US Close: tech slump? fuhgeddaboudit, US data cools downshift calls, oil slumps, gold lower on strong dollar, bitcoin hangs above $20k

The tech bloodbath is over and Wall Street still seems to be confident that the Fed is ready to downshift their tightening pace after they deliver a fourth consecutive 75bp rate hike next week. The labor market needs to weaken significantly before the Fed can have a slower pace of tightening. This Apple-led rally is somewhat surprising given the mediocre results and holes in the outlook. When you compare Apple’s earnings to Meta and Amazon, it does look a lot better.

US data

Another round of economic data supported the argument that pricing pressures are not slowing fast enough and that the Fed may need to remain aggressive with tightening. The Employment Cost Index (ECI) printed at 1.2% in the third quarter, which is still well above pre-pandemic levels. The core PCE inflation data isn’t cooling just yet, which might make it hard for policymakers to make that push for a downshift in tightening next month.

The consumer is also holding up as personal income and spending data remains positive. The US consumer sentiment report showed a little bump up, while inflation expectations remain elevated.

Next week will be massive and traders should not be surprised if the Fed avoids noncommittal to taking a side with the debate for a downshift for the December meeting.

Oil

Oil markets remain volatile as China ramps up COVID restrictions, some US oil giants signal modest commitments to boost production, and the global economic outlook continues to dim. Next week, energy traders will get a better sense of how China’s economy is performing despite the COVID lockdowns that happened in October. OPEC will also announce their World Oil Outlook on Monday.

WTI crude is also feeling heavy as the strong dollar trade could be returning as Treasury yields resume their climb higher.

Commodities broadly will also have a reaction to the next week’s FOMC policy decision and nonfarm payroll report. A dovish rate rise could allow for dollar weakness which could keep oil prices supported here. If risk appetite remains healthy, WTI crude could continue to consolidate above the mid-$80s.

Gold

Gold prices softened after another round of US data did not support calls for the Fed to downshift tightening in December.

The bullish case for gold is improving as financial markets begin to grow optimistic that the Fed will begin the deliberation of a slower pace of tightening. Gold could be on the verge of a major breakout if the FOMC decision is supported by the nonfarm payroll report at the end of the week. Gold has initial support at $1640, with the line in the sand being $1,620. The $1680 provides major resistance for gold, followed by the $1700 level.

Cryptos

Bitcoin is forming a trading around the $20,000 level as many investors await to see what happens with next week’s market reaction to the FOMC decision. What will also draw extra attention is the Hong Kong Fintech Week, that includes appearances from FTX’s Sam Bankman-Fried, but could contain more insight on how Hong Kong will provide guidelines on how retail crypto trading could be allowed. Binance CEO Zhao and Ark’s Cathy Wood will speak at the Web Summit in Lisbon.

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