Global stock prices continue to rise, supported by an overall solid earnings season and US data that raises expectations for interest rate cuts again. The S&P 500 closed yesterday less than 1% away from its all-time high and continued its upward trend, supported by broad gains – also in Europe and Asia. As we expected yesterday, chip stocks also recovered.
A strong recovery rally began on Friday after a soft NFP report suggested that the still tight labor market may finally be easing, which could allow the Fed to cut rates soon and return to disinflation. The rally then turned sideways, but received an additional boost from Thursday's US jobless claims, which reinforced the picture of an easing US labor market as jobless claims came in higher than expected.
For me, a positive sign of the ongoing rally is that the gains are more broadly based and not just driven by the big tech stocks (mega caps) – we are seeing gains in value and cyclical stocks in particular, which could help to keep the rally going.
However, there is also a fine line as the market needs more signals that the Fed can cut rates while the slowing economic data should not point to a recession. Inflation data also remains in focus – US CPI data next week will be very important. There is also a risk of escalating trade tensions between the US and China – US President Joe Biden's administration will announce a far-reaching decision on new Chinese tariffs next week.
We see another rather quiet day – at least for US economic data and earnings reports. The market will therefore also be paying attention to what Fed officials will say today about the timing of monetary easing.
The weaker USD, continued hopes of an imminent rate cut, overall positive market sentiment and rising demand from China continue to support commodity prices. The gold price saw a strong boost after expectations of interest rate cuts increased, which would lower the opportunity cost of holding non-interest-bearing gold (making gold more attractive).
I expect the positive market sentiment to continue for most of the day and then become a bit more cautious in the last 2-3 hours of US trading today. However, hawkish comments from Fed speakers could bring back concerns about prolonged rate hikes sooner. But even rather hawkish comments will not trigger a sharp correction or heavy profit-taking for the time being.
👁 ROB'S MARKET OVERVIEW:
May 10, 2024
🌐/🇺🇸 Global Markets ↗️/➡️
Cyclical / Luxury Stocks ↗️/➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️
Energy Stocks ↗️
Materials Stocks ↗️
💱 Forex
CAD ↗️
USD ↗️/➡️ (slightly recovering from this week's slide)
AUD, GBP ↗️/➡️ (Both benefit from positive risk sentiment; GBP benefiting from robust UK GDP data)
EUR ➡️
CHF ↘️/➡️
JPY ↘️
⚒ Commodity Markets ↗️
Oil prices ↗️
Natural Gas prices ↕️
Metal prices ↗️/➡️
Gold ↗️/➡️ (Further gains limited after strong gains / resistance in range $2,370 – $2,385)
⚡️Cryptos ↗️/↕️ (benefited from improved risk sentiment / increased rate cut expectations – gains limited)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
