US Close: Retail Sales weighed by energy price surge, Musk’s calculated Twitter offer, Commodities hit hard by strong dollar, Bitcoin below $40k

Wall Street is ready for a long weekend and stocks are struggling here after mixed bank earnings and a retail sales report that showed the consumer is spending more money on essentials.  The second act of bank earnings rewarded Goldman and Morgan Stanley for strong trading revenues, while Citigroup was hampered by their exposure to Russia and Wells Fargo posted disappointing revenue and net interest income.

Retail Sales/Consumer Sentiment

The US consumer is showing more signs that the surge in gasoline and food prices is taking up a bigger chunk out of their wallets.  Sales at gas stations and food and beverage stores were up 8.9% and 1.0% respectively from the last month.  The American consumer still has a good amount in savings, so they should be able to handle these price increases going into the summer.

The University of Michigan sentiment index surprisingly rebounded as the consumer became optimistic as gas prices have declined from the March peak and the labor market remains hot.  Inflation expectations were expected to increase over the next 12 months, so the staying steady at 5.4% was somewhat positive and suggests that peak inflation could be in place.

Musk/Twitter

Twitter shares surged after Elon Musk made a one-time offer to take the company private for $54.20 per share in cash. Musk’s filing noted, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.” This offer occurred shortly after he acquired around 9% of the company, which puts added pressure on the board to accept Musk’s offer.

Musk is going all-in on acquiring the social media platform as he wants to make sure it allows free speech for everyone.  If Twitter rejects his offer, Musk says he would “need to reconsider my position as a shareholder.” A rejection of Musk’s offer would send Twitter back to the low-$30s and spell trouble for the board of directors as they need to do what is best for shareholders, which easily seems to be to work for Musk.

Oil

Crude prices are lower as China continues to struggle with COVID and after the dollar surged following more hawkish Fed speak and a surprisingly dovish ECB rate decision.  Heading into the long weekend, oil was vulnerable to some profit-taking, but a major pullback is still unwarranted given the supply situation and as economic slowdown concerns are still far from happening.

WTI crude still looks like it has a home above the $100 level as a global supply deficit firmly remains in place.

Gold

Gold will have to wait until it makes another run at the $2000 level as king dollar appears it is not going away anytime soon.  Profit-taking hit gold as the dollar rallied after a dovish ECB decision and as the bond market selloff resumed after more hawkish Fed talk and another round of economic data that suggests inflation is starting to weigh on the consumer.

Bitcoin

Bitcoin is in the danger zone as risky assets are tumbling as the bond market selloff resumes.  Bitcoin fell below the $40,000 level and if it breaks below $38,000, it could get ugly real fast.  Heading into a long weekend, anything is possible with Bitcoin, so traders should not be surprised if prices fall to the $35,000 level or rebound to the $43,000 level.  The risks for Bitcoin are still for further pain if Wall Street maintains a cautious tone.

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