rather optimistic that rate cuts will support equity markets later this year. Support for equities from Chinese sovereign wealth funds has also helped risk sentiment (for now), as has a slight recovery in bonds (which has seen yields give back some of yesterday's strong gains).
The USD also gave back some of its four-day uptrend – but remains in demand overall. However, I still see yields supported and further gains – which means that growth stocks and other yield-sensitive assets (such as gold) will come under pressure again.
However, lower than expected initial jobless claims could further dampen hopes of a rate cut and will likely lead to the USD finding support/retreating after a weak Asian session.
Oil prices are little changed after another recovery attempt as a result of ongoing tensions in the Middle East – now with the Pakistani army striking back against Iran. While tensions in the region (particularly in the Red Sea) have “paralyzed” global shipping for the time being and caused some disruptions, the demand outlook remains fragile. Gold rose slightly and found support above $2,000 as predicted and benefited from yields giving back some of the recent gains. Gold remains under pressure, especially if yields stabilize or rise again. Bitcoin continues to trade in a narrow range and has faced headwinds from JPMorgan CEO Dimon, who said he does not want to get involved in Bitcoin. While I agree with Dimon that Bitcoin is limited, the increasing demand for Bitcoin and the upcoming interest rate cuts will likely lead to (another) good year for the cryptocurrency.
👁 ROB'S MARKET OVERVIEW:
January 18, 2024
🌐/🇺🇸 Global/US Markets ↗️/↕️/➡️ (broad dip buying with more caution in second half)
Cyclical Stocks ↘️
Tech/Growth Stocks ↗️/↕️/➡️ (chip stocks still outperforming)
Financial Stocks ➡️/↘️
Defensive Stocks ➡️
Energy Stocks ➡️
Materials Stocks ➡️/↘️
USD ➡️/↗️ (USD remains in demand / will continue to benefit from falling rate cut expectations)
EUR ➡️ (due to reduced rate cut expectations)
AUD, CAD ➡️/↘️
⚡️Cryptos ➡️ (sideways for now – no catalysts; potentially slide gains on temporary improved risk sentiment)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)