Mid-Market Update: Mixed Economic Data keeps stocks volatile, Oil rallies as Russia hints at output cut, Gold rallies, Cryptos edge higher

US stocks pared earlier losses as traders digest a wide range of mixed economic data that overall supports the story that inflation is coming down.  Wall Street had a tale of two rounds of economic readings.  The first wave, before the opening bell showed CAPEX is weakening and softer consumer demand.  The second round of data was rather upbeat as consumer sentiment improved and inflation expectations dropped even further.  New Home Sales also unexpectedly improved, but no one is betting that the bottom is in place. 

US Data

Disinflation trends are firmly in place after durable goods orders slumped and as personal spending softened.  Demand destruction should only continue and that will be well received by the inflation fighting Fed. 

The preliminary November look at durable goods orders fell 2.1%, a bigger decline than the eyed 1% drop, and much worse than the downwardly revised 0.7% prior reading.  Core capital goods still have plenty of room to soften and that should be more noticeable in the coming months.

Last month’s personal income rose by 0.4% and spending softened to 0.1%. 

The Final look at the University Michigan sentiment showed inflation expectations were revised lower.  The 1-year inflation expectations fell from 3.0% to 2.9%, reaching the lowest levels since June 2021.

The Fed’s tightening path is getting vindicated here as the narrative that personal and business spending will continue to slow appears to be firmly in place.

Oil

Crude prices are rallying after Russia threatened to cut oil output up to 7% over the price cap that has been put in place.  Thin trading conditions are quickly approaching but some traders are giving the oil market a lot of attention.  The oil market is vulnerable to a couple of shocks that could keep the recent rebound going into the New Year.  China’s Covid reopening is a big question mark, but it seems they will keep moving forward with it despite the estimate that 37 million a day could get infected with this current surge. 

Gold

Gold hovers around the $1800 as Wall Street becomes more confident that disinflation trends will continue.  Another round of economic data is painting a picture that consumers and businesses are weakening and that should help keep pricing pressures coming down.  The economy is still recession bound and if inflation continues to cool, gold demand should improve in the New Year. 

Crypto

A positive story in the crypto space is the court approval of a $37.5 million bankruptcy loan for Bitcoin miner Core Scientific.  The crypto miner shares are poised to rally which shows you that investors believe in the restructuring support agreement and are still willing to invest in some of the distressed parts of the cryptoverse.   

Bitcoin looks like it might be finding a home between the $16,000 and $17,000 zone.  Stocks are heading lower and Bitcoin is somewhat stable today. 

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