Earnings, tax outlook and strong data push stocks higher; US economic outlook strengthens, bitcoin consolidates

US stocks initially rallied after the latest round earnings mostly impressed, Democrats threw in the towel on unwinding Trump tax cuts, consumer confidence rebounded, the housing market remained strong, and manufacturing activity improved.  GE and 3M did not give any signs that inflation impact is easing but did provide some optimism that the consumer continues to handle the recent price increases.  This earnings season has been about pricing momentum and whether consumers are able to handle surging costs. So far it seems the consumer can handle it.

Tech earnings expected to soar

Ahead of gargantuan tech earnings and as confidence grows that Democrats will finalize infrastructure spending and Biden’s economic plan, stocks keep on making new record highs.  The 2022 US growth outlook will remain strong and pricing pressures should ease once we get past the winter of inflation as warm weather sends natural gas and crude prices lower and as the chip shortage improves.

US stocks gave up most of its gains heading into the European close.  Investors are taking off risk ahead of the after the bell earnings from Alphabet, Microsoft, and Visa.

US Data

The housing market remains very strong.  US home prices rose the most on record and new home sales surged 14.0% last month.  The end of the housing boom could be approaching as the pace of price increases slows.  Throughout this pandemic, the housing market has shined and still remains a bright spot as the country gets to the other side of the COVID fence.

With COVID cases continuing to decline, it is no surprise that consumer confidence is bouncing back.  Americans now want to spend big and that could mean the next few months could deliver better-than-expected purchases of new cars, TVs, home improvements, and vacations.  Consumer spending habits will be strong this holiday season and all signs are that it won’t end there.

The Richmond Manufacturing Index also posted a surprisingly strong rebound as the volume of new orders jumped.

Bitcoin

Bitcoin continues to consolidate as the battle amongst bitcoin ETF products becomes a battle of management fee wars.  Bitcoin ETF exhaustion happened a lot faster than most bulls were expecting but the recent gains back above USD 60,000 is still very healthy for long-term growth of the space.  Bitcoin may pass the torch to ethereum for the rest of the week as the buzz around its network upgrade grows.  A successful upgrade could dramatically reduce ethereum’s power consumption which could win over ESG investors.  Ethereum may also become less expensive and faster, which would cement its place as the dominant blockchain network.  Ethereum should have a clear path towards USD 4,500 if everything goes smoothly.

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