Wall Street is recovering after Wednesday's slump, which followed a rather hawkish Fed statement and press conference in which Fed Chairman Jerome Powell said that he does not think a rate cut in March is likely. The S&P 500 is currently trading 0.4% higher, while the Nasdaq 100 is recovering even more strongly (albeit also after a more pronounced sell-off) and is trading 0.6% higher in pre-market trading.
Investors are more optimistic about the next round of earnings from the major tech mega-caps as giants Apple, Amazon and Meta, all part of the Magnificent Seven that drove the strong rally in 2023, announce their latest earnings reports and guidance.
We are seeing the market reduce rate cut expectations for March – something I have always said is far too optimistic to assume given the strong US economic data, as the Fed is in no rush to cut rates.
The Bank of England left rates unchanged as widely expected. There was little information, but the central bank's lowered inflation expectations are likely to weigh somewhat on GBP, although rate cuts are unlikely in the coming 2-3 months as inflation remains well above the BoE's 2% target.
Many investors and analysts expected bonds to rally after the rather hawkish Fed statement, but US Treasuries gave back their short-lived gains. The USD is still in demand – which I see as a better sign that investors are scaling back their rate cut expectations – only the JPY has outperformed the USD since the Fed press conference as there are increasing signs that the Bank of Japan will soon normalize policy.
In Europe, equities fluctuated, partly in reaction to mixed earnings news – Adidas slumped after lower than expected earnings guidance.
Oil prices found some support after selling off sharply yesterday, but remain under pressure as much of the current support is based on expectations that tensions in the Middle East could lead to significant supply disruptions.
I expect market sentiment to improve as yesterday's Federal Reserve statement should be taken as another sign that the US economy is strong – too strong, in fact, to be boosted further with monetary easing. Yields have fallen further, which will continue to support the gold price.
👁 ROB'S MARKET OVERVIEW:
February 01, 2024
🌐/🇺🇸 Global/US Markets ↕️/↗️
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ↗️/↕️ (with rising volatility before NYSE closing and ahead of mega cap earnings reports)
Financial Stocks ↗️/➡️
Defensive Stocks ➡️
Energy Stocks ➡️
Materials Stocks ↗️/➡️
💱 Forex
JPY ↗️
USD ➡️/↗️ (remains in demand)
CAD, CHF ➡️
EUR, GBP ➡️/↘️ (with further downside potential given the Eurozone/UK economic underperformance)
AUD ↘️/➡️ (sharp losses / now limited downside potential during US trading)
⚒ Commodity Markets ↕️/↘️
Oil prices ↗️/↕️/↘️
Natural Gas prices ↘️/↕️
Metal prices ↘️
Gold ↕️/↗️ (we see gold fluctuating but continues to benefit from lower yields)
⚡️Cryptos ➡️ (cryptos in sideways movement – range $42K – $43.5K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
