Stocks rally as Google job cuts support disinflation trends, Fed speak, Oil’s good week, Gold hovers near 9-month highs, Bitcoin above $21k

US stocks are rallying as tech stages a comeback following Google parent Alphabet’s announcement that they will cut its global workforce by more than 6%. The reduction of 12,000 jobs globally for Google confirms a clear trend of mega-cap cost-cutting measures. ​ First it was Amazon and Microsoft with major job cut announcements and now it is Google. ​ We should see this theme spread across other sectors throughout the year and that should help keep disinflation trends intact.

Massive layoff announcements will stop wage pressures from rising, which should get inflation back towards target by the end of the year. ​

Fed

The economic data is not quite in unison for another downshift in Fed tightening. ​ The labor market remains too hot even despite all the layoff announcements that seem to be happening this earnings season. ​ The Fed seems poised for a 25-basis point rate hike at the February 1^st meeting, but one last half-point rise that is followed by a downshift in March might do the trick to keep disinflation trends going strong throughout the summer.

Fed’s Harker reiterated his support for a 25 basis point pace going forward. ​ Fed’s George, a non-voter, noted that the economy is responding to the work the Fed is doing.

Fed’s Brainard provided comments yesterday that support a long hold once the Fed is done tightening. ​ She refrained from giving any guidance as to what she supports for the next meeting or even how high rates should go. ​ Fed’s Williams sees US GDP growth around 1% this year. He added that there are still ways to go until sufficiently restrictive rates.

Wall Street seems confident that this recession bound economy will bring inflation all the way down and that the Fed will be cutting rates next winter. ​ The Fed’s messaging about higher for longer is completely getting ignored and will likely get tested throughout the year.

Oil

Crude prices had a good week as Chinese reopening optimism spearheaded this bullish move higher. Will global oil demand continue to grow as recession risks rise? It seems many energy traders are betting on that.

The start of the Chinese New Year holiday will be closely watched to see if travel is as robust as many are thinking.

Gold

Gold’s bullish rally has run out of steam after making a nine-month high. ​ Financial markets are pricing Fed’s dovishness for next winter, completely shrugging off a steady flow of higher for longer Fed speak. Gold is getting some support from Fed Harker’s reiteration that they should downshift their rate tightening pace again.

Gold’s facing some strong resistance ahead of the $1950 level and that might hold until we get to the FOMC decision at the start of next month. ​ If bullish momentum remains in place, the $2,000 level will remain massive resistance.

Crypto

Bitcoin is off to a great start this year. ​ A prolonged crypto winter or ice age does not seem to be happening as the crypto space gets cleaned up. ​ The bond market is not in agreement with Fed speak, so if we see more tightening beyond the March meeting, risky assets broadly, including crypto, could be vulnerable to major selling pressure. ​

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