Turnaround Tuesday, Pepsi’s inflation warning, dollar rebounds, bitcoin 50K

US stocks are rebounding as investors find value in beaten-up tech stocks and are coming to the realization that the global natural gas crisis is good news for energy stocks.  Yesterday, the Nasdaq selloff brought the recent slide to 8.5% from recent record highs.  US growth exceptionalism will be the theme for the next couple of quarters and that will help make it easy for fund managers to buy every dip.  Turnaround Tuesday might not lead to a substantial rally as Evergrande uncertainty remains, DC drama will last a couple more weeks, Treasury yields are consolidating ahead of Friday’s employment report, and Shanghai markets are closed for Golden Week.

The risks to the outlook remain and trading over the next couple of days may start to become rangebound.  Pepsico’s results and commentary provided another check to the inflation is persisting camp, and if that theme appears apparent across all sectors, risk appetite will struggle.

Energy stocks will see continued support over surging oil prices.  Oil prices are getting extra demand from the shortfall in natural gas.  The oil market is heavily in deficit and that won’t change until after the winter.

Pepsi points to supply chain problems

Pepsico delivered strong third-quarter results with beats on the top and bottom lines, along with raising its full-year organic revenue guidance.  Pepsico acknowledged they are navigating through the impact of higher commodity, transportation, and supply chain costs.  Wall Street set the bar high for the beverage and snack maker, but with no optimism that the cost/inflationary environment will improve, the outlook for next year is on shaky ground.  Pespico’s share price isn’t doing much this morning.

Pepsico CFO Johnston told CNBC that we’ll probably see a little bit more pricing increases in the first quarter.   Inflationary pressures are not easing anytime soon and if this earnings season delivers broad price increases for the US consumer, the 2022 outlook will start to come into question.

FX

The dollar extended gains after the US trade deficit widened to a record as demand for imports surged.  The 10-year Treasury yield is back above 1.50%, but still unlikely to deliver a substantial move above the last week’s high of 1.5565% until after Friday’s employment report.  With oil prices potentially entering skyrocketing mode, commodity currencies are faring better than high-beta currencies.

Bitcoin

Bitcoin is closer to USD 100,000 than it is to zero.  Recapturing the USD 50,000 level is a big deal for bitcoin and significant for the cryptoverse.  Bitcoin is starting to show bullish signs despite whatever risk mode is happening on Wall Street.  It appears large parts of both the retail and institutional world have evolved and have embraced becoming Long-Term-Holders(LTH).  The upcoming regulatory guidelines could prove to be disruptive over the short-term, but many cryptocurrency traders are gladly buying now in anticipation that we’ve seen the majority of the selling pressures.  A Bitcoin ETF might take a little longer to get done, but it seems like it will certainly happen.  That is expected to pave the way for the next boom.

Bitcoin volatility is always elevated on the passing of key psychological levels and that should remain the case this week.  If Bitcoin rallies above the USD 52,000 level, that could trigger another wave of technical buying.  Bitcoin could trade a handful of times through the USD 50,000 over the next couple of days.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.