US Close: Stocks lower on earnings and geopolitical risks, Dollar strength, Oil rises on demand hopes, Gold crushed, Bitcoin steadies

US stocks are declining on poor earnings and mounting geopolitical risks that will likely make it harder for disinflation trends to remain strong. Earnings season may also get the name layoff season as more companies announce their job reduction measures.  Today, Dell confirmed they will lose about 6,650 jobs.

Much of Wall Street is getting nervous over US-China tensions.  A few months ago, China was not investable. China was becoming a favorite bet with the great reopening, but now rising tensions and possible blacklisting, investors are heading to the sidelines.  

FX

Both king dollar and the bond market selloff is back as the next round of Fed speak will likely be hawkish.  The labor market is too strong and with inflation still nowhere near target, that should lead to a lot more Fed pushback against last week’s dovish FOMC press conference.

Earnings

Tyson Foods’ poor earnings were due to falling chicken and beef prices.  The largest meat company in the US posted an earnings miss of $0.85, worse than the consensus estimate of $1.33, while sales were slightly softer at $13.3 billion.  The consumer is weakening and purchasing less meat. 

Children’s Place preliminary results were disappointing as they focused on a deterioration in gross.  margin

Oil

Crude prices rose on an improving demand outlook and as this two-week slump appears to be overdone.  With all the talk of deteriorating crude demand outlook and a not-so-bad winter, energy traders were surprised after the Saudis raised prices next month.  The key Arab light grade was boosted to $2 a barrel above the regional benchmark.  The outlook can’t be that bad if the Saudis are raising prices. 

OPEC Secretary General Haitham expressed an upbeat outlook with China’s reopening, but that came with concerns that COVID still provides uncertainty to this market.  China remains the short-term key if oil prices can comfortably trade above the $80 level.

Gold

Gold prices are trying to find support as global bond yields surge.  Gold isn’t acting life a safe-haven right now as the bond market selloff might be here a little while longer.  Gold is still licking its wounds from that gamechanger of a NFP report.  The geopolitical risk also seems to be potentially inflationary and that is taking away some of gold’s luster. 

Gold should have found key support at the $1865 region, but that might not last if the bond market selloff intensifies.

Crypto

Bitcoin’s correlation stocks and bonds remains but it could be ending soon. Bitcoin is not dropping as much as stocks but if the bond market selloff extends, downward pressure will remain.  Bitcoin appears poised to trade in a range between $20,000 and $24,000 level until we get beyond the next inflation report. This week should be filled with Fed pushback that might keep risky assets vulnerable.  

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