US Close – Stocks pare gains after hot data drives taper fears, Oil pares weekly loss, Gold gives up gains after PMI readings, Bitcoin down again on China heat

US stocks reversed course after both hawkish comments from the Fed’s Harker and an impressive flash PMI reading that made another series high, as average selling prices for goods and services continue to rise at unprecedented rates.  Harker commented that the Fed should start having conversation about tapering sooner rather than later.  The FOMC minutes let the taper talk cat out of the bag and now we get to hear where policymakers stand on removing some accommodation. 

PMIs

US factories and services are seeing awe inspiring growth that suggests this economy will run hot for a few months and raise fears that the Fed will have to taper a lot sooner than what they were expecting.  The flash Composite Output index, Services Business Activity Index, and Manufacturing PMI reading all made series record highs.  The US growth exceptionalism story will fuel the taper debate as genuine inflation arguments continue to be made across corporate America. 

Oil

Crude prices are rebounding after much of the energy market has priced in more Iranian crude output later this summer and after robust PMI data across Europe and the US point to a greater short-term pickup with crude demand.  The crude demand outlook remains very strong for the second half of the year, so it will be hard for oil traders not to buy every dip.  Providing some relief to the demand outlook is optimism that the UK will still be able to end their lockdown despite a sharp rise with Indian variant cases.  The UK could be the template that the rest of the world will follow. 

Gold

Gold prices pared gains after another series record of manufacturing and service PMI data sent the dollar higher.  Gold was vulnerable to profit-taking going into the European close and the stellar US data gave the go-ahead for many traders to square up for the week. 

Gold’s outlook still looks bright as the Fed appears to have handcuffed Treasury yields with their lower for longer approach.  The upcoming week is filled with a lot of Fed speak and economic data that shouldn’t rock the boat.  Gold’s facing tentative resistance at the $1,900 level, but if that is quickly breached early next week, momentum could be very strong. 

Bitcoin

Bitcoin gave up earlier gains after another wave of critical comments from Beijing triggered a wave of concern that China might not be able to power Bitcoin in the short-term.  China vowed to resolutely prevent financial risks and reiterated their intentions to crackdown on Bitcoin mining and trading. 

Bitcoin has two problems, ESG and decreasing reliance on China, both of which could take some time.  

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