US Close: Slow Start for Stocks, Lagarde pushes back, Oil rally pauses, Gold rallies, Bitcoin momo is back

US stocks will struggle for direction until the latest inflation tilts market’s expectations as to how aggressive the Fed will tighten into what is still deemed as an overvalued stock market.  Wall Street saw early selling pressure for tech stocks as investors still digest a wrath of disappointing outlooks and surging borrowing costs. Technology stocks are no longer a one-way trade as investors cut losses and now focus on valuations, competition, and long-term outlooks.

FX

Financial markets are going to test the ECB.  ECB’s Lagarde eased back from her hawkish shift last week. Last week’s decision to not rule out a rate hike has investors rushing forward rate hike expectations. Today she told Parliament that there is no need to rush to premature conclusions. The euro softened after her comments.

Oil

Crude prices had been rebounding since December as a tight oil market has been met with improving demand, sluggish output growth, geopolitical concerns that pose a risk to output, and frigid weather that has led to supply disruptions.

Energy traders locked in some profits over optimism that the US and Iran might be able to salvage a nuclear deal.  A quick revival of the Iran nuclear deal still seems unlikely, so any relief from additional barrels of crude from Iran should not be priced in. The rally in crude was ready for a break as risk aversion sent equities lower.  The oil market still remains heavily in a supply deficit and whatever weakness happens to prices will likely be short-lived.

Gold

Gold prices rallied over geopolitical concerns, a late stock market slide, and uncertainty over how aggressive the Fed will be to raise interest rates.  Wall Street seems to be overly pricing in an aggressive Fed and the gold traders think that could be good news for bullion.  Gold has been able to stabilize above the $1800 level even as Treasury yields appear to be knocking on the 2.00% level.

As equity traders become more nervous over how stocks will perform over the first few Fed rate hikes, gold should start to see some safe-haven flows.

Bitcoin

Bitcoin believers are back.  Frothy calls are returning, and many investors are now confidently returning back to crypto.  The fundamentals have not changed at all, but the bullish buying has been steady. Momentum buying appears to be returning for cryptos and Bitcoin is leading the charge.  Many crypto traders are looking for a strong altcoin season shortly once Bitcoin can stabilize above the $50,000 level.

Ethereum, Cardano, Terra, and Solana are all up over 5% on the day as well.  The true test for cryptos will be can they maintain a rally if risk aversion hits all markets.  Today’s session on Wall Street was mixed.

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